Japan finalizes drug pricing reforms

Japan's Central Social Insurance Medical Council (Chuikyo) finalized drug pricing reforms set to take effect at the start of FY18 on April 1.

Chuikyo is tasked with setting drug prices in Japan. On Wednesday, the body presented its reforms, which are largely in line with those the Ministry of Health, Labour and Welfare (MHLW) presented in November (see BioCentury Extra Nov. 22, 2017).

Specifically, the reforms redefine which drugs will be eligible for the country’s price maintenance premium, which exempts drugs from mandatory repricing. With the reform, this designation would be limited to first-in-class therapies and the two next-in-class therapies launched within three years of the listing of the first-in-class drug.

Other drugs entitled to the premium include Orphan drugs, as well as drugs developed at MHLW's request or that eliminate a drug lag. MHLW will limit the number of companies and therapies that receive the full premium based on the number of clinical trials conducted in Japan, the number of new products launched in Japan within the past five years, the number of new products developed in response to open requests from MHLW and the number of products with a Sakigake designation.

Previously, drugs were exempt from mandatory repricing if they have been marketed for less than 15 years and no generics exist. The sponsor also had to have drug candidates in development “that could truly contribute to the improvement of medical care quality,” according to the Japan Pharmaceutical Manufacturers Association (JPMA).

About one-third of drugs in Japan received the price maintenance designation under the previous definition; however, the changes are expected to narrow this pool by about 35%, according to the Pharmaceutical Research and Manufacturers of America (PhRMA).

Beginning in FY21, select drugs will be subject to annual price cuts, instead of the current every-two-year cuts. MHLW will conduct drug pricing surveys over the next three years to determine which drugs will be subject to more frequent repricing.

Additionally, the U.S. will remain among the four countries included in Japan's foreign reference pricing basket. MHLW told BioCentury last April that it was considering removing the U.S. from the basket. Under the reforms, MHLW will use federally reported prices, including Medicare and Medicaid average sales prices, rather than average wholesale price, which had been used (see BioCentury, April 28, 2017).

In a joint statement in November after MHLW presented its proposed reforms to Chuikyo, PhRMA and the European Federation of Pharmaceutical Industries and Associations said they were "disappointed" by the reforms. They said incentives to develop new products in the country will be so eroded that early patient access to new medicines will be seriously jeopardized.