ࡱ> GE@AH% 0bjbj%% aGGy!l>>>$$"""8"dL#$v#$$%%E'E'E'  $1 Q:0EE'#'"E'E'E'0*%%{u***E'%% *E' *^*S+JFx\%# _C t$"'(zB.0z2'(*$$The Development of the Traditional Chinese Medicine Industry in Taiwan: A Welfare Challenge in Access to Medicines for the Elderly? Jerry Hsiao, Doctorate Associate Queen Mary Intellectual Property Research Institute, University of London Email:jerry_hsiaoUK@hotmail.com  Paper for the EASP Second Conference-Pressure, Policy-Making and Policy Outcome Understanding East Asian Welfare Reforms 30th June-2nd July, 2005. University of Kent The Development of the Traditional Chinese Medicine Industry in Taiwan: A Welfare Challenge in Access to Medicines for the Elderly? Jerry Hsiao, Doctorate Associate Queen Mary Intellectual Property Research Institute, University of London Email:jerry_hsiaoUK@hotmail.com Abstract Traditional Chinese Medicine (TCM) has a rich history and is widely used in Taiwan. As Taiwans aging population grows, medicines that will meet their particular needs are in high demand. TCM appeals to elder people because of its superior effect in treating chronic diseases that plague this age group (those aged 65 or older) for which it produces significantly fewer side effects than its Western counterparts. Since 2002, the Taiwanese government has aimed to spend $1.5 billion dollars over the next five years to build up and modernize its TCM industry. This modernization process will lead the pharmaceutical industry of Taiwan to prosperity, but it will result in research results being protected by intellectual property rights and will thus change the status of TCM from dietary supplements to prescription drugs. This could raise the price of TCM significantly and may lead to a reduction in welfare for elderly members of the society. The National Health Insurance (NHI) currently covers TCM and a price hike will surely contribute to a heavier financial burden on the already financially tight NHI scheme. This paper explores the trade-off between local industrial growth and the welfare of the elderly in accessing essential medicines. Introduction Traditional Chinese medicine (TCM) has a rich history and is widely practiced around East Asia. Today, following the success of the electronics industry, the government of Taiwan aimed to achieve the same in the biotechnology and pharmaceutical sector, a sector believed to be the star industry of the 21st century. However, to invest in the biopharmaceutical industry, a high level of human resources is required and large sums of money must be spent on conducting research and development. Currently, Taiwan does not have any multinational biotechnology or pharmaceutical companies like those of Western Europe or the United States. Instead, the industry is comprised of mainly Small and Medium Enterprises (SMEs) without much significant R&D. Because of the long history of use of TCMs in Taiwan, the country is well suited to exploiting this potential niche sector in the global biopharmaceutical market. To promote innovation, intellectual property serves an important role in todays business world. For example, a patent helps a company to gain a monopoly right in the invention in order to recoup its expenses in developing the product or process. The dilemma here is that traditional medicines are the products of traditional medicinal knowledge that has been around for thousands of years. Thus, they consist of knowledge that is in the public domain which is freely available to everyone. Therefore, the application of IPR will secure the knowledge in the hands of a few for a limited period of time. Prof. Carlos Correa has argued in his article that a tension arises between those who exploit knowledge or who share in the benefits of such commercialization but at the cost of limiting access to traditional medicine by those who need the medicines and treatments. The purpose of this article is to test that statement to find out whether industry building in TCM might affects peoples ability to gain access to medicines, especially the elder people with chronic diseases in Taiwan who are most likely to be affected. The Aging Trend Heroes grey and beauty fades. Aging populations are becoming a worldwide trend as people born in the baby-boom years are growing old. According to the population study conducted by the United Nations, when over 7% of a countrys population is aged 65 and older, that country is considered to be an aging society. According to another United Nations study, the worlds elderly population is now growing at a rate 2.4% per year and increasing much faster than the global population as a whole. Aging is a fear for many people and the fight against aging is not a recent phenomenon; it is believed that 2,200 years ago the Qin Emperor, the first man to unify China, sent Xu Fu to what is now the modern day Japan in search of the elixir of immortality. In the Taiwan of 2005, the aged group accounts for 9.56% of the entire populationor around 2.16 million people. This aging phenomenon is especially prominent in developed countries such as France, Sweden, Germany, the U.K., the U.S. and Japan. During the past decades, up until the 1960s life expectancy increased significantly as a result of improved social conditions, sanitation, hygiene, nutrition and working conditions. Nowadays improvements in medicine and medical technology have helped to prolong peoples life span. This increase of life expectancy is considered to be a mark of successful civilization. Today, Taiwan has approximately 23 million people with comparable living standards to that of many Western countries and the life expectancy is 72.6 for men and 78.3 for women. The aging population brings several new demands and challenges: 1.) an increase in total health expenditure; 2.) a change of disease pattern with a greater concentration on chronic diseases such as cancer, heart diseases and diabetes mellitus; 3.) a decline in numbers in the labor production force; 4.) a heavier burden on society both in terms of social welfare and health care. Traditional Chinese Herbal Medicines: Definition In Taiwan, TCM is defined as followed: Chinese medicine encompasses acupuncture, moxibustion, and other components of the Chinese medical system; it relies primarily on the prescription of herbal formulas. As the appeal of natural medicines increases all over the world, more efforts have been made to scientifically research on the efficacy and pharmacology of todays herbal medicines. The popularity of manufactured herbal formulas in the western hemisphere is due to the convenience and quality of dried extracts, the advancements in encapsulation and tableting technologies, and the availability of single herb extracts for making new formulas. Ultimately, the tradition of Chinese herbal medicine can play a valuable role in the modern medicine industry. TCM are categorized in three categories: Traditional formulas: Formulas that have appeared in the traditional text or concentrated products made from those texts. Non-traditional formulas: Formulas that were not included in traditional text; these ranged from modified formulas, to entirely new formulas that use diverse array of herbs. Botanical derived drugs or herbal extracts (including mixed or pure compounds). The occurrence of many non-fatal chronic diseases requires medicines that can handle the prevalence of those diseases. Traditional Chinese herbal medicine appeals to the elder people for its mild therapeutic value and the fact that it has fewer side effects than conventional drugs. It is vital to provide suitable drugs for the chronic diseases, especially for the elderly who as an age group require three to four times more medication than the younger generation. Conventional drugs are chemical drugs that cure the disease based on an active chemical substance. They are far more effective than herbal drugs but, on the other hand, they are also far more poisonous. The differences between TCM and Western medicine is that although both have the same roots in herbal medicines, Western drugs have evolved with the birth of chemistry and industrialization in the 18th Century and now the herbal medicine in the West is based on extracting essences from the herbs. Despite the modern day dominance of Western medicine, TCM is still thriving in East Asian countries like Taiwan, China, Hong Kong S.A.R., Singapore and Malaysia. Nowadays, TCM has gained much popularity in the West, according to research done between 1990-1997 in the U.S. suggesting that a substantial increase in the amount of people seeking alternative medicine and the total amount of out of pocket expenditure for alternative medicines is comparable to the total US physician services in 1997. In order to combat aging, the Taiwanese people have spent a considerable amount of money in purchasing health food products /dietary supplements-NT$20 billion in 1998 alone. This leads us to explore what are traditional Chinese herbal medicines. Traditional Chinese Medicine: The History and Art The origins of Chinese medicine are thought to date back to 2910 B.C. It is said that the first emperor Hu Hsi advocated the doctrine of Ying and Yang which became the philosophy for Chinese medicine. The second emperor compiled the Shen Nongs Herbal (Shen Nong Ben Cao Jing), the earliest material medica in which 365 drugs were categorized into three categories: superior, medium and inferior. Nowadays the mainstream knowledge is based on The Yellow Emperors Classic of Medicine (Hunag-Di Nei Jing) written in the 2nd century B.C and the Treatise on Febrile Diseases (Shang Han Lung) written in the 3rd century A.D. It developed in the following centuries, was fully documented and could show its safety and efficacy by drawing on the experience of thousands of years. TCM is an art as well as a science. It exists not simply as medicine or therapy but it also represents Chinese philosophy, describing how humans interact with the natural world. The knowledge centers on the balance of Ying and Yang inside a human body. TCM practitioners argued conventional medicine focused on the Ying part of the body the substance of the body cells and chemicals, whereas TCM works more on the Yang part on the energy that animates those cells. Unlike Western medicines which aim to identify a particular chemical, hormonal or biological imbalance and to treat the symptom with a counteracting medicine, TCM seeks to cure the disease through achieving a point of equilibrium in the human body. TCM focuses on health maintenance and in the treatment of diseases emphasizes the enhancement of the bodys resistance to diseases. According to Lee from Natural Products Laboratory, University of North Carolina-Chapel Hill, different herbs used in TCM have different properties and effects, leading to different results in the body. Such properties include the 4 essences( cold or cool drugs for Yang diseases, warm or hot drugs for Yin diseases), 5 flavors( pungent, sour, sweet, bitter, salty), 4 directions of action( ascending, floating, descending, sinking), and 7 effects( single, additive, synergic, antagonistic, inhibitive, destructive, opposite) . Thus, many different herbs with different pharmacological actions are typical in TCM. Those terms together with knowledge regarding to Qi in the human body, and pulse analysis in diagnosis are however, not easy to define such concepts in modern- day Western scientific terms. This has caused to the near abandonment of TCM in early 20th century China in a time of turmoil when many Asian arts and sciences were discriminated against and categorized as unscientific by the dominant Western thinking. Traditional Chinese Medicine: Utilization in Taiwan TCM has been practiced in Taiwan since the 16th Century. It was first introduced by the early Chinese immigrants and all the TCM practitioners gained their knowledge through apprenticeships. After Taiwan was ceded to Japan by China in 1895, the Japanese government began to replace TCM with Western medicine. The status of TCM declined gradually and by the time Japan left Taiwan in 1945 there were less than 20 TCM practitioners left. After the Nationalist government took over Taiwan in 1945, they adopted a dual approach of recognizing both TCM and Western medicine, but under the modern dominance of Western medicine TCM served more in a complementary than as an integral role( in other words, it was not in the mainstream of medical practice). TCM was used to treat chronic conditions like back problems, anxiety, depression and headaches in the U. S. In Israel, TCM is used to cure musculoskeletal and respiratory problems. In Taiwan, according to a research conducted by Dr. Chou et al from the Institute of Public Health at National Yang-Ming University, peoples approaches to TCMs can be divided into two categories: 1.) single treatment method( seeking help either from Western medicine or TCM only); 2.) dual method approach (seeking help from both Western medicine and TCM). Dr. Chou et al found that within the single treatment approach, there were adherents of folk-religion, farmers and businessmen; and patients who suffered from musculoskeletal, sensory organs or skin disease disorders favored TCM. Amongst patients who adopted a dual-treatment approach, patients with folk-religion beliefs or respiratory diseases favored TCM. So, what knowledge, attitudes and behavioral intentions do TCM users in Taiwan have regarding TCM? According to Dr. Chou et al, TCM users believed that TCM was herbal drugs made in different forms according to drug character and effect. They favored TCM over Western drugs because the side effects of Western drugs are more pronounced than those of herbal drugs, the nature of herbal medicine is bland and the sustained effectiveness of Western medicine is shorter than that of TCM. In the year 2003, the total number of TCM clinic outpatients aged 65 or above was 512,892 and the top three disease categories were: 1.) musculoskeletal system and connective tissue diseases; 2.) signs, symptoms and ill-defined conditions; 3.) diseases of the respiratory system. Traditional Chinese Medicine Industry Building in Taiwan The wide spread enthusiasm for herbal remedies in the West has sparked an interest among the East Asian countries as well. Former Hong Kong S.A.R.s Chief Executive Tung Chee Hwa has laid down a 10-year plan to make Hong Kong the foremost international center for Chinese herbal medicine. Likewise, Chinas Ministry of Science and Technology has made the modernization of traditional Chinese medicine one of the 12 focal points in the current Five-Year Plan with $3.6 million being allocated to screening both conventional chemical compounds and medicinal herbs for potential drugs. Taiwans pharmaceutical industry began in the 1930s and was greatly stimulated by Japans invasion of northern China and the end of World War II. By 1990, Taiwans pharmaceutical industry accounted for $1.1 billion or 0.7 % of world total pharmaceuticals manufactured. In 2001, the production value of Taiwans biopharmaceutical industry amounted to NT$100.9 billion. Out of this total, the pharmaceutical industry accounted for NT$51.4 billion, pharmaceutical raw materials /or active pharmaceutical ingredients (API) NT$4.1 billion, the production value of western drugs reached NT$43.1 billion and Chinese herbal medicine valued at NT$4.2 billion. Taiwan has 490 pharmaceutical manufacturers with an average production value of NT$100 million. This accounts for 0.5% of the total production in global pharmaceutical industry. Taiwans pharmaceutical industries are comprised largely of SMEs with little R&D in developing new drugs. Instead, their businesses are based primarily on the production of generic versions of patent-expired Western drugs. As part of a national policy to boost the biotechnology industry, starting from 2002, Taiwan aimed to spend US$1.5 billion in complying with the Ministry of Economics proposal to build up Taiwans herbal medicine industry over the next 5 years and the research focus will be on asthma, anti-aging, liver-related diseases and immune-related diseases. Taiwan has the potential to become the worlds largest supplier of herbal medicines in the future. Currently it ranks in the top three, alongside Japan and Germany for R&D, manufacturing and quality control of herbal medicines. The herbal medicine industry building is aiming to make TCM scientific through rigorous clinical studies to prove the safety, efficacy and quality of the medicines, thus transforming TCM from the mere production of different delivery models obtained from ancient texts to high quality clinically proven drugs for which patent protection can be obtained. Currently, the herbal medicine industry in Taiwan is structured as followed: dietary supplements make up 70% of the market, scientific herbal medicines 13%, functional foods 10% and traditional Chinese medicine 7%. The local Traditional Chinese herbal market is estimated to be around NT$ 15-25 billion dollars. In the EU, annual sales have been estimated at $ 7 billion and annual sales in the U.S. in 1997 to have increased to $ 5.1 billion from $200 million in 1988. The value of global herbal medicine market value is predicted to reach $40 billion in 2006. Graph 1 Global Market  Source: Information Center of the herbal medicine industry, DoIT, MoEA Graph 2 Domestic Market  Source: Information Center of the herbal medicine industry, DoIT, MoEA However, unlike its Western counterparts whose pharmaceutical industries began in the 19th century, Taiwan was a late starter in this pharmaceutical race and as seen above Taiwans herbal medicine market is still relatively small. Currently dietary supplements are the major market targeted by the herbal industries due to the difficulties in passing drug regulatory tests like the U.S. Food and Drug Administration (FDA). However, recognizing the growing popularity of TCM in the U.S., the FDA introduced Guidance for Industry Botanical Drug Products which lowers the stringent drug regulatory requirement for these products, potentially enabling the transfer of dietary supplements into new drugs. In 1998, Taiwan spent almost 6.0 % of GDP on health of which pharmaceuticals accounted for 25% of the amount, in which foreign pharmaceutical firms had 70% of the market share. The TCM industry is being developed as a niche market that the Taiwanese government wishes to succeed in this well-established global pharmaceutical sector. Taiwans National Health Insurance The building of local industry and the promotion of medical innovation depends largely on the willingness of consumers to pay. In Taiwan, the National Health Insurance plays a major role in this process because it pays for the drugs prescribed to the patients. Unlike the pharmaceutical industry, the health care insurance in Taiwan is very established. Taiwans NHI was introduced in March, 1995 and is a government run, single layer national health insurance financed through a mixture of premiums and taxes, comprising a mixed public and private delivery system on a fee for service basis. The NHI incorporated three objectives: 1.) to provide equal access to adequate health care for all citizens in order to improve the health of the Taiwanese people; 2.) to control health care costs at the reasonable level; 3.) to promote the efficient use of health care resources. The NHI replaced three existing health insurance programs which covered 57% of the population, these were: labor insurance, government employee insurance and farmers insurance. By 2003, the NHI covered 97% of the population. Amongst those covered are people who were not insured previously, especially amongst the workers of small firms, children, women, the aged and non-working adults. Now the NHI covers the entire population regardless of their age, sex, family, income, health status even their nationality-foreign nationals with Alien Resident Certificates who have resided in Taiwan for more than four months are entitled to the same benefits. According to Chang, Taiwan spent $13.5 billion on the NHI. The cost was primarily covered by a pay roll tax premium; with additional subsides from the governments general revenue. In 2004, a worker paid a 4.55% of payroll tax premium for each covered person in his family. Employer contributed 60% of this sum, the workers 30%, and the remained 10% was subsidized by the government. The government fully subsidized the poor, granted 40% subsidies for the self-employed farmers and 70% subsidy for veterans. The NHI has thus became one of the most popular social welfare policies in Taiwan, as evidenced from the satisfaction ratings, jumping from 20% when the NHI was first introduced to 81% by the end in 2004.The introduction of the NHI has reduced the two most significant blocks to peoples entitlement to health care-cost and access. Hence, the NHI has been praised as the most satisfying policy made since the governments relocation to Taiwan and The Economist has ranked Taiwan second only to Sweden for the quality of health care in advanced industrial countries and newly industrialized countries. Graph 3 History of Taiwan NHI 1950Labor Insurance ( Covering 40.12% of population)1958Government Employee Insurance (8.06%)1985Farmers Insurance (8.21%)1990Low-Income Household Insurance (.055%)1995The total population covered by these separate insurance schemes was 56.94%Phases in the establishment of NHI1986-1993Planning1993-1994LegislationMar 1 1995Implementation (expansion added 41% of the population to NHI)2003NHI covered 97% of populationSource: Cheng 2003 The NHI covered a wide range of services, includes inpatient care, ambulatory care, laboratory tests, x-ray examinations, pharmaceuticals, dental services, traditional Chinese medicine, day care for the mentally ill, and limited home care. The NHI also covered four preventive services-adult health examinations, pre-natal examinations, well-baby check ups and Pap smear examinations and several expensive treatments such as the cocktail therapy for HIV-positive patients. Global consensus has it that while not everyone is entitled to things he/she desires whether it be a cup of Starbucks coffee or a Mercedes Benz, when it comes to medicines, everybody should have the right in access to them because they matter to ones survival. According to the Taiwan Pharmaceutical Affairs Law medicines are sorted into four categories, namely: i) prescription drugs, ii) indication drugs, iii) over the counter (OTC) drugs and iv) traditional Chinese medicine. Currently, the NHI excludes the coverage of OTC drugs and indication drugs. In 2000, Chinese medicine accounted for only 4% of the NHI spending. However, as the aging society continues to expand, more TCMs will be used to avoid the numerous side effects that accompany treatment with conventional pharmaceuticals and because of the growing need for drugs that address illnesses associated with aging and senility. The inclusion of traditional Chinese medicine within the scope of the NHI encourages peoples access to it. According to Chi et al, they have found that if a countrys health care system does not discriminate between Western medicine and Chinese medicine, patients can freely choose between the two and gain potential benefits from both systems. In theory, the building of the TCM industry in Taiwan can lessen Taiwans dependence on foreign drugs and drug innovation can reduce spending on medical care. However, this statement can be questioned because insured consumers pay only a fraction of the price of care, and also price is less of a concern to them. Thus health insurance subsidizes investment in medical research, but it also encourages research into quality-improving innovations, rather then focusing on reducing costs. Old Age and the NHI The Taiwanese elderly accounts for a significant portion of health care expenditure, in 2000 the Taiwanese elderly spent 4.6 times more than the 0-64 age group.To take care of the aging society, the government of Taiwan has passed the Elderly Welfare Law in the 1980s regarding elderly rights to health, life and welfare. According to Section 21 of the Elderly Welfare Law, if the elderly are not able to pay for the insurance fee, out-of-pocket fees or services not covered by the NHI, the local government should assist in covering those fees. In Taipei for example, any elderly person aged 65 years or above and who has resided in Taipei for more than one year or any aboriginal aged 55years or above does not have to pay out-of-pocket insurance fees. The aging society means that in the future, fewer people will pay the insurance fees. This will definitely change medical use patterns for the elderly based upon the presence of a moral hazard in the medical care market. The insured person has a strong incentive to over-utilize medical services due to lower health expenditures through national health insurance. In Taiwan, a citizen makes 14.8 visits to hospitals per year which is four times the average of Europe and the U.S. The spending for the NHI was so high that in 2002, the NHI is forced to increase the insurance premiums. A similar situation arose in Japan during the early 1970s, when the Law for the Welfare of the Aged was introduced. Because of the law, problems have occurred as the health insurance system based on fee for services, payments tended to provide greater compensation to service providers with emphasis on curative care instead on preventive care and such pattern is not appropriate to the needs of chronic illness faced by the elderly. Therefore, in 1982 the Law of Health and Medical Services for the Aged was proposed to abolish the free medical care for the elderly and introduce co-payment to the elderly as they were unaware of the cost and were said to take advantage of the free services. The law also focused on more on preventive care. Since the older population suffers mainly from chronic diseases, the continuing prescription of medicines contributed to higher financial burdens. To constrain the rise in the usage of outpatient prescription drugs, the NHI implemented an outpatient prescription drug cost-sharing program beginning in 1 August 1999. The program imposed no charge for outpatient prescription costing less than $3.125 and an additional charge of $0.625 for an increase in drug costs of $3.125 until $15.625 was met. In Taiwan prescription medications are for a few days and thus require multiple visits. Repeat visits require an outpatient visit charge. High frequency outpatient visits occur for two reasons: 1.) co-payment was low and designated to encourage patients to use clinics rather than medical hospitals; 2.) the NHI reimbursement for physicians is based on fee-for service, making it an incentive for doctors to encourage frequent outpatient visits. To decrease the number of outpatient visits, the cost-sharing program excludes people with chronic diseases who need continuous prescriptions. They are to receive free medications for up to 30 days and the medications can be delivered at once. Paying for health care is a huge issue under any national health insurance system. According to Fuchs: Except during an economic depression, no magic wand of finance can divert labor, capital, and other resources to medical care without resulting in a reduction in resources available for food, housing, education, recreation nor other goods and services. Nor is there any secret formula that can transfer the cost of health to government or business without the burden eventually being borne by the public through more taxes, higher prices, or lower wages. NHI and the Reimbursement for Drugs The broad coverage of NHI enables doctors to dispense newer, more expensive drugs over older and less expensive drugs. In Taiwan, drug costs contributed most to outpatient cost (about 33%), with an annual increase of 13%. The elderly comprised 8.6% of the population but they accounted for 26.5% of total health expenditure. Health providers obtain their revenue from three sources: payment by the NHI, patient user fees, co payments, sale of payments of products and services not covered by the NHI. Generally, experts believed that fees paid by the NHI were too low. This created two problems of high drug expenditure in Taiwan: doctors prescribed more drugs than necessary and hospitals were allowed to sell drugs to patients at a higher price than they negotiated with the drug companies, creating a drug price black hole and over medication to patients. In Taiwan, the NHI purchases 96% of the drugs on the market and reimbursed hospitals and clinics that dispense them. In recent years, the NHI reduced the profit margin by reducing the reimbursement rate for drugs and use reference pricing to save the cost constraint. In addition, patients must pay 20% co-insurance on drugs. However, going to a hospital in Taiwan is still relatively affordable for almost anyone. One pays around $20 per month as an insurance fee and around $2-10 for an outpatient visit. Anyone can freely choose any hospitals he/she desires. Liu and Romeis have found out that elderly Taiwanese with non-chronic diseases were more sensitive to drug cost-sharing and more likely to reduce drug utilization when compared to elderly people with chronic diseases. They found that since the elderly mainly suffered from chronic diseases that cost-sharing may not be a very effective way for cost control unless significant out of pocket costs are imposed. They also suspected that the elderly are increasingly seeking outpatient drug prescription in health institutions of higher accreditation status; they found that the share of outpatient costs in academic hospitals increased from 24.62% in 1998 to 29.07% in 2000 but in contrast with local clinics the outpatient drug costs decreased from 36.13% in 1998 to 30.68% in 2000. Graph 3 shows the co-payment rate for outpatient care, in order to reduce the financial burden. The NHI is proposing to increase co-payment for outpatients and the increase in academic hospitals is the highest. In addition, the NHI is proposing to change the co-payment cap for drugs from NT$200-NT$300 that is due to be enforcing next year. Graph 4 Proposed Changes in Co-payment rates for outpatient care Level of Service ProvidedOutpatient CareClinic50District Hospital50(80Regional Hospital140(240Academic Hospital210(360Graph compiled by author Value in NT$ Dollar For example, if a patient goes to an academic hospital, he pays NT$100 to visit the hospital, NT$360 as co-payment and if he needs medicine, he pas up to NT$300 maximum. Therefore, in total he pays NT$760. Taking the total and multiplying it by the average number of outpatient visits in Taiwan, which is 14.8, will equal to NT$11,248. This will be NT$3000-4000 more than the current rate. To lessen the financial constrain the NHI also imposed global budgets for dental service in 1999, traditional Chinese medicine in 2000, primary care in 2001 and hospital in 2002 hence, creating a complete global budget for the NHI. A global budget is defined as comprehensive plans for the financing of health programs, allocation of funds, and predicting and funding expenses. In Taiwan, global budget is the total health care cost budget for the year taking account of the aging of population, wage, price increases, and new medical technology then negotiate with the provider to adjust fees schedule to pay for services within the restraints of that budget. (The fee-schedule multiplied by the volume of services can not exceed the global budget, when the budget is exceeded; the fee schedule is reduced proportionally). As mentioned earlier, TCMs are not categorized as prescription drugs or as non-prescription drugs in Taiwan and Taiwan might be the only country in the world now that still separates medicines into Western and Chinese. Drug prices for TCMs are relatively lower than that of the prescription drugs but prescription drugs are much more important than nonprescription drugs from both the medical and economic point of view. The separation of Western medicine and Chinese medicine has caused ambiguities in regarding to the definition of prescription. According to the Principle on the Drug Reimbursement Listing in National Health Insurance, prescription drugs are drugs that have received regulatory approval and have been registered at the central health authority. The NHI does not reimbursed non-prescription drugs and TCMs will be reimbursed limited to those concentrated only for dispensing a prescription and prescription only used by physicians (Chinese medicine) and manufactured by approval GMP Chinese medicine company; Compounding concentrated Chinese medicine shall be listed in Standard formula of clinically common used Chinese medicine edited by central health authority. The introducing of global budget does not necessary lowered down the financial burdens because the global budget has created prisoners dilemma amongst hospitals, since no body knew how much other hospitals or doctors are prescribing, the only reasonable manner is to maximize ones own profit. Although there was an overall decrease of spending in 2002 but currently, the NHI spending has again expected to exceed its revenue this year, which leads to voices proposing to abolish prescription drugs coverage under the NHI. NHI vs. the Adoption of New Technology and Intellectual Property A generous health insurance results in higher expected returns from health care providers; this motivates the growth of biomedical research and encourages hospitals to adopt more expensive medical technologies. In 1995 in a survey to fifty leading health economists, 81% agrees that the primary reason for the increase in the health sector share of GDP over the last 30 years is due to the technological changes in medicine. The advance of medical technology changes the demand for health insurance that with the rising of medical technologies costs more insurance will be demanded. The technology change enables patients on the demand side to expect longer lives, access to more effective therapies and more choices in making individual health care choices. On the supply side, innovators will increase the R&D funding being channeled into the health technology fields from both public and private sector sources and building on new developments in drugs, medical technology, among the others. Based on that statement TCM industry building will increases its cost, in 2002, TCM consists of only 4% of NHI spending, however, the NHI coverage encourages patients to seek for newer and better drugs and hence make it worthwhile for drug companies to develop drugs that are more new. The NHI together with the potential to obtain intellectual property rights protection such as patent both served as incentives for local industrys interest in TCM as it creates possibility for profits. Nevertheless, what is the role of patent in helping to secure profitability for the drug companies? Generally is through the granting of exclusive rights, the economy theory of intellectual property is that intellectual inventions are public goods that are much easier and cheaper to copy than to produce in the first place. Absent some form of exclusive rights over inventions no one will bother to innovate, so patents solve the problem by privatizing the public good to provide the incentive in engaging R&D. Patents are considered the most important of intellectual property rights as it served to secure market monopoly for a period on innovative products and processes and their role is crucial in both the marketing and pre-marketing stage of such product and process. Patent allows the company to be defended from competition within the years of patent term and allows them to recover R&D and to maximize their profits. The prolonging of patent lives and broadening of the patent protection extends the barrier of competition and greatly increases the profit margin. With some sort of protection inventors are more willing to put their invention to the public without being misappropriated by its competitors. There are three requirements for patentability which are: novelty, inventive step and industrial applicability. Because TCMs are ancient knowledge and have been codified, companies could not patent something that is not new, they have to alter it significantly therefore building up TCM industry is not as easy as merely following what the ancient books have already reveled and all the expenses conducted on meeting patentability will incur onto future drug prices. When it comes to traditional medicines, granting property rights to several private companies has always been controversial and can only be justified not by the amount of money spent but by whether if new medicines create welfare gains for the patients. The rise of drug spending and insurance co payment for drugs means that people have to pay more out of the pocket for their medicines. This trade-off creates dilemma as according to Fuchs, if promoting innovation were not a consideration, consumers would be better-off if patents did not exists and any company was free to produce any product but on the other hand this removes the incentive to conduct R&D. In Taiwan, Chou et al have found that the adoption of NHI has increased the adoption of technology and is more in private hospital than public teaching and non-teaching hospitals. The reason is that since under the NHI all patients can freely select their hospitals, hospitals face inelastic demand for medical care services and have little incentive for price competition but more likely to engage in non price competition, competing for patients by providing the latest technology. Nevertheless, how fast will the patients are affected by the impact of technology? According to Fuchs, that question is rarely simple or immediate, unless the drug is a breakthrough drug like Viagra"! that might have an immediate impact; most of the new drugs are utilize more upon the building of confidence by the doctors. For the short term the problem of increase in drug prices might not be eminent initially but the further development, refinement, and diffusion of the technology will result in large increases in spending and the rate of increase tend to be more rapid in old ages. Interaction of NHI and TCM Industry Building Under the global budget of NHI, drug price has been controlled. According to Art.49(3) of the NHI The allocation ratio and a system of separating accounts for medical and pharmaceutical expenses may be established in regard to the budget for payment of the ambulatory care described in the preceding paragraph, according to the ambulatory care services provided by physicians, Chinese medicine doctors and dentists, pharmaceutical services and expense of drugs. Drugs, priced medical devices and materials shall be reimbursed at cost and Art. 50(3) The ambulatory care drug expenses shall be paid to the contracted medical care institutions after being examined by the Insurer. In case the payment of expense exceeds the total of drug expense preset according to the preceding article, a certain ratio of the excessive amount shall be deducted from the budget for the ambulatory care for the current season. In such a situation, the Reference List for Drugs shall be adjusted in the following fiscal year. Hence, the global budget constraints hospital and doctors freedom in prescribing drugs, the switching of TCM from prescription drug or the price rise due to patent monopoly might not necessary leads to unaffordable price rise. Since the NHI provides universal care for all the Taiwanese people, the situation in the United States where the insured are able to enjoy the benefits of new technologies while those uninsured has to pay out-of-pocket for the medical expenses might not occur in Taiwan. However, one of the difficulties in health care policymaking is to that making innovation affordable slows innovation. Universal health care provides overall justice and equity for the society but it is now creating several dilemmas in Taiwan: First, If more elderly people do not have to pay for the insurance fees or are getting subsidy then the NHIs financial burden will not likely be lessen. The NHI has to find other financial resources or constrain the utilization of health care services but that will lead to welfare reduction for the elderly; Second, as mentioned earlier, technological innovation depends heavily on consumers willingness to pay, cost containment in the NHI might not create a healthy environment for building infant industries like TCM. Currently, NHI reimbursed generic drugs almost the same cost as those innovative drugs, this has been criticized by the foreign multinational pharmaceutical companies as a policy to promote its generic industry and this is understandable since Taiwans pharmaceutical industries do not conduct much R&D as mentioned earlier. This could be a deliberate attempt by the Taiwanese government and the Japanese government in the past adopted a similar protective strategy. Foreign clinical test data were unacceptable in Japan for racial difference reasons and local clinical trials were required in order to receive local marketing approval. This requirement has successfully delayed foreign competition to several years. However, the similar reimbursement rate for both generic and innovative drugs certainly does not create incentives for local innovative industry building such as the case of TCM; a suggestion is to implement Article 49(3) of the National Health Insurance Law accordingly. Conclusion In conclusion, the universal coverage essentially benefits all who lives in Taiwan but the NHI is not a flawless system and as other countries, financial burden is the hurdle to take better care of its people. According to Fuchs, he suggested that there is only one way to slow down spending growth, which is to slow down the growth of services to patients, since technology is the principle force behind the growth in use of services but it also means the slowing down of development and diffusion in new technology. Is this what the Taiwanese wants? The increase of new medical technologies attributes to longer life expectancy and better health status for the elderly and the development of TCM creates medical pluralism for the patients, which allows them the right to choose the kind of medicines that best suits their needs. While some might argue that new and better drugs push people to doctors for more prescriptions; on the other hand some have argued that new and better drugs could actually keep patients-especially those with chronic diseases more stable and away from extensive medical labor care. Overall, the high-price new drugs may be the cheapest weapon in our struggle against rising overall medical expenses. Pharmaceutical innovation is hugely expensive, although the real R&D conducted by pharmaceutical industries were not clear but taking the United States pharmaceutical innovation experiences as an example, the price of brining new drugs to the market accounts to $802 million estimated by the Tufts University Center for the Study of Drug Development. Currently, the amount of R&D expenses conducted on TCM is not clear, however, evidences do showed that the development model trend for herbal medicines is inclining to follow that of Western drugs and is likely to cause price hike in the future upon successful products into the market. There are already some herbal products, which have received patent protection, but currently none of the products has passed the drug review under the FDA to be categorized as medicines. For now, it is a bit early to assess the impact of industry building in TCM without case studies comparing the impact of herbal products becoming medicines and hence shows tendency of creating access to medicines problem for elderly in Taiwan. This paper assumes that access to medicine problem for now is unlikely due to global budget and an immature TCM industry, more future research has to be done. Conventional wisdom has it that social and industrial policy attributes to different policy domains but the government of Taiwan should inter-link the two and set for a balance in the technological innovation and the protection of the elderly welfare. Should industry innovation be slowed or should elderly people pay more for their own well-being? To become a welfare state and taking care of the aging society means that the Taiwanese government has to consider the policy conflicts in health care for the elderly and the commitment to industry building and how the question to be solved by the interest of all parties with financial restrains. In the end of the day, industry building in TCM for Taiwan means transforming from high-tech value adding industry to a truly innovative ones. In the end, TCM industry might even help to lessen the financial burden of the NHI in the future since it focuses more on preventive than curative medicine, which is the competitive strength that Western medicines lack. Taiwanese government should consider how to constraint the escalating healths care spending on the one hand and the direction to cost-reducing technologies and the same time to avoid the reducing of incentives for R&D at the primitive stage of industry building. The dilemma is not a straight away answer, the interaction between elderly health welfare and local industry building is at stake that needs to be further research and solve by the wisdom of the Taiwanese people. References Primary Resources: National Health Insurance Law Principle on the Drug Reimbursement Listing in National Health Insurance Pharmaceutical Affairs Law Statistic Report of the Department of Health 2003 The Small and Medium Enterprises Standards The Welfare Law for the Elderly Secondary Resources: Articles Cassel C.K. and Rudberg M.A. The Price of Success: Health Care in an Aging Society 11Health Affairs 2 (1992) Chiang T.L. Taiwans 1995 Health Care Reform 39 Health Policy (1997) Cheng T.M. Taiwans New National Health Insurance Program: Genesis and Experiences So Far 22 Health Affairs 3 (2003) Chi C.H. et al, The Practice of Chinese Medicine in Taiwan 43 Social Science and Medicine 9 (1996) Chi S.K. and Hsin P.L. Medical Utilization and Health Expenditure of the Elderly in Taiwan 20 Journal of Family and Economic Issues 3(1999) Chou .S.Y., Liu J.T. and Hammitt J.K. National Health Insurance and Technology Adoption: Evidence from Taiwan 22 Contemporary Economic Policy 1 (2004) Chou P., Chen C.F. and Kang J.T., Factors Related to the Choice Between Traditional Chinese Medicine and Modern Western Medicine Among Patients with Mutli-Method Treatment 57 Chinese Medical Journal 405-412 (1996) Eisenberg D.M. et al, Trends in the Alternative Medicines Use in the United States 1990-1997:Results of a Follow-Up National Survey 280 Journal of American Medical Association (1998) Fuchs V.R. Health Care For The Elderly: How Much? Who will Pay For It? 18 Health Affairs 1 (1999) Fuchs V. R. and Garber A.M. Medical Innovation Promises &Pitfalls 21The Brookings Review 1(2003) Iwamoto Y. et al. Policy Options for Health Insurance and Long-Term Care Insurance ESRI Collaboration Project 2004-Marcoeconomic Issues Kleinke J.D. The Price of Progress: Prescription Drugs in the Health Care Market 20 Health Affairs 5 (2001) Lee K.H. Research and Discovery Trends of Chinese Medicine in the New Century 15 Journal of Chinese Medicine 3 (2004) Lemley M.A. Intellectual Property Rights and Standard-Setting Organizations 90 California Law Review 1889 (2002) Liu S.Z. and Romeis J.C. Assessing the Effect of Taiwans Outpatient Prescription Drug Co payment Policy in the Elderly 41 Medical Care 12 (2003) Liu S.Z. and Romeis J.C Changes in Drug Utilization following the Outpatient Prescription Drug Cost-Sharing Program-Evidence from Taiwans Elderly 68 Health Policy (2004) Lu A.P. et al, Theory of Traditional Chinese Medicine and Therapeutic Method of Diseases 10 World Journal of Gastroenterology 13 (2004) Wu Y.R. The Emerging Health Care Market in Taiwan: An Economic Analysis Working paper No 92 Murdoch University April 1999 Saito H. Regulation of Herbal Medicines in Japan 41Pharmaceutical Research 5 (2000) Zinner D. Medical R&D At The Turn o f The Millennium 20 Health Affairs 5(2001) Books Fuchs V.R., Who Shall Live? Health, Economics and Social Choice, (New York: Basic Books 1974) Powell M. and Anesaki M. ,Health Care in Japan, (London: Routledge 1990) Pugatch M. P. ,The International Political Economy of Intellectual Property Rights, ( Cheltenham: Edward Elgar 2004) United Nations, Sex and age distribution of the world population, (New York: United Nations 1994) Conference Paper Chang H.J. Taiwans National Health Insurance: Current Development and Performance Paper presented at the International Symposium: Toward an Equitable, Efficient, and High Quality National Health Insurance-Celebrating the 10th anniversary of Taiwans National health Insurance March 18-19, 2005 Taipei, Taiwan. Magazine Wallace P. The Health of Nations The Economists July 17-23 2004 On-Line Resources A brief introduction to Taiwan: Public Health. Government Information Office 2004 available on line at:  HYPERLINK "http://www.gio.gov.tw/taiwan-website/5-gp/brief/info04_13.html" http://www.gio.gov.tw/taiwan-website/5-gp/brief/info04_13.html /> Correa C.M. Protection and Promotion of Traditional Medicine Implications For Public Health in Developing Countries available on line at:  HYPERLINK "http://www.southcentre.org/publications/traditionalmedicine/toc.htm /" http://www.southcentre.org/publications/traditionalmedicine/toc.htm /> Chan J.H.Y. Mixing the Old with the New Chinese Traditional Medicine and the Regulation of Food and Drugs in the United States available on line at:  HYPERLINK "http://leda.harvard.edu/leda/data/248Chan_Justin.pdf /" http://leda.harvard.edu/leda/data/248Chan_Justin.pdf /> Biotechnology in Taiwan, available on line at:  HYPERLINK "http://www.ntio.org.tw/trade/Biotechnology.htm/" http://www.ntio.org.tw/trade/Biotechnology.htm/> Chung A, Biotech sector gets European news exposure Taipei Times, 22 December 2004 available on line at:  HYPERLINK "http://www.taipeitimes.com/News/biz/archives/2004/12/22/2003216259/print" http://www.taipeitimes.com/News/biz/archives/2004/12/22/2003216259/print /> Current status of the herbal medicine industry Information Center of Herbal Medicine Industry, DoIT, MoEA. Available on line at:  HYPERLINK "http://www.herbal-med.org.tw/Eng/index.htm" http://www.herbal-med.org.tw/Eng/index.htm /> Gail M. International Collaboration in Traditional Medicine and Medicinal Plant Research: A World Health Perspective available on line at:  HYPERLINK "http://www.uic.edu/pharmacy/research/diet/content/articles/mahady99.htm" http://www.uic.edu/pharmacy/research/diet/content/articles/mahady99.htm/> Information Center of Herbal Medicine Industry, DoIT, MoEA. Available on line at: http://www.herbal-med.org.tw/Office_4.asp /> (Original text in Mandarin) Taiwan at  HYPERLINK "http://www.cptech.org/ip/health/pharma/nte-99/taiwan.html /" www.cptech.org/ip/health/pharma/nte-99/taiwan.html />  HYPERLINK "http://www.cmanet.org/publicdoc.cfm/61/0/glossary3/67The" The California Medical Association On-line service, see  HYPERLINK "http://www.cmanet.org/publicdoc.cfm/61/0/glossary3/67 /" http://www.cmanet.org/publicdoc.cfm/61/0/glossary3/67 /> Whats Chinese Herbal Medicine? Information Center of the Herbal Medicine Industry, DoIT, MoEA. Available on line at:  HYPERLINK "http://www.herbal-med.org.tw/Eng/index.htm /" http://www.herbal-med.org.tw/Eng/index.htm />  Correa C.M. Protection and Promotion of Traditional Medicine Implications For Public Health in Developing Countries available on line at:  HYPERLINK "http://www.southcentre.org/publications/traditionalmedicine/toc.htm" http://www.southcentre.org/publications/traditionalmedicine/toc.htm />  UN, 1994  Statistic report of The Department of Social Affairs, Ministry of Interior until March 2005  Cassel C.K. and Rudberg M.A. The Price of Success: Health Care in an Aging Society 11Health Affairs 2 (1992)  Life expectancy is defined as the average expected years of remaining for an individual at the certain age.  Wu Y.R. The Emerging Health Care Market in Taiwan: An Economic Analysis Working paper No 92 Murdoch University April 1999  Whats Chinese Herbal Medicine? Information Center of the Herbal Medicine Industry, DoIT,MoEA. Available on line at:  HYPERLINK "http://www.herbal-med.org.tw/Eng/index.htm" http://www.herbal-med.org.tw/Eng/index.htm />  Ibid.  Eisenberg D.M. et al, Trends in the Alternative Medicines Use in the United States 1990-1997:Results of a Follow-Up National Survey 280 Journal of American Medical Association (1998)  Powell and Anesaki , 1990 Pp.13-14  Chan J.H.Y. Mixing the Old with the New Chinese Traditional Medicine and the Regulation of Food and Drugs in the United States available on line at:  HYPERLINK "http://leda.harvard.edu/leda/data/248Chan_Justin.pdf" http://leda.harvard.edu/leda/data/248Chan_Justin.pdf />  Lu A.P. et al, Theory of Traditional Chinese Medicine and Therapeutic Method of Diseases 10 World Journal of Gastroenterology 13 (2004)  Lee K.H. Research and Discovery Trends of Chinese Medicine in the New Century 15 Journal of Chinese Medicine 3 (2004)  Chi C.H. et al, The Practice of Chinese Medicine in Taiwan 43 Social Science and Medicine 9 (1996)  Chou et al, Factors Related to the Choice Between Traditional Chinese Medicine and Modern Western Medicine Among Patients with Mutli-Method Treatment 57 Chinese Medical Journal 405-412 (1996)  Statistic Report of the Department of Health 2003.  Supra at note 6  Biotechnology in Taiwan, available on line at:  HYPERLINK "http://www.ntio.org.tw/trade/Biotechnology.htm/" http://www.ntio.org.tw/trade/Biotechnology.htm/>  The foreign currency rate on the 5th May 2005 is 1 to NT$40.1016 and US$1 to NT$31.  According to Article 2 of the Small and Medium Enterprises Standards of Taiwan, manufacturing industry with paid  in capital less that NT$80 million and regular employee less than 200 are considered as SMEs.  Information Center of Herbal Medicine Industry, DoIT, MoEA. Available on line at: http://www.herbal-med.org.tw/Office_4.asp /> (Original text in Mandarin)  Chung A, Biotech sector gets European news exposure Taipei Times, 22 December 2004 available on line at:  HYPERLINK "http://www.taipeitimes.com/News/biz/archives/2004/12/22/2003216259/print" http://www.taipeitimes.com/News/biz/archives/2004/12/22/2003216259/print />  Current status of the herbal medicine industry Information Center of Herbal Medicine Industry, DoIT, MoEA. Available on line at:  HYPERLINK "http://www.herbal-med.org.tw/Eng/index.htm" http://www.herbal-med.org.tw/Eng/index.htm />  Supra at note 15. DOH report  Gail M. International Collaboration in Traditional Medicine and Medicinal Plant Research: A World Health Perspective available on line at:  HYPERLINK "http://www.uic.edu/pharmacy/research/diet/content/articles/mahady99.htm" http://www.uic.edu/pharmacy/research/diet/content/articles/mahady99.htm />  Despite the high popularity of herbal medicines in Europe on the use of herbal products like St.Johns wort, Ginseng and Ginkgo, they failed to pass the U.S. FDA drug test and hence are sold as dietary supplements.  Taiwan at  HYPERLINK "http://www.cptech.org/ip/health/pharma/nte-99/taiwan.html" www.cptech.org/ip/health/pharma/nte-99/taiwan.html />  Cheng T.M. Taiwans New National Health Insurance Program: Genesis and Experiences So Far 22 Health Affairs 3 (2003)  Chiang T.L. Taiwans 1995 Health Care Reform 39 Health Policy (1997)  Chang H.J Taiwans National Health Insurance: Current Development and Performance Paper presented at the International Symposium: Toward an Equitable, Efficient, and High Quality National Health Insurance-Celebrating the 10th anniversary of Taiwans National health Insurance March 18-19, 2005 Taipei, Taiwan.  Supra note 29  Supra at note 30  Ibid  A brief introduction to Taiwan: Public Health. Government Information Office 2004 available on line at:  HYPERLINK "http://www.gio.gov.tw/taiwan-website/5-gp/brief/info04_13.html" http://www.gio.gov.tw/taiwan-website/5-gp/brief/info04_13.html />  Indication drugs are drugs that do not need the prescription from a Doctor and its not OTC drugs anyone can buy from the pharmacy. They will need an indication of the usage either form the pharmacist or the doctor.  Article 8 Pharmaceutical Affair Law  Article 39(4) National Health Insurance Law  Believed to reach 19.7% of the population in 2031  Saito H. Regulation of Herbal Medicines in Japan Pharmaceutical Research vol. 41 No.5(2000)  Supra note 14.  The Health of Nations The Economists July 17-23 2004  Fuchs V. and Garber A.M. Medical Innovation Promises &Pitfalls 21The Brookings Review 1(2003)  Iwamoto Y. et al. Policy Options for Health Insurance and Long-Term Care insurance ESRI Collaboration Project 2004-Marcoeconomic Issues.  Chi S.K. and Hsin P.L. Medical Utilization and Health Expenditure of the Elderly in Taiwan 20 Journal of Family and Economic Issues 3(1999)  Supra at note 10 Powell and Anesaki,1990 Pp.124-126  Ibid.  Liu S.Z. and Romeis J.C. Assessing the Effect of Taiwans Outpatient Prescription Drug Co payment Policy in the Elderly 41 Medical Care 12 (2003)  Liu S.Z. and Romeis J.C Changes in Drug Utilization following the Outpatient Prescription Drug Cost-Sharing Program-Evidence from Taiwans Elderly 68 Health Policy (2004)  Fuchs V.R. 1974, Pp.127-128  Supra at note 47  The introduction of third-party party payment enables doctors and hospitals to dispense drugs to obtain large portion of income. Hospitals could obtain drugs at largely discounted prices, dispense to patients and receive reimbursement of the drug list price from the insurance funds. This price gap between the real transaction cost and the reimbursable price contributes to large part of the incomes form hospitals.  Taiwans price setting system based on international comparisons, new products without bio equivalent competition are set at the median price of the product as listed in ten developed market. In practice, new products are often reimbursed at the bottom end of the ten market prices. The NHI also allows bioequivalent generic drugs to be reimbursed close to 100% of the original drug and 80% for the non-bioequivalent generic drugs.  Supra at note 47  Ibid.  Example taken from  HYPERLINK "http://tw.news.yahoo.com/050527/15/1vs4q.html /" http://tw.news.yahoo.com/050527/15/1vs4q.html />   HYPERLINK "http://www.cmanet.org/publicdoc.cfm/61/0/glossary3/67The" The California Medical Association On-line service, available on line at:  HYPERLINK "http://www.cmanet.org/publicdoc.cfm/61/0/glossary3/67" http://www.cmanet.org/publicdoc.cfm/61/0/glossary3/67 />  Supra at note 30  Supra at note 49  Fuchs V.R. Health Care for the Elderly: How Much? Who Will Pay For It?18 Health Affair 1 (1999)  Chou .S.Y., Liu J.T. and Hammitt J.K. National Health Insurance and Technology Adoption: Evidence from Taiwan 22 Contemporary Economic Policy 1 (2004)  Zinner D. Medical R&D At The Turn o f The Millennium 20 Health Affairs 5(2001)  Lemley M.A. Intellectual Property Rights and Standard-Setting Organizations 90 California Law Review 1889 (2002)  Pugatch M. P., 2004 Pp.86  Supra at note 49  This due to the publics preference of public hospitals than private hospitals in Taiwan  Supra at note 60  Supra at note 59  If the reimbursement rate for innovative drugs and generic drugs are similar, generic drug companies are able to offer huge discounts to hospitals than innovative drug companies since they do not have to recoup R&D expenses. Thus, hospitals have the incentive to purchase cheaper generics over innovative drugs to increase the profit margin.  Supra at note 59  Kleinke J.D. The Price of Progress: Prescription Drugs in the Health Care Market 20 Health Affairs 5 (2001)  Ibid.     DRAFT NOT FOR QUOTATION, COMMENTS AND PROOFREADING WELCOME  PAGE 1 89:;?ELQ0kuv!$ . 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