Clipping Board » Medical Affairs and Administration ─ Medical system, pharmaceuticals, and medical community-related reports
Article by Lin Yingqiu
Over the past 12 years, the National Health Insurance Administration (NHIA) has cut drug costs by NT$57.2 billion, yet overall drug expenditures under the health insurance system have not decreased—instead, they’ve risen. This has led to the absurd phenomenon where medicine is cheaper than candy! The NHIA, which should prioritize "using medicine to heal the people," has now become a system that "uses medicine to sustain hospitals," allowing the black hole of drug pricing to devour public health while benefiting corporate hospitals and stifling the development of Taiwan’s domestic pharmaceutical industry. With the second-generation NHI set to launch next year, drug pricing policies must be reformed. Patients deserve the most effective medication, not the drugs with the biggest price gaps. Raising premiums will do little to improve the NHI’s finances—the urgent task is to untangle the complex relationship between hospitals, doctors, pharmaceutical companies, and the NHIA.
### Second-Generation NHI Premium Hikes and Seven Consecutive Drug Price Cuts, Yet Drug Spending Rises
Would you believe that when you visit a doctor for discomfort and follow their prescription, the pill you swallow could be cheaper than a piece of candy? Or that if you need an IV in the hospital, the solution injected directly into your veins costs less than a can of soda?
This is the much-praised "miracle" of Taiwan’s NHI—the same system that constantly warns of collapse unless premiums are raised.
Common sense tells us that "medicine cheaper than candy" is unreasonable. So where does the problem lie?
In a free-market economy, mass production lowers unit costs—a simple concept. But while candy and soda can be consumed anytime by anyone, medicine is only needed by the sick. The market scales of food and pharmaceuticals are worlds apart, and drug manufacturing is far more complex than producing candy or soda, with life-or-death consequences if done poorly. Yet under Taiwan’s NHI system, a glance at the reimbursement drug price list reveals pills priced at fractions of a dollar everywhere.
### The "Drug Price Gap": Hospitals’ Biggest Profit Source!
When the NHI was launched in 1995, annual drug expenditures were around NT$20 billion. Today, they’ve skyrocketed to over NT$110 billion, accounting for 25% of NHI spending—surpassing the U.S.’s 15%. From 1999 to 2008 alone, Taiwan’s NHI drug costs surged from NT$80.3 billion to NT$125.1 billion, a 56% increase. Yet since the NHIA’s first drug price adjustment in 2004, it has cut prices seven times over 12 years, slashing NT$57.2 billion in total. While these impressive figures showcase the NHIA’s "performance," overall NHI drug spending continues to rise. Why?
Of every NT$100 spent on drugs in Taiwan, NT$76 goes to treating major illnesses and chronic outpatient conditions. With an aging society and longer lifespans, drug costs for cancer, mental illness, dialysis, hypertension, diabetes, and hyperlipidemia have surged. Additionally, NHI reimbursements for doctors’ professional services are disproportionately low—regardless of specialty or severity, a single outpatient visit earns just 228 points (about NT$200+), whereas a U.S. neurosurgeon earns 270 *dollars* per visit—30 times more. No wonder some major hospital residents receive year-end bonuses as meager as NT$30,000.
Thus, the NHI reimbursement system incentivizes hospitals to prioritize the "drug price gap" as their primary profit source. To maximize NHI payouts, hospitals and doctors often overprescribe. So while the *price* of drugs drops, the *volume* prescribed increases.
### Generic Drugs: Local Pharma’s Race to the Bottom
With "using medicine to sustain hospitals" becoming the norm and the "drug price gap" dictating procurement, hospitals aggressively negotiate with suppliers—leveraging order volume, delivery terms, and payment conditions—to secure discounts, bulk freebies, and rebates. Meanwhile, domestic generic drug manufacturers engage in cutthroat competition, operating on razor-thin margins.International pharmaceutical companies, burdened with the high costs of new drug development, clinical trials, and compensation for side effects, are far less competitive than local manufacturers that only produce generic drugs.
Take Norvasc (brand name for amlodipine), a hypertension medication that tops the list of Taiwan’s National Health Insurance (NHI) top ten star drugs, as an example. When it was first launched 15 years ago, one pill cost NT$23. However, after its patent expired, generic drug manufacturers rushed to produce it, intensifying competition. Today, the NHI sets reimbursement prices ranging from NT$5.4 to NT$8.8 for 21 domestic and international brands of 5mg Norvasc with the same active ingredient. Hospitals negotiate prices aggressively, and some can now purchase the drug for as low as NT$3 per pill. With the NHI’s average reimbursement price at NT$8, hospitals pocket a "drug price spread" of NT$5, which they use to offset other financial losses and shortages.
But drug prices have been slashed repeatedly—seven times so far—and there’s little left to cut. If cuts continue, could they compromise the health of the nation’s medication users?
Teng Hsi-hua, a member of the NHI Supervisory Committee and secretary-general of the Mental Health Association, explains that drug price adjustments follow a highly complex formula. Since the NHI Bureau has a "top-down policy" for cutting drug prices, pharmaceutical companies naturally devise "bottom-up countermeasures." For instance, if a drug comes in two dosages—5mg sold for NT$5 and 10mg for NT$10—the NHI Bureau may lower reimbursement prices due to high market volume. To counter this, drug companies strategically launch the higher 10mg dosage first. After several price adjustments, the 10mg version might drop from NT$10 to NT$2, becoming unprofitable and discontinued. Only then does the company introduce the 5mg version, which, having no prior transaction history, remains priced at NT$5, ensuring profitability.
**New Drug Introduction: Three to Four Years Behind Advanced Countries**
However, a former Eli Lilly Taiwan sales representative points out that in recent years, some international pharmaceutical companies, facing global pricing pressures and Taiwan’s NHI "floor pricing," have withdrawn from the market. Some new drugs, such as targeted cancer therapies, have either chosen not to launch in Taiwan or delayed their introduction. This is detrimental to public health and negatively impacts doctors’ access to the latest medical knowledge and advancements in treatment. "After seven NHI price cuts, local generic drugmakers with large 'price spreads' win big. But when hospitals and doctors prioritize price over quality, public health suffers a pyrrhic victory."
According to research by Huang Wen-hung, a professor at Yang Ming University’s Institute of Health and Welfare and former director of the Department of Pharmaceutical Affairs under the Department of Health, Taiwan lags behind other advanced countries by an average of three to four years in introducing new drugs. Moreover, patented new drugs account for only 32% of NHI drug expenditures, far lower than in Europe and the U.S.
After seven rounds of drug price adjustments, even Teng Hsi-hua, who has long advocated for NHI cost control, noticed that within the same drug group, the highest reimbursement price was given to generic drugs. "I support drug price adjustments, but the methods need review. Otherwise, the NHI’s medication system will see 'bad money driving out good.'"
Several doctors unanimously report that after each NHI price cut, hospitals change their drug procurement, forcing physicians to switch to cheaper alternatives with the same active ingredient. Although the ingredients are identical, differences in manufacturing processes—such as temperature, humidity, and technical controls—as well as variations in raw material sources and side effects, result in differing "bioavailability" in patients. Hospitals that switch drugs en masse to cut costs often see more patients experiencing changes in their condition, shorter follow-up cycles, and increased emergency visits. Thus, while patients ostensibly take the same drug, recovery periods lengthen.
Take Mrs. Liang, for example. A long-time diabetes patient, she initially took two 800mg pills daily—one in the morning and one at night—to control her blood sugar. However, under the hospital’s "maximizing drug price spread" policy, her prescription was changed to three 500mg pills per day (morning, noon, and night). Possibly due to insufficient dosage, another diabetes medication was later added to her morning regimen before meals.Due to changes in medication habits, she often forgot to take her medicine, and the more she took, the worse her blood sugar control became. The doctor had no choice but to increase the dosage, but the excessive medication caused hypoglycemia, forcing another switch to a different drug.
Originally, she only needed to return for a check-up every two months, but due to the need to adjust to new medications and dosages, her visits were shortened to every two weeks. Coupled with several emergency visits for unexplained dizziness and a half-month hospitalization due to uncontrolled blood sugar, she eventually switched to insulin to manage her condition. After seven or eight months of back-and-forth struggles, her blood sugar finally stabilized, and she returned to bi-monthly check-ups. However, her ten fingers were nearly worn out from daily pricks to measure blood sugar before and after meals.
**Poor Healthcare Behavior Leads to Wasted Medication Costs of 25 Billion Annually**
Additionally, unnecessary stomach medications or "placebo drugs" often appear in doctors' prescriptions.
Some doctors worry that patients might experience stomach discomfort after taking antibiotics and come back complaining, so they simply prescribe stomach medicine as a precaution. Due to the deeply ingrained belief that "Western medicine harms the stomach," most people don’t question when doctors prescribe stomach medications. While these drugs aren’t particularly harmful, they allow hospitals and clinics to claim more health insurance reimbursements. However, some doctors point out that certain magnesium-aluminum antacids contain aluminum, which can accumulate in the body over time and increase the risk of dementia in the elderly. Unnecessary stomach medications can also interact with other drugs, potentially affecting their absorption.
Many Taiwanese enjoy "hospital hopping," with some elderly frequently visiting hospitals just to collect medications, reasoning, "I’ve already paid my health insurance premiums—wouldn’t it be a waste not to get some medicine?" However, excessive medication can damage the kidneys, sometimes leading to dialysis and further driving up health insurance costs.
According to statistics from the National Health Insurance Administration, the average Taiwanese visits the doctor about 15 times a year. However, last year, over 33,000 people exhibited "abnormal healthcare behavior" by visiting doctors more than 100 times, with five individuals nearing 200 visits. These individuals were penalized with four months of "health insurance probation," restricting their access to medical services.
Former Minister of Health Li Ming-liang, also a doctor himself, discovered after his father’s passing that his father’s drawers contained "half a rice bag’s worth" of medications—some untouched, others unfinished. He realized his father had seen multiple doctors simultaneously, collecting duplicate prescriptions. Overmedication can harm the stomach, kidneys, liver, and more. "Taiwanese healthcare behavior is truly poor. I couldn’t even teach my own father better—how can I expect to change others?"
During his tenure as health minister, he asked the Bureau of Pharmaceutical Affairs to estimate how much medication Taiwan wastes annually. The answer: 30% of prescribed medications go unfinished, with 15% discarded unused. Based on this, Taiwan wastes approximately 25 billion NT dollars in medication costs each year.
**Health Insurance Reimbursement Should Move Toward "Personalized Medicine"**
With health insurance medication costs rising steadily and changing public behavior proving difficult, further price cuts on drugs aren’t a sustainable solution. Academia Sinica Vice President Chen Chien-jen proposed the concept of "health economic evaluation," suggesting that health insurance reimbursement should strive for "personalized medicine" rather than "commercial equality." Drug pricing shouldn’t be arbitrary.
For example, early-stage hypertension and diabetes can often be managed through lifestyle and dietary adjustments, eliminating the need for medication or injections. However, if a doctor spends 30 minutes explaining this without ordering tests or prescribing drugs, patients are unlikely to accept it. Hospitals would only earn consultation fees, and doctors couldn’t see many patients under such a system. Under the current framework, hospitals, doctors, and patients would all oppose this approach. As a result, "taking medication" remains the fastest and simplest—though not the best—solution.Whether it's the "black hole of drug prices" or the "drug price gap," seven consecutive cuts have only slashed the profiteering of pharmaceutical companies, without touching the profits of hospitals. Since the price gap can't be eliminated, why doesn’t the government step in to purchase drugs directly from suppliers and distribute them to medical institutions, thereby directly saving on health insurance drug costs?
"The pressure from legislative lobbying is beyond what most people can imagine. Just the joint procurement by public hospitals alone has led to numerous issues. If health insurance drugs were to be procured collectively, it would surely cause chaos!" said an official from the Department of Health. Different drugs and biologics have varying expiration dates—some radioactive injections are only viable for an hour. For the central government to collectively procure such a diverse and complex range of medications, a specialized "Procurement Department" separate from the Department of Health would be necessary.
"Seven cuts have already pushed us past the critical point. There’s not just widespread discontent, but deep wounds as well," Li Mingliang stated bluntly. If drugs yield no profit, who would be willing to produce them? "If there’s waste in health insurance, cut it elsewhere—not from drugs, because drug prices have already been slashed to the limit!"
Source: http://mag. chinatimes. com/ mag- cnt. aspx? artid=13609& page=4
Cheap Drugs Harm Health!
Over the past 12 years, the National Health Insurance Administration (NHIA) has cut drug costs by NT$57.2 billion, yet overall drug expenditures under the health insurance system have not decreased—instead, they’ve risen. This has led to the absurd phenomenon where medicine is cheaper than candy! The NHIA, which should prioritize "using medicine to heal the people," has now become a system that "uses medicine to sustain hospitals," allowing the black hole of drug pricing to devour public health while benefiting corporate hospitals and stifling the development of Taiwan’s domestic pharmaceutical industry. With the second-generation NHI set to launch next year, drug pricing policies must be reformed. Patients deserve the most effective medication, not the drugs with the biggest price gaps. Raising premiums will do little to improve the NHI’s finances—the urgent task is to untangle the complex relationship between hospitals, doctors, pharmaceutical companies, and the NHIA.
### Second-Generation NHI Premium Hikes and Seven Consecutive Drug Price Cuts, Yet Drug Spending Rises
Would you believe that when you visit a doctor for discomfort and follow their prescription, the pill you swallow could be cheaper than a piece of candy? Or that if you need an IV in the hospital, the solution injected directly into your veins costs less than a can of soda?
This is the much-praised "miracle" of Taiwan’s NHI—the same system that constantly warns of collapse unless premiums are raised.
Common sense tells us that "medicine cheaper than candy" is unreasonable. So where does the problem lie?
In a free-market economy, mass production lowers unit costs—a simple concept. But while candy and soda can be consumed anytime by anyone, medicine is only needed by the sick. The market scales of food and pharmaceuticals are worlds apart, and drug manufacturing is far more complex than producing candy or soda, with life-or-death consequences if done poorly. Yet under Taiwan’s NHI system, a glance at the reimbursement drug price list reveals pills priced at fractions of a dollar everywhere.
### The "Drug Price Gap": Hospitals’ Biggest Profit Source!
When the NHI was launched in 1995, annual drug expenditures were around NT$20 billion. Today, they’ve skyrocketed to over NT$110 billion, accounting for 25% of NHI spending—surpassing the U.S.’s 15%. From 1999 to 2008 alone, Taiwan’s NHI drug costs surged from NT$80.3 billion to NT$125.1 billion, a 56% increase. Yet since the NHIA’s first drug price adjustment in 2004, it has cut prices seven times over 12 years, slashing NT$57.2 billion in total. While these impressive figures showcase the NHIA’s "performance," overall NHI drug spending continues to rise. Why?
Of every NT$100 spent on drugs in Taiwan, NT$76 goes to treating major illnesses and chronic outpatient conditions. With an aging society and longer lifespans, drug costs for cancer, mental illness, dialysis, hypertension, diabetes, and hyperlipidemia have surged. Additionally, NHI reimbursements for doctors’ professional services are disproportionately low—regardless of specialty or severity, a single outpatient visit earns just 228 points (about NT$200+), whereas a U.S. neurosurgeon earns 270 *dollars* per visit—30 times more. No wonder some major hospital residents receive year-end bonuses as meager as NT$30,000.
Thus, the NHI reimbursement system incentivizes hospitals to prioritize the "drug price gap" as their primary profit source. To maximize NHI payouts, hospitals and doctors often overprescribe. So while the *price* of drugs drops, the *volume* prescribed increases.
### Generic Drugs: Local Pharma’s Race to the Bottom
With "using medicine to sustain hospitals" becoming the norm and the "drug price gap" dictating procurement, hospitals aggressively negotiate with suppliers—leveraging order volume, delivery terms, and payment conditions—to secure discounts, bulk freebies, and rebates. Meanwhile, domestic generic drug manufacturers engage in cutthroat competition, operating on razor-thin margins.International pharmaceutical companies, burdened with the high costs of new drug development, clinical trials, and compensation for side effects, are far less competitive than local manufacturers that only produce generic drugs.
Take Norvasc (brand name for amlodipine), a hypertension medication that tops the list of Taiwan’s National Health Insurance (NHI) top ten star drugs, as an example. When it was first launched 15 years ago, one pill cost NT$23. However, after its patent expired, generic drug manufacturers rushed to produce it, intensifying competition. Today, the NHI sets reimbursement prices ranging from NT$5.4 to NT$8.8 for 21 domestic and international brands of 5mg Norvasc with the same active ingredient. Hospitals negotiate prices aggressively, and some can now purchase the drug for as low as NT$3 per pill. With the NHI’s average reimbursement price at NT$8, hospitals pocket a "drug price spread" of NT$5, which they use to offset other financial losses and shortages.
But drug prices have been slashed repeatedly—seven times so far—and there’s little left to cut. If cuts continue, could they compromise the health of the nation’s medication users?
Teng Hsi-hua, a member of the NHI Supervisory Committee and secretary-general of the Mental Health Association, explains that drug price adjustments follow a highly complex formula. Since the NHI Bureau has a "top-down policy" for cutting drug prices, pharmaceutical companies naturally devise "bottom-up countermeasures." For instance, if a drug comes in two dosages—5mg sold for NT$5 and 10mg for NT$10—the NHI Bureau may lower reimbursement prices due to high market volume. To counter this, drug companies strategically launch the higher 10mg dosage first. After several price adjustments, the 10mg version might drop from NT$10 to NT$2, becoming unprofitable and discontinued. Only then does the company introduce the 5mg version, which, having no prior transaction history, remains priced at NT$5, ensuring profitability.
**New Drug Introduction: Three to Four Years Behind Advanced Countries**
However, a former Eli Lilly Taiwan sales representative points out that in recent years, some international pharmaceutical companies, facing global pricing pressures and Taiwan’s NHI "floor pricing," have withdrawn from the market. Some new drugs, such as targeted cancer therapies, have either chosen not to launch in Taiwan or delayed their introduction. This is detrimental to public health and negatively impacts doctors’ access to the latest medical knowledge and advancements in treatment. "After seven NHI price cuts, local generic drugmakers with large 'price spreads' win big. But when hospitals and doctors prioritize price over quality, public health suffers a pyrrhic victory."
According to research by Huang Wen-hung, a professor at Yang Ming University’s Institute of Health and Welfare and former director of the Department of Pharmaceutical Affairs under the Department of Health, Taiwan lags behind other advanced countries by an average of three to four years in introducing new drugs. Moreover, patented new drugs account for only 32% of NHI drug expenditures, far lower than in Europe and the U.S.
After seven rounds of drug price adjustments, even Teng Hsi-hua, who has long advocated for NHI cost control, noticed that within the same drug group, the highest reimbursement price was given to generic drugs. "I support drug price adjustments, but the methods need review. Otherwise, the NHI’s medication system will see 'bad money driving out good.'"
Several doctors unanimously report that after each NHI price cut, hospitals change their drug procurement, forcing physicians to switch to cheaper alternatives with the same active ingredient. Although the ingredients are identical, differences in manufacturing processes—such as temperature, humidity, and technical controls—as well as variations in raw material sources and side effects, result in differing "bioavailability" in patients. Hospitals that switch drugs en masse to cut costs often see more patients experiencing changes in their condition, shorter follow-up cycles, and increased emergency visits. Thus, while patients ostensibly take the same drug, recovery periods lengthen.
Take Mrs. Liang, for example. A long-time diabetes patient, she initially took two 800mg pills daily—one in the morning and one at night—to control her blood sugar. However, under the hospital’s "maximizing drug price spread" policy, her prescription was changed to three 500mg pills per day (morning, noon, and night). Possibly due to insufficient dosage, another diabetes medication was later added to her morning regimen before meals.Due to changes in medication habits, she often forgot to take her medicine, and the more she took, the worse her blood sugar control became. The doctor had no choice but to increase the dosage, but the excessive medication caused hypoglycemia, forcing another switch to a different drug.
Originally, she only needed to return for a check-up every two months, but due to the need to adjust to new medications and dosages, her visits were shortened to every two weeks. Coupled with several emergency visits for unexplained dizziness and a half-month hospitalization due to uncontrolled blood sugar, she eventually switched to insulin to manage her condition. After seven or eight months of back-and-forth struggles, her blood sugar finally stabilized, and she returned to bi-monthly check-ups. However, her ten fingers were nearly worn out from daily pricks to measure blood sugar before and after meals.
**Poor Healthcare Behavior Leads to Wasted Medication Costs of 25 Billion Annually**
Additionally, unnecessary stomach medications or "placebo drugs" often appear in doctors' prescriptions.
Some doctors worry that patients might experience stomach discomfort after taking antibiotics and come back complaining, so they simply prescribe stomach medicine as a precaution. Due to the deeply ingrained belief that "Western medicine harms the stomach," most people don’t question when doctors prescribe stomach medications. While these drugs aren’t particularly harmful, they allow hospitals and clinics to claim more health insurance reimbursements. However, some doctors point out that certain magnesium-aluminum antacids contain aluminum, which can accumulate in the body over time and increase the risk of dementia in the elderly. Unnecessary stomach medications can also interact with other drugs, potentially affecting their absorption.
Many Taiwanese enjoy "hospital hopping," with some elderly frequently visiting hospitals just to collect medications, reasoning, "I’ve already paid my health insurance premiums—wouldn’t it be a waste not to get some medicine?" However, excessive medication can damage the kidneys, sometimes leading to dialysis and further driving up health insurance costs.
According to statistics from the National Health Insurance Administration, the average Taiwanese visits the doctor about 15 times a year. However, last year, over 33,000 people exhibited "abnormal healthcare behavior" by visiting doctors more than 100 times, with five individuals nearing 200 visits. These individuals were penalized with four months of "health insurance probation," restricting their access to medical services.
Former Minister of Health Li Ming-liang, also a doctor himself, discovered after his father’s passing that his father’s drawers contained "half a rice bag’s worth" of medications—some untouched, others unfinished. He realized his father had seen multiple doctors simultaneously, collecting duplicate prescriptions. Overmedication can harm the stomach, kidneys, liver, and more. "Taiwanese healthcare behavior is truly poor. I couldn’t even teach my own father better—how can I expect to change others?"
During his tenure as health minister, he asked the Bureau of Pharmaceutical Affairs to estimate how much medication Taiwan wastes annually. The answer: 30% of prescribed medications go unfinished, with 15% discarded unused. Based on this, Taiwan wastes approximately 25 billion NT dollars in medication costs each year.
**Health Insurance Reimbursement Should Move Toward "Personalized Medicine"**
With health insurance medication costs rising steadily and changing public behavior proving difficult, further price cuts on drugs aren’t a sustainable solution. Academia Sinica Vice President Chen Chien-jen proposed the concept of "health economic evaluation," suggesting that health insurance reimbursement should strive for "personalized medicine" rather than "commercial equality." Drug pricing shouldn’t be arbitrary.
For example, early-stage hypertension and diabetes can often be managed through lifestyle and dietary adjustments, eliminating the need for medication or injections. However, if a doctor spends 30 minutes explaining this without ordering tests or prescribing drugs, patients are unlikely to accept it. Hospitals would only earn consultation fees, and doctors couldn’t see many patients under such a system. Under the current framework, hospitals, doctors, and patients would all oppose this approach. As a result, "taking medication" remains the fastest and simplest—though not the best—solution.Whether it's the "black hole of drug prices" or the "drug price gap," seven consecutive cuts have only slashed the profiteering of pharmaceutical companies, without touching the profits of hospitals. Since the price gap can't be eliminated, why doesn’t the government step in to purchase drugs directly from suppliers and distribute them to medical institutions, thereby directly saving on health insurance drug costs?
"The pressure from legislative lobbying is beyond what most people can imagine. Just the joint procurement by public hospitals alone has led to numerous issues. If health insurance drugs were to be procured collectively, it would surely cause chaos!" said an official from the Department of Health. Different drugs and biologics have varying expiration dates—some radioactive injections are only viable for an hour. For the central government to collectively procure such a diverse and complex range of medications, a specialized "Procurement Department" separate from the Department of Health would be necessary.
"Seven cuts have already pushed us past the critical point. There’s not just widespread discontent, but deep wounds as well," Li Mingliang stated bluntly. If drugs yield no profit, who would be willing to produce them? "If there’s waste in health insurance, cut it elsewhere—not from drugs, because drug prices have already been slashed to the limit!"
Source: http://mag. chinatimes. com/ mag- cnt. aspx? artid=13609& page=4