Japan's Central Social Insurance Medical Council (Chuikyo) has launched discussions on a new drug pricing policy earlier than expected following prompting by Prime Minister Shinzo Abe, with new regulations expected by the end of this year, according to local media reports. In addition, Japan's health minister Yasuhisa Shiozaki has proposed reviewing drug prices "at least once a year" in addition to the usual biennial drug price revision cycle.
Implications | Japan's Central Social Insurance Medical Council (Chuikyo) has launched discussions on a new drug pricing policy earlier than expected following prompting by Prime Minister Shinzo Abe, with new regulations expected by the end of this year, according to local media reports. In addition, Japan's health minister Yasuhisa Shiozaki has proposed reviewing drug prices "at least once a year" in addition to the usual biennial drug price revision cycle. |
Outlook | Despite vociferous opposition by Chuikyo drug industry representatives, political pressure over the "expensive drug issue" indicates that some form of annual drug price cut is expected, leading to significant impact on drug pricing and potentially on company earnings. |
According to Pharma Japan, a report issued late last week by Prime Minister Shinzo Abe's advisory panel – the Council on Economic and Fiscal Policy (CEFP) – has called for the introduction of annual drug price revisions. Under the proposal, authorities would carry out a drug price survey every year, with drug price declines to be incorporated into Japan's annual fiscal budget.
The CEFP's report outlined several major points to address drug pricing. In particular, the report highlighted the need to address changes in the market after the initial price-setting of a treatment. For example, for treatments whose target populations have expanded following the approval of additional indications, the report proposed regulations to reduce the drug's price at an inversely proportional rate to the expanding patient numbers.
The approval of several additional indications – and subsequent expansion in target patient population – for Opdivo (nivolumab; Ono Pharma, Japan) was widely blamed in Japan for its increasing unaffordability for the government (see Japan: 22 November 2016: Japan's MHLW plans talks by end-2016 on major drug-pricing overhaul after Opdivo repricing).
In addition, the report stressed that National Health Insurance (NHI)-listed expensive treatments should also undergo price revisions, if their prices in Japan versus other countries exceed a certain amount, for example, more than double. At the moment, Japan only refers to a drug's prices overseas during initial price-setting. Opdivo's NHI price in Japan has also come under attack for significantly exceeding its price in other major markets.
The CEFP's report also calls for increased transparency during the pricing of new drugs and the comprehensive introduction of cost-effectiveness assessments.
Separately from the CEFP's report, Japan's health minister Yasuhisa Shiozaki has proposed reviewing drug prices "at least once a year" in addition to the usual biennial drug price revision cycle.
Abe's call to move up discussions and the introduction of a new drug pricing policy has thrown into disarray the Ministry of Health, Labour and Welfare (MHLW)'s initial plans. Originally, the MHLW had planned to discuss a drug pricing overhaul by the end of 2017, with a policy to materialise early next year.
Outlook and implications
The Japanese prime minister's call to hurry along an overhaul of the country's drug pricing regulations underlines the urgency of the issue, sparked off by the emergency 50% price cut of PD-1 inhibitor Opdivo. Despite vociferous opposition by Chuikyo drug industry representatives, the introduction of some form of annual drug price cut is expected, leading to a significant impact on drug pricing and potentially company earnings.
The Federation of Pharmaceutical Manufacturers' Associations of Japan (FPMAJ) has criticised the introduction of annual price revisions as "totally unacceptable" and warned of drug makers becoming "emasculated" directly impacting the competitiveness of Japanese drug makers and potentially disrupting stable drug supplies.
While opposition from drug industry groups is unsurprising, the Japan Medical Association (JMA) – which represents healthcare providers – has also voiced its opposition to annual revisions, suggesting a thorough review of the current similar efficacy comparison and cost calculation methods.
However, it currently remains unclear whether annual drug price revisions will come in the form of direct price cuts, or revisions only after the market environment changes because of expanded indications, for example. The approval of additional indications for Opdivo was widely criticised for its growing cost to the government, making it likely that other high-cost drugs – for example, Merck & Co. (US)'s PD-1 inhibitor Keytruda (pembrolizumab), which is awaiting NHI pricing – will have a more challenging time applying for additional indications or see their prices cut in the process.
In addition, given Japanese authorities' urgency to overhaul drug pricing, it appears that the country is moving into a no-holds-barred period where a wide range of suggestions will be considered. For example, the Liberal Democratic Party (LDP) has proposed the creation of a "drug pricing agency".
Furthermore, it also appears more likely that Japan's pilot cost-effectiveness assessment programme will be introduced sooner than its FY 2018 target to directly influence whether new drugs would be reimbursed or when setting NHI prices.