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Japan to step up price cuts for off-patent drugs

  • November 18, 2017
  • , Nikkei Asian Review , 5:12 a.m.
  • English Press

TOKYO — Japan will slash in increments its government-set prices of originator drugs whose patents have expired, part of efforts of stem the country’s rapidly increasing health costs. 


The Ministry of Health, Labor and Welfare has drawn up a proposal for overhauling the country’s existing pricing system. In addition to cutting prices of off-patent drugs, the change also aims to bring down prices of expensive, innovative treatments.


Under the proposal, prices would drop in increments for off-patent drugs whose generic versions have been available 10 years, eventually coming down to the levels of generics.


If generics have replaced more than 80% of the market for an originator drug, the price of that drug would drop to 250% of the generic at the 10-year mark, then to 200% after two more years, and to 150% four years later. The price would be on par with those of generics six years after the cut begins. If the substitution rate is less than 80%, the originator drug’s price would fall to 150% of generics over a decade.


The government will target new drugs as well. Drug development requires massive sums, so Japan allows drugmakers to maintain prices of innovative drugs for a period to help them fund development. The ministry now seeks to sharply narrow down the manufacturers and drugs to be protected under this arrangement.


Drugmakers would be rated on whether they are developing innovative new drugs, and whether a so-called drag lag of slow approval is delaying introduction in Japan relative to other markets, among other criteria.


The proposal would also bring in annual revisions of drug fee schedules starting in fiscal 2021, compared with the current frequency of once in two years, to reflect market conditions better. 


The Central Social Insurance Medical Council, an advisory body to the ministry responsible for setting fee schedules for pharmaceuticals, will consider the proposal. The ministry plans to finalize the plan by the end of the year after consultation with the ruling coalition.


Japan’s health care costs exceed 42 trillion yen ($371 billion) a year, with more than a fifth of that sum spent on drugs. The aging population has exacerbated the increase.

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