Taiwan pharma market to hit $8bn but regs may limit homegrown R&D

By Fiona BARRY

- Last updated on GMT

Taiwan is becoming a lucrative market for pharmaceuticals. (Image: Mark Chang)
Taiwan is becoming a lucrative market for pharmaceuticals. (Image: Mark Chang)

Related tags Pharmacology

Taiwan’s pharmaceutical market is expected to grow to over $8bn by 2020, driven by chronic and non-infectious therapies, but uncertain relations with China, TPP entry, and price cuts will also influence the region.

The country spent $5.4bn on medicines in 2013, making it a smaller market than Japan, China, India and South Korea, in 2013, but its per-capita expenditure on medicines was significantly higher, at $232.8, a recent report from Global Data​ notes.

The pharmaceutical market expanded at a CAGR of 6.4% from 2008 to 2013, and continues to grow thanks to health insurance access, government initiatives and a growing healthcare burden.

Global data reported the market will reach $8.4bn by 2020, despite the ongoing political tensions with China.

“The government has reduced income tax for the pharmaceutical industry as an inducement to foreign multinational drug companies to invest in Taiwan,” explained economist and analyst Jing Zhang at market consultancy IHS.  

The government is also promoting the northern city of Hsinchu as a global manufacturing and R&D centre.

The number of people in Taiwan aged over 65 makes up around 11.5% of the population.  “The country has a per capita income of around $22,000 and the hallmarks of a typical advance economy in having a steady middle income class and patients typical of an ageing society, so chronic/non-infectious diseases,​” said Zhang.

National programmes have recently made 13 prescription medicines available over the counter, making drug purchases more convenient. The government also spent some 13% of its annual budget on cancer treatment last year. At the same time, it cut the price of drugs funded under National Health Insurance seven times since 2002, which impacting domestic and foreign companies.

Price cuts: driving away R&D?

Taiwan has a policy of cutting drug prices after any year when spending exceeds the healthcare budget.  In 2014, a deficit of $2.75m led to an average price cut of 5.3% on 6,821 drugs which went into effect in April of this year.

The Taiwanese health system is ranked very highly in terms of ease of access, choice of doctors and hospitals and low premiums paid for health insurance,​” said Zhang. “The government is very much focused on cost containment now.  If you look at reimbursement prices in Taiwan, they are only some 51% of the median price for A10 countries [a reference to a basket of 10 developed markets].​”

The government’s drive on cost containment has a downside, added Zhang, in acting as a disincentive for R&D-based pharma activity. “It could hinder patient access to innovative drugs. That is one concern,​” he said. He also pointed to Taiwan’s interest in joining the Trans-Pacific Partnership trading block as having huge implications in terms of pharmaceutical prices; it could extend time periods for patents and market exclusivity.  “They are nowhere near getting accepted [to this trading block], but it is something to consider,​” said Zhang.

Zhang believes any deterioration in relations with China is unlikely.  “Ultimately the tone is set by Washington and I don’t think Washington wants to see chaos in the region,​” he said. There is already a huge interchange of people between Taiwan and mainland China. 

People from top universities in Taiwan get hired by multinational companies or even local companies in mainland China.  Also there is a huge presence of Taiwan companies in mainland China, especially in the province of Fujian, which shares the same dialect and culture.​”

Global Data, however, noted: “Although the economy continues to be strong and stable, the unrest arising due to free-trade agreement with China and Taiwan’s long-standing diplomatic isolation act as obstacles to economic development.​”

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