Taiwan will continue to represent a modestly attractive proposition for drug manufactures. Our view is based on factors such as the maturity of its pharmaceutical market, government encouragement of generic medicines and authorities desire to reduce unnecessary use of medicines. For example, the Bureau of National Health Insurance (BNHI) in Taiwan is cracking down on prescription drugs waste by tightening its oversight of prescription drug distribution. Therefore, we envisage that main drivers of the Taiwanese pharmaceutical market development will be volume- based, thus not necessarily translating into strong value gains, especially given the pending changes to reimbursement.
Headline Expenditure Projections
- Pharmaceuticals: TWD142.50bn (US$4.82bn) in 2012 to TWD149.90bn (US$5.12bn) in 2013; +5.2% in local currency terms and +6.2% in US dollar terms. Forecast broadly in line with previous quarter's projections.
- Healthcare: TWD975.96bn (US$32.99bn) in 2012 to TWD1,023bn (US$34.93bn) in 2013; +4.9% in local currency terms and +5.9% in US dollar terms. Forecast broadly in line with previous quarter's projections.
Risk/Reward Rating: Taiwan again occupies sixth position in our latest Pharmaceutical Risk/Reward Rating (RRR) assessment of the 18 key markets in the Asia Pacific region. The new Risk and Reward assessment tool is more transparent and more sensitive in regards to potential rewards. While it is a small pharmaceutical market, Taiwan boasts above-average Rewards and Risks, propped up by factors such as the high per capita consumption of medicines.
Key Trends & Developments
- In February 2013, Japanese company Eisai's subsidiary Eisai Taiwan reached a deal to divest a plant in Tainan, Taiwan, to Taiwanese pharmaceutical company Bora. The move comes as the company is revamping its production network. The company is selling the plant as it does not comply with its new global-centric approach. The divestment is likely to be finalised by September 2013. The plant, which became operational in 1974, has manufactured medicines for Asian markets. The financial details of the deal have not been disclosed. Eisai Taiwan is a wholly-owned subsidiary of Eisai. Its Tainan plant has approximately 130 employees, approximately 50 of whom are employed at the Tainan plant.
- In December 2012, the US Food and Drug Administration (FDA) issued a warning letter to Taiwan Three Mast Pharmaceutical for serious manufacturing violations. The FDA inspectors, following an April 2012 audit of the facilities, reportedly found that the company was not testing APIs to find out whether finished products met strength criteria. The company did not even have written procedures for making sure that API testing happened. The warning letter also stated that the company's manufacturing processes for a number of products - including Imbue Pain Relief Patch, Panlax Herbal Patch, Panlax Herbal Balm, and Panlax Herbal Cream - are not authenticated. There is also no surety regarding the skill set of employees, and whether they have been offered adequate training.
BMI Economic View: Taiwan's central bank announced in March 2013 that it expected inflationary pressures to subside through the rest of 2013, which chimes with our outlook on consumer price inflation (CPI) in the course of the year. We still believe, however, that consensus', and the central bank's, expectations towards economic growth continue to be overly optimistic, despite recovering export performance and homebound investment in recent months.
BMI Political View: A number of positives have emerged from Taiwan of late, particularly on the trade front, as Taipei and Washington recently resumed trade negotiations following a six-year hiatus. While any economic benefits are only likely to transpire over a longer-term, we believe a more important development lies in Taiwan's gradual breakaway from the political isolation it has had to endure in the past few decades. While still in the nascent stages, the recommencement of bilateral trade talks sets Taiwan on a path towards achieving its longer term goals of establishing not just a free trade agreement (FTA) with the US, but also gaining entry into the Trans-Pacific Partnership (TPP) - a proposed trade bloc that includes the Pacific Rim countries.