Pharmaceutical News
Sorry, drug efficacy is not the top priority anymore

Chen Yi-Feng, Director of the TPMA, recalled clearly from her experiences of working for an international pharmaceutical company.  She was told by the management of a hospital at a price negotiation meeting: “Start the talk only if you can offer at least 15% discount.” 

Her senior supervisor who has an MD degree sat uncomfortably beside her, because he could only offer a 5% discount as instructed by the company. 

Medical treatment is turned into arithmetic.  Hospitals consider not only the effectiveness and safety but also the profit margin of a drug when making decisions on drug procurement.

Calculation 1: Is the price gap big enough?

The drug price gap has become a crucial income source for hospitals as a means to make up the loss from medical treatments.  It has a profound impact on prescriptions.

The drug price gap is caused by the price difference between the NHI reimbursement prices and the actual prices paid by hospitals to drug companies.  Hospitals make a profit from the price differences, the bigger the better.

According to medical professionals’ analysis, the average rejection rate of claims of NHI reimbursement for medical services is 10-15%.  This means that hospitals only receive NT$ 85-90 for every NT$100 spent on treating patients.  It is only natural for hospitals to reduce the deficit by squeezing drug companies. 

According to Heather Lin, C.O.O. of the IRPMA, the minimum discount requested by hospitals is 25% for original manufacturers and 50% for local manufacturers.  “It is seemingly a buy-one-and-get-one-free deal,” said Lin.

Every drug company complains about being treated like an ATM by hospitals. 

A senior manager of a drug company was once told bluntly by a hospital that the hospital’s major income sources are: the food hall, the car park and drugs.   “Therefore, hospitals will never give up the drug price gap,” said the senior manager.

 “Led by their pursuit of drug price gap, hospitals turn away from some quality drugs which have no substitutes on the market simply because the manufacturers refuse to make any concession on drug prices,” said a director of a medical center. 

The director continued that he has seen a doctor tried to save a patient who was in desperate need of stronger antibiotics.  However, the hospital’s procurement department refused to buy the life-saving medicine due to high drug prices.  Instead, the management requested the doctor to refer this patient to other hospitals. 

 “It increases the risk of nosocomial infection, doesn’t it?” asked the director. 

Calculation 2: Is the drug cheap enough?

Whether a hospital signs up for the NHI sub-budget scheme also affects its decision on drug procurement. 


In situations where there is a sub-budget for a hospital, the hospital will surely buy drugs as cheap as possible because the total NHI reimbursement is already fixed.  Cutting down on drug cost will leave more money for medical services whose cost is comparatively less controllable. 


A professor of cardiology explained the situation by giving an example of treatment for atrial fibrillation (AF).   Warfari, an anticoagulant, used to be the standard treatment for AF.  After receiving Warfari, patients are subject to regular blood tests to ensure adequate drug concentration in blood so as to reduce the risk of side effects.

Now, there is a new drug, Pradaxa, with fewer side effects but a bigger price tag.  One capsule costs NT$50.  Patients need to take 2 capsules a day.  One month treatment costs NT$3,000.   It is much higher than the monthly treatment cost of Warfari (NT$108). 

Hospitals which have signed up for the sub-budget scheme are more concerned about drug cost than its side effects.  “One tactic to have a budget surplus is to reduce drug spending by prescribing cheap drugs,” said the professor.

Patients are deprived of choices and become vulnerable.  There are more and more patients, especially cancer patients, being turned away by hospitals.   

A medical material management staff of a large private hospital expressed that the price gap of cancer drugs is just about 3%.  As cancer drugs are expensive, they account for a huge share of the hospital’s drug spending.   Some hospitals, therefore, choose not to procure cancer drugs and ask their patients to go to other hospitals. 


 “The hospital treats patients like human balls, kicking them around,” said the staff. 

Calculation 3: Restrict doctors’ freedom to prescribe drugs 

Some hospitals take more extreme measures.  They impose “personal budget” on individual doctors to restrict their freedom to prescribe drugs.

If a doctor uses up his personal budget before the end of a quarter, he/she may “borrow” the budget from the head of the department.  In fact, it is more likely that he/she is asked by the management to take days off or to see fewer patients. 

In order to keep within the personal budget, some doctors would reduce the prescription of expensive drugs or ask their patients to switch hospitals. 

 “Patients swallow down whatever given to them,” said a specialist of haematology and oncology.  He has received many cancer patients who were kicked out by other hospitals.  He tried to take in as many as he could because, after all, saving life is a doctor’s responsibility. 

However, he is still under pressure, especially when the management showed him the spreadsheet of prescription costs. 

In an environment where medical treatment is synonymous with arithmetic, “treating patients becomes a rather sad thing to do,” a doctor with 30-year working experience sighed. 


【2015-07-21 / CommonWealth Magazine 】