COUNTERFEIT PHARMA NOT A PRIORITY FOR TAIWAN DOH

C O N F I D E N T I A L SECTION 01 OF 03 TAIPEI 002143

SIPDIS

STATE FOR EAP/RSP/TC AND EB/BTA, STATE PASS AIT/W AND USTR,
USTR FOR KI AND FREEMAN, DOC FOR
4431/ITA/MAC/OPB/TAIWAN/MBMORGAN AND DUTTON

E.O. 12958: DECL: 05/12/2015
TAGS: ECON KIPR TW ETRD IPR
SUBJECT: COUNTERFEIT PHARMA NOT A PRIORITY FOR TAIWAN DOH

REF: 04 TAIPEI 3198

Classified By: AIT Director Douglas Paal, Reason 1.4 (d)


1. (SBU) Summary: Following the March 2004 passage of
amendments to Taiwan's Pharmaceutical Law that increased
penalties for trafficking in counterfeit pharmaceuticals,
Taiwan's Department of Health (DOH) is now beginning to look
for ways to address concerns about pharmaceutical piracy and
the sale of unlicensed copies of active ingredients in
medicines and food supplements. Officials from the DOH and
from Taiwan Customs reported an increase in the number of
cases of counterfeit medicines discovered and seized in 2004.
The National Police and the Coast Guard also reported making
seizures. In spite of what appears to be increasing
awareness of the need to "do something" about counterfeit
drugs, DOH is driven by its concern for consumer protection
rather than respect for intellectual property. In addition,
Taiwan's system for pharmacy accreditation is weak, DOH has
no enforcement or national inspection arm, and sees no need
to cooperate with the Taiwan Intellectual Property Office
(TIPO) to glean best practices in the fight against
counterfeits. End Summary.

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Counterfeit Pharma a Problem, but How Big?
==========================================


2. (U) International pharmaceutical manufacturers have long
complained that pharmaceutical counterfeiting is a serious
problem in Taiwan. An oft-cited 2002 survey by a major
international pharmaceutical research manufacturer claimed
that approximately 40 percent of Viagra sampled in several
hundred pharmacies all over Taiwan was counterfeit or an
unlicensed parallel import. One quarter of an expensive
heart medication was found in the same survey to be
counterfeit. This 2002 survey remains the best estimate of
the scale and scope of the problem and seems to be supported
by the results of MJIB and National Police raids. Since this
survey, manufacturers have estimated that around 25 percent
of research-based pharmaceuticals sold in Taiwan are
counterfeit or unlicensed. The DOH also uses this figure in
discussing the prevalence of unlicensed drugs. The USTR
Special 301 report in 2005 listed pharmaceutical piracy as an
area of concern for the first time.

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DOH Defines the Problem, but Lacks Power
========================================


3. (U) In response to increasing concern about counterfeit
pharmaceuticals, DOH began a pilot project in March 2005 to
try to identify which medical products, including
pharmaceuticals and non-pharmaceutical supplements, are most
popular among by Taiwan consumers. According to DOH Bureau
of Pharmaceutical Affairs Chief Wang Hui-po, DOH has
contracted an outside research institute to conduct a survey,
the results of which should be known by June. DOH then plans
to use the results of that survey to target the most popular
products for testing to determine the percentage of these
products that are counterfeit or contain unlicensed
ingredients. DOH sees the problem purely as a consumer
safety issue and does not distinguish between fake
pharmaceuticals and unlicensed ingredients or additives.
This is in contrast to pharmaceutical manufacters, which tend
to view the problem as a lack of protection of their
intellectual property that not only hurts their sales and
reputations but puts consumers at risk.


4. (U) DOH,s efforts to combat counterfeit pharmaceuticals
are made more difficult by the fact that it has no statutory
enforcement arm, nor does it have any official role in
accrediting pharmacies. Instead, DOH relies on county health
authorities to conduct ad hoc and sporadic inspections of
pharmacies as part of their regular duties and the National
Police and Ministry of Justice Investigation Bureau (MJIB) to
carry out inspections and raids of night markets or other
unlicensed distribution channels. Pharmacies, once licensed,
do not have to renew that license and are only subject to
biennial accreditation inspections by the county
pharmaceutical association.


5. (C) According to DOH statistics, there were five cases of
counterfeit pharmaceuticals reported by the county
pharmaceutical associations in the last year. DOH itself
filed 72 cases in 2004 accusing vendors of selling
counterfeit or unlicensed drugs. 27 of these cases involved
food products and supplements, 21 involved herbal medicines.
The active ingredients of Viagra and Cialis were the most
often illegally added to pills or drinks that were then
marketed as sexual potency aids.

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Coordination to Combat Counterfeiting
=====================================


6. (U) In 2003, DOH established a committee to facilitate
the sharing of information about pharmaceutical
counterfeiting. The committee includes representatives from
the Ministry of Justice (MOJ),Taiwan Customs, the Taiwan
Coast Guard, the Ministry of the Interior (which includes the
National Police),the International Research Pharmaceutical
Manufacturers Association (IRPMA),local pharmaceutical
manufacturers associations, and the Taiwan Pharmacists
Association, in addition to DOH. The Committee meets
biannually and provides agencies the opportunity to share
information and best practices, and offers training for
enforcement officials on how to recognize counterfeit
products.


7. (U) That training appears to be paying some dividends.
Enforcement agencies active in the Counterfeit Pharmaceutical
Committee (DOH, Customs, the Coast Guard, and the National
Police) report a steady increase in the number of cases of
counterfeit or unlicensed drugs: 84 cases in 2002, 171 in
2003, and 249 cases in 2004. Taiwan Customs has been most
active, filing 23 cases in 2002, 103 in 2003, and 160 in

2004. Taiwan Customs officials tell AIT they believe that
the majority of these counterfeit products originate in China
and are destined for the Taiwan market. The Ministry of
Justice and National Police cooperated on an investigation in
the summer of 2004 that led to the seizure of almost a
million doses of Viagra, Reductil, and Stilnox with a street
value of several million US dollars that were allegedly
produced in Guangdong Province and smuggled into Taiwan on
fishing boats. (reftel)

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"Protecting IP not DOH's Job"
=============================


8. (SBU) According to Dr. Wang, DOH,s primary concern is
consumer protection, not the protection of intellectual
property. Taiwan,s adverse reaction reporting system has
not yet reported any case of illness or death brought about
by an adverse reaction to a counterfeit pharmaceutical
product. For that reason, DOH prefers to focus its attention
on specific products that make exaggerated claims or do not
meet sanitary production standards. In 2005, DOH is
concentrating its efforts on inspecting medicated liquors.
Wang noted that MOJ had been making specific efforts to focus
on counterfeit drug cases in 2004 and had had some success,
offering to pass the ultimate responsibility for combatting
counterfeit pharmaceuticals to them. When asked if DOH had
ever considered cooperating with TIPO to find ways to
successfully combat counterfeit pharmaceuticals, Wang
dismissed the idea, noting that the Pharmaceutical Law makes
public health concerns paramount, not IP protection and that
TIPO didn't have a role to play in protecting public health.

============================================= =========
Comment: DOH Passing the Buck on Pharmaceutical Piracy
============================================= =========


9. (C) Despite their positive spin, it is clear that DOH has
no idea of the scale of pharmaceutical counterfeiting in
Taiwan, is not making combating piracy a priority, and seems
happy to pass the buck to MOJ, the county health authorities
or others. The pilot project proudly touted by Dr. Wang as
evidence of DOH,s commitment to rooting out counterfeiters
will not produce a list of potential target products for
monitoring before July and appears to be aimed more at
unlicensed food additives and supplements. Wang told AIT
that recently installed DOH Minister Hou had not yet been
briefed on the project, further calling into question the
importance DOH places on even this meager effort. The 2004
amendments to the pharmaceutical law were a very positive
step in that they substantially increased penalties for
manufacture, sale and distribution of counterfeit products,
but given the slowness of the judicial process in Taiwan we
will not see increases in sentences for infringers until
later this year at the earliest. While DOH,s commitment to
consumer protection is laudable, they are not likely to take
a leadership role in efforts to reduce the scale of
pharmaceutical counterfeiting in Taiwan,s market until there
is a public health crisis caused by fake drugs.
PAAL