Pharmaceutical health policies are designed to regulate cost, access and quality of patented drugs. Many of the assumptions upon which policies are designed, however, have not been empirically substantiated. This study was conducted to provide a national longitudinal trend of the NSAIDs pharmaceutical market in Taiwan during the 4-year period with events in three kinds of interventions (i.e., price regulation, new entries and information shock). In the entire 4-year period drug cost per RA/OA visit increased approximately 30% and we have found that new entry could be the main driving force that impacts the pharmaceutical market most in Taiwan even under policies of price regulation. The fact that market entry of COX-2 inhibitors was associated with nearly a one-third increase in the cost per visit raises concerns about the comparative value of new drugs, especially in therapeutic area where some might question whether the new drugs are truly distinguished from older therapies.
This study captured the market changes from two price regulations implemented by the Bureau of NHI. However, the association between these regulations and the market changes was very short-lived, especially under the driving force of entries of new COX-2 inhibitors. In Taiwan, price regulations were based on results of an annually survey of market price and volume. The "reference pricing" or "generic grouping" techniques were also used to reduce the price variation among products with similarity of active ingredients. Using 1996-2003 NHI's claim data, Lee et al  has reported that "reference pricing" or "generic grouping" used in the price regulation schemes on April 2001 and March 2003 were the most effective price control strategies for reducing total drug spending in Taiwan. However, in the study of Lee et al , the impact of price regulation on the total pharmaceutical spending appeared to be short-lived as observed in our study.
This study, using NSAIDs as a case, has tried to reveal a more detailed picture of changes in drug expenditure, utilization, and market structure after price regulations. Although the two price regulations used similar concepts and techniques, their impacts are different. The second price regulation implemented on March, 2003 (2003S1), however, did not significantly changes NSAIDs expenditure. Instead, it was associated with a substantial change of the NSAIDs volume prescribed for RA/OA treatment. Market redistribution may have resulted from providers' replacing products under price regulation with other more profitable products. Alternately, the resulting prescription volume increases may have canceled the changes due to price regulation in a short period.
Of great value, this study elucidates how new drugs diffuse into the medical care system, how they begin to substitute for existing products, and how they change the cost of treatment. It is evident from our empirical analysis that the first new entry, celecoxib, diffused rapidly and took less than one year to reach to its plateau of market share (23.68%, 2002 S2) after its being listed in NHI's drug benefit coverage. Its competitor, the follower COX-2 inhibitor (rofecoxib), although having a disadvantaged diffusion pattern as compared to celecoxib, continuously and steadily increased its market share. Overall, the two new entries took up about 50% (2004 S3) of the market originally held by traditional NSAIDs. This sizable substitution of new drugs for traditional ones shows the potential of a generous health care system in providing better access to new drugs for their beneficiaries by encouraging the adoption and use of expensive medical technology.
The changes of drug expenditure after the market entry of COX-2 inhibitors was very large in Taiwan, the cost of NSAIDs per RA or OA ambulatory visit increased by 40% following the approval of the new drugs. The magnitude of this increase is very high when compared to the overall trend in drug cost increase per ambulatory visit in the NHI system during our study period (drug cost per ambulatory visit NT 220 (yr 2001) and NT 257 (yr 2004), increased by 16.8%) . The Bureau of Taiwan's NHI has tried to manage the potential contribution of new drugs by using reference prices through international comparisons, which require the introductory prices be less than or equal to the median of their list prices in 10 comparator countries (France, Germany, Italy, Sweden, Switzerland, Belgium, Australia, Japan, the United Kingdom, and the United States). However, because of the higher prices of new drugs in the reference countries, which were all developed countries and all had higher per capita gross domestic product (GDP) than that of Taiwan, the reimbursement price of new drugs may be still very high . In our case, two COX-2 inhibitors, celecoxib 100 mg and rofecoxib 25 mg, were both categorized as breakthrough new drugs and reimbursed at 5 to 10 times the price of non-selective NSAIDs per tablet in Taiwan's NHI system. In addition, when prices are set by a regulating agency, the price competition between patented drugs apparently disappears due to the imbalanced market mechanism [21–23]. Although rofecoxib should be considered as a follower in the COX-2 inhibitor category after the introduction of celecoxib in Taiwan's NHI system, its introductory price was twice the introductory price of celecoxib. However, our study found that the high price of rofecoxib did not guarantee a good market share as compared with celecoxib. Besides, the market may become price-insensitive when third parties such as insurance system greatly affect choices on behalf of an individual [3, 21–23]. The substitution of nonselective NSAID with higher priced COX-2 inhibitors had thus caused a significant economic impact on the cost of treating chronic pain in patients with RA and OA in whom long-term or life-long consumption of NSAIDs is required. In this situation, the question must be asked whether the increased cost of a new product paralleled its improvement in clinical effectiveness.
The safety of new drugs is another on-going health policy concern, especially when they start being rapidly adopted once they are covered by a national insurance program. There have been several new drugs withdrawn from the market due to severe adverse drug reactions not noticed in the pre-marketing stage. Our study drug, rofecoxib, is one of the most significant examples. The information shock due to rofecoxib's withdrawal was followed by a 6% decline in the cost for RA/OA treatments (NT 304.06 (2004 S3) vs. NT 285.24 (2004 S4)). In the short run, there was only a slight change in drug cost, however. This intervention is more clinically relevant than other ones since the patients' and physicians' perception of the COX-2 inhibitors for RA/OA treatments is expected to be altered. We believed further studies on this issue would be of great benefit to policy makers in managing drug safety signals.
Data and design limitations may affect the extent to which the results of this study can be generalized. Although we have specified three important policy interventions and applied segmented regression analysis for interrupted time series to examine changes of drug expenditure and volume after the implementation of interventions, we could not control unobserved exogenous factors. Therefore, our findings could only present an association rather than a causality effect between implementation of interventions and changes of drug expenditure or utilization. Due to data limitation, we could only evaluate the short-term change after the release of information of drug safety (three months after the withdrawal of rofecoxib). Thus, our aggregated estimate may reveal the change due to the withdrawal event rather than the information on pharmaceutical market. Data were lacking on which to base the differences between reimbursement price and real market price of NSAIDs drugs. As a result, our estimate may not reflect the actual cost and dynamics of the pharmaceutical market. Another limitation is that we assumed that the traditional NSAID and COX-2 inhibitors (new generation of NSAIDs) had identical therapeutic markets, while COX-2 inhibitors may not just be used to replace traditional NSAIDs but they may also be used to increase demand.