U.S. Medical Device Industry Consultations in Taiwan, April 2001

Summary:

From April 25-27, 2001, U.S. Department of Commerce industry staff accompanied representatives of U.S. medical device industry associations in Taipei for meetings with agencies responsible for product regulation and healthcare reimbursement in Taiwan. The U.S. delegation called attention to our strong concern with current reimbursement policies, problematic aspects of existing regulatory systems (especially registration quotas), and emphasized the importance which U.S. industry attaches to Taiwan officials' continued participation in global regulatory harmonization efforts.

We received assurances that officials from the responsible agencies (the Bureau of National Health Insurance on reimbursement and the Department of Health's Pharmaceutical Affairs Bureau on regulation) would take U.S. industry views into account in the course of modifying their policies. The Department of Health voiced some willingness to consider incremental changes that could somewhat ease the adverse impact on major suppliers of its annual registration quota. BNHI was also receptive to further dialogue with industry on such issues as low reimbursement rates for single-use devices. We received assurance of the Department of Health's interest in ongoing participation in global regulatory harmonization fora for the medical device industry, including the Global Harmonization Task Force and the Asian Harmonization Working Party.

The support of the Advanced Medical Technology Association, Medical Device Manufacturers of America, National Electrical Manufacturers Association and Medical Device Committee members of the American Chamber of Commerce in Taiwan in planning and conduct of these meetings is hereby acknowledged.

Bureau of National Health Insurance

Key Taiwanese legal ruling: During our visit, we learned of an April 20, 2001 Taiwanese Grand Jury (high court) ruling to the effect that the "non-reimbursable conditions" list in Taiwan's Healthcare Insurance Law is too broad, implying that more procedures should be covered. The court has given BNHI two years to propose and implement new language elaborating more specifically on what products/treatments are or are not covered. According to AmCham/Taipei, BNHI Vice President Liu Chien-Hsiang (with whom we met later that day) has indicated a preference for a "positive list" of reimbursable treatments, as opposed to a "negative list" of non-covered items. Taiwanese hospitals reportedly also favor a "positive list" approach. While U.S. industry has not developed a unified position on the issue at this early stage, there are concerns that a "positive list" could lend itself to bias against new devices. During our April 26 meeting with BNHI, in reply to our delegation's query, Dr. Liu acknowledged that the ruling poses a significant challenge to BNHI, especially in light of funding constraints; but he noted that as it had been only a week since the decision, BNHI has not had time to decide on an approach to achieving compliance with the court's decision.

Reimbursement decision delays and low coverage: The U.S. delegation expressed concern with Taiwan's low reimbursement rates, as well as the (anecdotally) slow rate of approval for new technologies. Noting that the disproportionate ratio of health insurance expenses devoted to medical devices (only 2.5%, according to one source) and pharmaceuticals (25%) suggested some distortion of cost incentives, the U.S. side urged BNHI to look for ways to capture the benefits of medical technology advances promote efficiency in the healthcare system overall, such as greater use of diagnosis-related groups (DRGs), and introduction of by-function pricing such as has been adopted in Japan. Dr. Liu replied that BNHI is now forming "expert teams" to look at DRG coverage and that it aims to speed up coverage decisions (current decision periods, he said, are approximately six months for new devices, or two months for devices that are substantially equivalent to those already approved for coverage).

Asked how many new-technology medical devices have been approved in recent years, Dr. Liu reported that two "totally new" devices had been approved since 1999, out of five applications received. The U.S. delegation noted that this low figure reinforces perceptions that approval of new technologies is excessively difficult to obtain. We also stated that U.S. industry perceives a lack of adequate feedback on reasons for denial of reimbursement applications, and called for closer, regular communication with BNHI, and more concrete information regarding the bases for denial-of-coverage decisions. Mr. Huang Chao-Ming, the key payment expert in BNHI's Department of Medical Affairs, welcomed the prospect of regular consultations with U.S. industry in the future.

"Pay-the difference" option for patients: Dr. Liu reported that BNHI had introduced this option, a priority of U.S. industry's, into draft amendments to the health insurance law, and he hoped for progress toward enactment during the current legislative session. However, he cautioned that the public misperceives this as "mandatory patient co-pay," hurting the provision's chances politically.

Single-use devices: Lengthy discussion regarding BNHI's practice of reimbursing multiple uses of single-use-only-labeled devices revealed perceptions on BNHI's part that there are no significant safety concerns and that USFDA had not acted on any concerns regarding re-use of such devices. The U.S. delegation noted its concern with reimbursement policy that promotes re-use, with attendant possibility of legal and reputational ramifications for U.S. suppliers of single-use devices. In reply to Mr. Huang's request, the U.S. delegation promised to provide information relevant to this issue. (Note: An April 23, 2001 USFDA letter announces USFDA's enforcement policy with regard to reprocessing of single-use devices. Industry also believes it can submit a study done in Europe which cites variations in clinical outcomes from reprocessed devices).

Department of Health

Quota on registrations: The U.S. delegation argued that the 24-per-year quota on device registrations disadvantages major suppliers that offer broad product lines, forcing some firms to bypass Taiwan's market with certain of their products. Although we would accept an increase in the quota as a positive step, we urged that the quota be abolished altogether in lieu of alternative ways of managing the registration application workload, through more effective deployment of DOH's resources. At minimum, the U.S. delegation appealed for "grandfathering" of currently-marketed devices in lieu of re-registration under Taiwan's new 1999 risk classification scheme.

Dr. Oliver Hu, Director of DOH's Pharmaceutical Affairs Bureau, replied that the quota on device registrations applies only to new devices and new usage indications. He demurred on the question of whether re-registrations of currently-marketed devices would continue to count against the quota, but promised to look at this question. He did indicate that devices that would move from Class I to Class II under the reclassification would need to be re-registered. While lamenting that his bureau has only 40 staffers for all of its work (including pharmaceutical regulation), he conceded that DOH might seriously consider raising the quota across-the-board to, for example, 36-per-year; or else raising the quota for suppliers that have filled their quota in recent years. Reacting to the evident confusion surrounding this topic (e.g., one U.S. rep asked whether a brand name change would require re-registration, a question that was not clearly answered), Dr. Hu indicated that DOH would clarify its definition of "new devices," with opportunity for industry to comment.

Quality systems (QS) issues: The U.S. delegation cited several issues related to DOH's documentary requirements, including "consularization" delays in the transfer of information under DOH's January 1998 exchange-of-letters with USFDA, DOH's refusal to accept USFDA-audited Establishment Inspection Reports (EIRs) from factories outside the United States, and general uncertainty among industry regarding what Taiwan requires in the way of quality system documentation. Dr. Hu acknowledged that the consularization process adds little in the way of safety assurance, but asserted that it serves as important "cover" for DOH in the event that a firm submits fraudulent documents, and that it would remain a requirement. Regarding acceptance of all USFDA EIRs regardless of country-of-origin, he reframed the discussion by stating that Taiwan seeks to replicate the January 1998 USFDA-DOH exchange of letters with a similar arrangement with the European Union.

Local clinical trials: U.S. reps voiced concern over the DOH Medical Affairs Bureau's rumored plan to promote physician training in Taiwan by mandating local clinical trials, and called on the Pharmaceutical Affairs Bureau to make sure that such an additional trial requirement, for other than a true regulatory purpose, is not imposed. We argued that if Taiwan wants to encourage physician training, it should work directly with companies, which are usually happy to offer training along with their products, rather than requiring local clinical studies atop trials already performed abroad (or deemed as unnecessary by foreign regulators), which would have the contrary effect of discouraging firms from bringing new technologies to Taiwan. Dr. Hu appeared to be influenced by this argument, and promised to raise this issue with the Medical Affairs Bureau orally and in writing (Dr. Hu added that he has close working relations with the Director of the Medical Affairs Bureau).

Type testing for sterility: Ms. Huang Hsiau-Wen, bureau senior researcher, stated that the sterility type tests required from the National Food & Drug Laboratory for certain devices would be waived during the re-registration process for re-classified devices that are already on the Taiwanese market. Instead, she noted, Taiwan plans to increase post-market surveillance. (Presumably, Taiwan will continue to require these tests as part of the registration process for new-to-market devices in the affected product categories).

Taiwan's Participation in GHTF and Asian Harmonization Working Party: The U.S. delegation commended DOH for its past participation in activities of the Global Harmonization Task Force and the AHWP, and encouraged continuation of this involvement. Dr. Hu said that his Department plans to attend the summer 2001 AHWP meeting, and that he himself hopes to go to Barcelona for the October 2001 GHTF sessions.

Legislative Yuan

AmCham/Taiwan Medical Device committee staff arranged an impromptu meeting for the U.S. delegation on April 27 with Hong Chi-Chang, Chairman of the Committee on Health, Welfare & Environment (a psychiatrist by training, he is a member of the Democratic Progressive Party, minority party in Taiwan's legislature). He was joined by his Chief-of-Staff, Ryan Hsueh (a physician). We recounted our meetings with BNHI and DOH and expressed hope that Taiwan would devote adequate resources to new medical technology. Mr. Hong empathized with this view. He stated that Taiwan's health system is operating "in the red," even though it spends just 6% of GDP on health (versus 13% for public health spending in the U.S.). He was guardedly optimistic that some health spending increases will be approved (due in part to widening recognition that Taiwan, with an aging population, needs it), though he doubts that this will occur before the next legislative elections.

Mr. Hsueh opined that the April 20 grand jury decision on health insurance could harm prospects for legislating a "pay-the-difference" patient option for medical treatments, insofar as it could spur public perceptions that the government has a greater legal obligation to pay more for healthcare, and nuances such as the word "option" would be lost in debate, at political cost to advocates of such an option (among whom Mr. Hong counts himself). On a more optimistic note, Hsueh believes that progress is being made toward a global budget system. Global budgets will be implemented for clinics (although not yet for hospitals) beginning in July 2001; and at a "case" (DRG-style) payment system already in place for a few conditions will be expanded to cover others. These developments would favor new, cost-effective medical technologies - provided, as a member of the U.S. delegation pointed out, that the aggregate reimbursement amount for each case is sufficient.