The government is going to work out a drastic drug pricing reform plan by the end of this year. In this regard, the Sankei Shimbun learned on Dec. 9 of the government’s final plan for a “new drug development premium” that will maintain revolutionary new drugs at high prices. The premium has been allowed for almost all pharmaceutical companies that developed new drugs and for their products. However, the new system after the reform will limit the number of companies eligible for the premium to the top 25% according to the degree of contribution. The government had initially intended to limit the number of companies, but it modified the plan in response to opposition from the pharmaceutical industry. In addition, the government will establish a timeline for the eligibility of drugs similar to a newly developed drug. These similar drugs will be eligible for the premium for a limited period of time “within three years” after the application of health insurance to the newly developed drug.
The new drug development premium is a system under which the amount reduced from drug prices at every drug price revision after being put on the market is added to the prices of highly innovative drugs to a certain degree in order to have their prices maintained at a certain level. The system is aimed at encouraging pharmaceutical companies to develop new drugs. In fiscal 2016, about 90 companies were considered for the system with about 820 products. The total premium amounted to 106 billion yen.
The government will limit the number of eligible pharmaceutical companies as part of reducing the amount of natural increase (130 billion yen) in social security costs in compiling the fiscal 2018 budget. In revising the so-called fee-for-service system scheduled for April next year, the government will slightly increase fees paid to doctors and other hospital staff and at the same time reduce drug prices; thereby, the government intends to keep the overall revision rate to below zero.
With respect to the new drug development premium, the Finance Ministry has pointed out that less effective and innovative drugs have been awarded the premium. The Ministry of Health, Labour and Welfare has regarded maintaining less innovative drugs at high prices as problematic.
However, the pharmaceutical industry has been opposed to limiting drug companies eligible for the premium out of concern for a drop in profits. “The limitation will undermine the pharmaceutical industry’s incentive for developing new drugs,” said an official of the Pharmaceutical Research and Manufacturers of America (PhRMA). Under the circumstances, the matter could have developed into a diplomatic issue.
In the final plan, the government decided to limit the number of pharmaceutical companies eligible for the premium to the top 25% according to their degree of contribution. Originally, the government had intended to limit the number of companies to the top 5%. But it ended up easing the limitation.
Pharmaceutical companies eligible for the premium will be rated according to (1) the development of innovative new drugs; (2) the elimination of a “drug lag” in which medicines used in the U.S. and Europe cannot be used in Japan; and (3) the development of drugs that are the first in the world.
Similar drugs manufactured after the development of a new drug will be eligible for the premium for a period of three years after the application of health insurance to the newly developed new drug. The government had originally intended to set a limited period of time of less than one year.