Friday, September 23, 2005

Uncompetitive pricing practices of INER of Taiwan

1. INER is a government agency. Therefore it enjoys many advantages over private companies when conducting business activities. For example, it does not need to pay various taxes, including income tax (25%) and sales tax (VAT, 5%). These all affect the customer prices.

2. Being a government agency, INER receives huge funding from central government each year. It is very likely that part of the government funding is used to subsidize their business activities, both directly and indirectly. This is a violation of the WTO agreements regarding subsidies.

3. INER does not have a pricing policy based upon cost analysis. It simply surveys the market prices of competitors and undercuts them. One of INER’s major products is Tl-201. They started selling this product in 2003. At that time the market price was around NT$950~1000 per mCi (a radioactivity unit), they undercut the market price by offering NT$900 average per mCi. Since then INER has kept dropping their prices to block out competitions and their price is now around NT$600. This price is even below our acquisition price from Bristol-Myers Squibb.

4. INER is a subsidiary of Atomic Energy Commission (AEC), which regulates radiation safety affairs in Taiwan. GMS’s radiopharmacies, in respect of radiation safety issues, is supervised by AEC. This is an unfair situation as competitors will worry any fierce confrontation with INER will get themselves into trouble with AEC. We do not think under this structure that INER should be engaged in any business activities.

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