Pharmas want Japan to maintain its price stability scheme

TOKYO – Domestic and multinational pharmaceutical companies want Japan to maintain a scheme that adds price premiums to certain drugs, which makes it easier for drug companies to recoup research and development costs.

The program, supported by the National Health Insurance (NHI), is coming under scrutiny as the government looks for ways to cut ballooning health care costs.

The industry wants to avoid proposed downward revisions to drug prices, which could come as early as 2017, when Japan’s consumption tax is expected to go up. At the very least, drug companies want to avoid lowering drug prices and would rather see a higher tax rate for each product.

Industry representatives from the U.S., Europe and Japan gave their views at a hearing of Japan’s Central Social Insurance Medical Council (Chuikyo) on Aug. 26, regarding various pricing policy issues, especially the renewal of the price maintenance scheme, which is in its third pilot two-year period.

The price maintenance scheme allows companies to add premiums to the price of certain new drugs to recover costs while the drugs are still protected by patents. The premiums come to an end when patents expire, which also means generics enter the market.

“Japan is one of the best markets in the world for pharmaceutical companies, and we hope that government policies in the areas of pricing and reimbursement, regulations and clinical development continue to support innovation in health care,” said Ira Wolf, Japan representative of the Pharmaceutical Research and Manufacturers of America (PhRMA).

The Federation of Pharmaceutical Manufacturers’ Associations of Japan (FPMAJ) also wants to see the current price maintenance scheme maintained through 2016 and beyond, ideally making it permanent.

“Our desire that the premium be made permanent remains unchanged,” said Chairman Masafumi Nogimori.

A stable pricing system is critical to keep investment and long-term development of new drugs, said Tony Alvarez, chairman of the Japan-based Executive Committee of PhRMA.

“The introduction of the maintenance scheme has clearly stimulated drug development activities in Japan,” Alvarez pointed out. “There has been a significant decrease in the submission lag and increase in the number of drugs developed in Japan.”

The Japanese drug lag has been shortened since the introduction of the premium maintenance scheme, and further reductions are expected in the next five years. New drug applications are also expected to more than double in the next five years. Government reforms and R&D tax credits have encouraged companies to operate in Japan.

The nation has the second largest pharmaceutical market in the world behind the U.S. In 2013 it reached $72.8 billon and is expected to increase to $79.8 billion by 2020, according to Globaldata.

Moreover, Japan has the fastest growing number of people older than 65 years of age in the world, moving the market along. It is predicated that seniors will make up approximately 40 percent of the population by 2055.

This has brought about an increase in the number of chronic diseases. Cancer is increasing and there is a gradual increase in diabetic patients.

The government is also looking to cut costs by increasing the number of generics in the market. The government is looking to generics to take an 80 percent market share, up from the current 52 percent, according to the Japan Generic Medicines Association.

“With an 80 percent generic era on the horizon, we feel that all on-patent drugs should be eligible to receive the price premium, but there’s understandable concern that this would increase the price discrepancy rate, or the difference between actual market and NHI prices,” said Masafumi Nogimori, chairman of the FPMAJ.

The discrepancy between the NHI price and the market price of a drug varies, particularly when there are multiple drugs in the same space competing for sales.

And there are also concerns about whether the public would benefit from a dominance of generics in the market.

“We need to thoroughly discuss whether it is a good thing for people to raise the target so sharply to 80 percent,” said Toshio Nakagawa, vice president of the Japan Medical Association, which represents health care providers on Chuikyo at the panel’s drug pricing subcommittee meeting.

Nakagawa also wondered about the ability of generics maker to produce enough drugs to meet the target.

“We are working to achieve the target in terms of supply,” Nakagawa said. “Working hard and being able to do it are two separate things. Frankly speaking, people have much greater confidence in long-listed products than in generics.”

In addition, the PhRMA, FPMAJ and EFPIA voiced opposition to Japan’s National Insurance reductions when the sales tax is raised from the current 8 percent to 10 percent in 2017.

Source