New Market Report: Taiwan Pharmaceuticals & Healthcare Report Q1 2013
2013-02-03 16:37:13 - New Healthcare market report from Business Monitor International: "Taiwan Pharmaceuticals & Healthcare Report Q1 2013"
BMI View: We continue to view Taiwan as a challenging market for multinationals, mostly on account of the difficult pricing and reimbursement environment, which is due to undergo further changes. Specifically, as part of the Second Generation National Health Insurance (NHI) programme, which becomes effective in 2013, a new reimbursement system is expected to be rolled out in Taiwan. The
American Chamber of Commerce in Taipei (AmCham), in its latest White Paper published in 2012, wrote that it hoped that the new system - known as the Drug Reimbursement Item and Payment Scheme (DRIPS) - will not become so complicated as to cause delays in patient access to innovative new drugs.
Headline Expenditure Projections
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* Pharmaceuticals: TWD135.10bn (US$4.59bn) in 2011 to TWD140.44bn (US$4.71bn) in 2012; +4.2% in local currency terms and +2.6% in US dollar terms. US dollar forecast back in the positive territory, unlike in Q412, on account of exchange rate fluctuations.
* Healthcare: TWD953.29bn (US$32.42bn) in 2011 to TWD1,018bn (US$34.15bn) in 2012; +6.5% in local currency terms and +5.3% in US dollar terms. Local currency forecast slightly up since Q412, on account of macroeconomic factors.
* Medical devices: TWD52.63bn (US$1.79bn) in 2011 to TWD55.09bn (US$1.85bn) in 2012; +4.7% in local currency terms and +4.3% in US dollar terms. Local currency forecast slightly up since Q412, on account of macroeconomic factors.
Risk/Reward Rating: Taiwan's score in the current version of our proprietary Pharmaceuticals & Healthcare Risk/Reward Ratings (RRRs) remains unchanged in relation to the previous year. With a composite figure of 60.2, Taiwan is again ranked sixth out of the 18 countries surveyed in the Asia Pacific region, above Hong Kong and below Singapore. Taiwan's risk component remains judged more favourably for multinationals than its rewards, which are subdued by factors such as relatively low pharmaceutical prices and opaque reimbursement.
Key Trends & Developments
* In July 2012, Taiwan-based ScinoPharm announced that it will manufacture topiramate, one of the APIs for Vivus' Qsymia (phentermine + topiramate). Qsymia is a treatment for obesity that was approved by the US Food and Drug Administration (FDA) on July 17 2012. Signifying the importance of the product to the US firm, Vivus' share price went up by 9.6% on the day the approval was announced. The move is in line with our view that offshoring manufacturing to low-cost bases will accelerate.
* In the same month, the government of Taiwan was urged to work with international pharmaceutical companies to ensure the development of a vaccine against enterovirus 71 (EV71). To date, Taiwan has registered 111 cases of EV71, according to the Centese for Disease Control. EV71 is a dangerous and potentially fatal form of foot and mouth disease that might also cause severe neurological disorders, the director of the infectious disease control department at Cheng Kung National University Hospital, Liu Ching-chuan, told the China Post.
BMI Economic View: We have continuously highlighted that new product launches towards the end of 2012 posed upside risks to our call for a further slowing in Taiwan's economy. Indeed, the rebound in output over the past few months came on the back of strong demand for semiconductors and electrical components, owing to a series of planned product launches such as Apple's iPhone 5. Taiwan is positioned at the start of the global tech supply chain and, as such, broadly benefits from the annual tech cycle as businesses constantly upgrade old products or launch new offerings. That said, a weakening external environment will continue to weigh on Taiwan's export-oriented economy and an expected modest recovery in Taiwan's manufacturing and exports is likely to be short-lived. Export orders remain underwater, having contracted for a six consecutive month in August 2012. With orders from Taiwan's major export partners continuing to look weak, any possible recovery in the demand for Taiwanese goods is unlikely to extend beyond 2012.
BMI Political View: Cross-strait ties continue to strengthen, with Taipei and Beijing having recently inked an agreement to establish a direct clearing system for each parties' currency. While no timetable has been set, such a mechanism means that parties on both sides of the strait will now be able to convert directly between the Taiwan dollar and the Chinese yuan, without having to first go through the US dollar. This move marks an important step in enhancing further cross-strait relations and is expected to foster closer trade and investment relations. Additionally, this enhances the possibility of Taiwan becoming a regional offshore yuan trading hub.
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