EFPIA Hopes To Shift Conversation In Japan From Pricing To Funding

The European pharma trade group also plans communication offensive on health technology assessment as Japan reconsiders pricing methodology.

TOKYO – The Ministry of Health, Labor and Welfare and Japan's Finance Minister, tasked with bringing down healthcare costs as Japan's population ages, are putting pressure on bringing drug prices down. The European Federation of Pharmaceutical Industries and Associations (EFPIA) said it hopes it can move discussions about Japan's healthcare expenditures from "pricing to funding."

EFPIA Japan Chairman and GlaxoSmithKline Inc. Japan President Philippe Fauchet said Feb. 28 the organization is putting an emphasis on moving the healthcare debate to funding for preventative and health maintenance medicines, particularly vaccines, oncology and cardiovascular therapies.

Japan's healthcare costs are expected to rise as the population ages. Roughly 23% of the population is above the age of 65, and nearly 40% of the population is expected to be above 65 by 2050, according to MHLW. As the population ages, the government will be looking for ways to pay for their healthcare. EFPIA is recommending the government help fund new preventative and healthcare management treatments that can help keep those costs down.

As an example, Fauchet suggested tobacco prices – lower in Japan than in the U.S. – could be raised, and the additional revenue generated could be channeled back to drug research.

Fauchet called for all vaccine-preventable diseases to be fully funded and compensated under the national immunization program. Of the vaccines recommended by WHO for patients in all regions, Japan's Immunization Law still does not include vaccines for Hib, hepatitis B, HPV, pneumococcus 7-valent, rotavirus, and the inactivated polio vaccine. MHLW is currently considering revisions to the Immunization Law, and EFPIA submitted public comments in May 2011.

Azumi called for 10% price cuts to long-listed patented products in 2011, sparking loud protests from industry groups in Japan.

Shifting discussions from pricing to funding will take some work, as Finance Minister Jun Azumi has identified price cuts as a source for budget savings. Azumi called for 10% price cuts to long-listed patented products in 2011, sparking loud protests from industry groups in Japan. MHLW Minister Yoko Komiyama rejected Azumi's proposal, and both sides agreed to an across-the-board reduction of 0.9% for 2012. Azumi said however that greater price cuts are still an option on the table for the future (Also see "Japan 2012 NHI Price Revision Takes Shape, Long-Listed Products See Smaller Cuts Than Expected" - Scrip, 11 Jan, 2012.).

Fauchet argued that after years of biennial price cuts, long-listed products are already at low prices comparable to generics. He characterized these drugs as branded generics, a term generally reserved for emerging markets, but apt for original branded products now off-patent. These products are still priced higher than generics, but Fauchet noted that some patients still prefer the more expensive brand over the generic.

Whatever the cause – whether its patient preference or doctor prescription habits – Japan's generics market lags behind the U.S. IMS data show generics held only 27.6% of Japan's unprotected market by volume in 2010, compared to generics' 90.8% share in the U.S. The government has initiated a number of incentives and policy changes to encourage generic use, and started to see a pick-up in their use in 2006. Still, it's expected that MHLW will fall short of reaching its 2012 goals for generic use (Also see "Top Japanese Pharmas Show Appetite For Emerging Market Expansion, Will Generics Follow?" - Scrip, 10 Aug, 2011.).

NHI Evolution

Overall, Fauchet expressed optimism in the National Health Insurance pricing system, noting that "Japan is evolving to encourage innovation and balance the budget."

The cornerstone of that evolution is a pilot program by MHLW's Chuikyo that protects new innovative products from the biennial price cuts. Instead, companies are subject to large price cuts at patent expiration. While EFPIA and its U.S. and Japan counterparts had hoped the pilot program would be made permanent, Chuikyo decided at the end of 2011 to extend the program for another two years to assess its impact (Also see "Japan 2012 NHI Price Revision Takes Shape, Long-Listed Products See Smaller Cuts Than Expected" - Scrip, 11 Jan, 2012.).

The two-year extension comes with conditions. Companies are required to develop unapproved products or unapproved indications for drugs that MHLW deems necessary for Japan.

EFPIA member companies were given 57 requests in total in 2010. A second wave of requests is currently circulating MHLW, and Fauchet expects the ministry will release it at some point in 2012.

Chuikyo said in December 2011 it will take a tougher stance on companies not compliant with the requests, and will revoke premiums and/or ask for companies to return revenue they received due to the pilot program if companies fail to adequately develop drugs and indications for unmet needs.

"We aren't against re-pricing, we are against some forms of re-pricing, those without a clear calculation, without a clear expectation of the pricing" – GSK Japan President Philippe Fauchet

Fauchet reiterated the association's hope that the program becomes permanent; it prefers the steep price drop at patent expiration instead of incremental price cuts.

"We aren't against re-pricing, we are against some forms of re-pricing, those without a clear calculation, without a clear expectation of the pricing," Fauchet said.

The biennial price cuts currently don't offer full transparency, and the uncertainty of price cuts every two years impacts companies' ability to invest in development in Japan, he said.

HTA In Japan

In 2012, EFPIA has also made communicating opinions on health technology assessments a top priority in Japan. The new chairman of Chuikyo has expressed interest in pursuing a HTA model similar to UK's National Institute for Health and Clinical Excellence (NICE) – despite NICE's expected downgrade in responsibilities in 2013 – to replace Chuikyo's current pricing methodology, especially for oncology drugs (Also see "Could Japan's Chuikyo Embrace NICE Model As New Chairman Takes Reign?" - Scrip, 9 May, 2011.).

The Japan Pharmaceutical Manufacturers Association is leading the messaging of HTA in Japan on behalf of EFPIA and PhRMA, but EFPIA has established a pharmacoeconomics committee to communicate member companies' experiences with HTAs in their home countries, a topic for which European companies have great familiarity.

Fauchet said EFPIA will focus on representing "patient-oriented medicoeconomic evaluations."

"We are taking the risk as a company that innovation is worth it. We're not afraid that [government] assessments will confirm [the patient benefit] of our clinical trials," Fauchet said.

What EFPIA may be afraid of is Japan adopting a HTA method more in line with UK's NICE instead of Germany's Institute for Quality and Efficiency in Healthcare (IQWiG).

The difference comes down to cost-effectiveness. IQWiG currently does not consider cost-effectiveness in its evaluations, unlike NICE. Although IQWiG has recommended oncology drugs purely on patient benefit, NICE has not recommended some of the same drugs on the basis that the benefit to patient was not great enough to justify the price tag (Also see "European HTA Round-Up: NICE Focuses On Cost Effectiveness, IQWiG On Clinical Benefit, But Convergence May Come" - Pink Sheet, 6 Feb, 2012.).

IQWiG will begin to incorporate cost-benefit analysis later this year, which may explain EFPIA's communication push as Chuikyo considers options for its own HTA.