Pharma trade groups, including the Pharmaceutical Manufacturers' Associations of Japan (FPMAJ), the Pharmaceutical Research and Manufacturers of America (PhRMA), and the European Federation of Pharmaceutical Industries and Associations Japan (EFPIA Japan), have held discussions with a Central Social Insurance Medical Council (CSIMC) subcommittee on the fiscal 2014 National Health Insurance price revisions.
IHS Global Insight perspective | |
Significance | All three groups have voiced support for the innovation premium introduced in 2010 to be made full and permanent. PhRMA has outlined benefits to Japan brought by the premium in terms of encouraging greater research and development investment in the country and increased global simultaneous development. |
Implications | PhRMA and EFPIA have voiced opposition to proposed changes to international reference pricing parameters that would see more drug prices revised downwards. |
Outlook | The CSIMC remains characteristically cautious regarding making the innovation permanent, pointing to the potential for an imbalance in the number of companies agreeing in return to carry out development of unapproved drugs and indications under Ministry of Health, Labour and Welfare direction. |
Three major pharmaceutical trade groups – the Pharmaceutical Manufacturers' Associations of Japan (FPMAJ), the Pharmaceutical Research and Manufacturers of America (PhRMA), and the European Federation of Pharmaceutical Industries and Associations Japan (EFPIA Japan) – last week held discussions with the Central Social Insurance Medical Council's (CSIMC) Expert Subcommittee on National Health Insurance (NHI) Drug Pricing Affairs. The talks covered a range of topics related to the fiscal year (FY) 2014 NHI price revisions, as reported by Pharma Japan.
Innovation premium encourages R&D investment, simultaneous global development
All three trade groups have voiced their support for the premium for new drug development, introduced in 2010 but still officially a temporary measure, to be made full and permanent. The premium exempts innovative drugs that meet certain conditions from any reduction of price under the biennial NHI revisions for the duration of patent. In return, drug companies are expected to respond to requests from the Ministry of Health, Labour and Welfare (MHLW) to develop unapproved drugs and neglected indications.
PhRMA has taken the opportunity to present the results of a survey highlighting the beneficial effects of the premium since its introduction, supporting its view that it promotes Japan as a location for research and development (R&D) investment and encourages pharma companies to include the country in multi-regional global simultaneous development of drugs.
According to a survey carried out by PhRMA on the activities of 19 multinational companies with bases in Japan, when the premium was introduced in FY2010, only 50% of 214 drugs in Phase III studies were under global simultaneous development. By FY2012, the ratio had risen to 62% of 205 drugs. The United States trade group forecasts that, by FY2017, 84% of 352 Phase III drugs being developed by the surveyed companies will include Japan in global simultaneous development. The study also highlights the influence of the premium on those 19 firms' Japan-based R&D: in relation to drugs at the Phase II and III stages in Japan, there were 231 drugs in development in FY2010 and 263 in FY2012. The survey predicts that 395 drugs will be in development by FY2017.
PhRMA's survey had also questioned firms on their response to the MHLW's requests for development of unapproved treatments and medications meeting high unmet needs. Of 15 drug makers surveyed in FY2010, 27% said they had started such development; this figure rose to 71% of 21 drug makers surveyed in FY2012.
Opposition to international reference pricing expansion
The other major issue discussed was the CSIMC's proposals to tweak its rules on international reference pricing. The foreign average price adjustment rule sees drug prices calculated upwards or downwards based on the average of prices in the US, the United Kingdom, Germany, and France. Currently, prices are adjusted downwards if drugs are priced at 1.5 times the average of the selected countries. However, the CSIMC has suggested that this should be adjusted to 1.25 times the average, thereby increasing the number of products that would fall within the remit. PhRMA and EFPIA have declared their opposition to the proposal, noting that foreign prices can be unpredictable because of exchange rate fluctuations and arguing that the change would only make pricing even less predictable. The CSIMC subcommittee has countered by pointing out that the pricing rules already take this into account by averaging exchange rates over a two-year period.
Outlook and implications
The meeting was the first time that trade groups have been able to contribute to discussions on the proposed FY 2014 NHI price revisions. The innovation premium has clearly been a successful innovation, but the CSIMC subcommittee continues to be cautious regarding adopting it permanently. A subcommittee member has noted the potential for an imbalance in terms of companies receiving the premium and agreeing to carry out development of drugs that satisfy unmet needs, and suggested that the premium might only be applied to those companies agreeing to such development.
PhRMA's survey quantifies some of the benefits to Japan brought by the premium in terms of R&D investment and inclusion in global simultaneous drug development. Global simultaneous development benefits pharma firms in terms of avoiding duplication of clinical work and contributes to reducing the country's drug lag. The introduction of the premium, alongside other measures such as easing drug registration requirements at the Pharmaceuticals and Medical Devices Agency (PMDA), have seen Japan's market transformed since 2008, with the drug lag reduced from an average of over 15 months in 2008 to around seven months in 2011 (see Japan: 22 May 2013: Japan to speed up drug approvals with doubling of PMDA staff by 2020). Other reforms designed to encourage Japan's inclusion in global trials include the PMDA's announcement earlier this year that it will accept clinical trial data from patients across East Asia (see Japan: 10 October 2012: Japan's PMDA to accept drug applications based on South Korea, China-based clinical trials).
The next price revisions will take place in April 2014, with the CSIMC generally considering rule changes that encourage innovation, and long-listed (off-patent) drugs set to come under increasing pressure to compensate.