Prime Minister Shinzo Abe noted at a meeting of the Council on Economic and Fiscal Policy held on Dec. 21 that discussions on the drastic reform of official drug prices (the drug pricing scheme) “should be deepened at the Council and others bodies.” The Central Social Insurance Medical Council (Chuikyo) will play the main role in working out specifics of the reform, which centers on reviewing the drug pricing scheme every year, but Abe instructed the CEFP to oversee progress in making concrete steps to ensure that the reform will not be watered down in the face of opposition from the Japan Medical Association and others.

Minister for Health, Labor and Welfare Yasuhisa Shiozaki, Chief Cabinet Secretary Yoshihide Suga and other concerned cabinet ministers approved a basic policy on the drug pricing reform on Dec. 20. At a CEFP meeting on Dec. 21, Shiozaki again briefed on the reform. The main pillar of the reform is an annual drug price review, which will be implemented from fiscal 2018.

The government has the authority to decide drug prices. Currently, they are reviewed every other year. The prices paid by patients remain unchanged for two years once they are determined. Meanwhile, drug wholesalers often sell drugs to hospitals below the official prices. The spread of generics is also contributing to pushing down market prices. The difference between official drug prices and market value has become a source of revenue for medical institutions.

Once the drug prices are reviewed every year and lowered, the difference between official prices and market value will shrink, as will medical institutions’ revenue from this source. This may also put downward pressure on the earnings of pharmaceutical firms.

To rein in medical expenses, the government plans to review drug prices in a wide range of categories every year. But if discussions on specifics take place at Chuikyo, of which the Japan Medical Association and pharmaceuticals are members, conditions for the annual review could be narrowed down and the reform of the drug pricing scheme might be eviscerated. By getting the CEFP to oversee discussions, “the Chief Cabinet Secretary and the Prime Minister’s Office, who lead the reform drive, can maintain their grip,” said a person close to the CEFP.