Japan’s 2014 Drug Price Reforms Extend Price Premium Program
This article was originally published in PharmAsia News
Executive Summary
The Japanese government has decided to revise its drug pricing policies starting in April 2014. Changes include extending a price premium program for two more years, bundling the pricing of similar generic drugs, and reduced pricing on long-listed drugs.
TOKYO – Japan will extend a price premium pilot program, revise its drug pricing on generics by consolidating same formulations and drop prices on long-listed brand drugs beginning from the new fiscal year that starts in April.
A special committee on drug prices under the Central Social Insurance Medical Council – commonly called by its abbreviated Japanese name Chuikyo – inside the Ministry of Health, Labor and Welfare agreed on these 2014 drug price reforms at a Dec. 25 meeting.
Price Premium Extended
A price premium program that has been in effect since 2010 was extended for another two years at the Dec. 25 meeting.
In addition to offering premiums for innovative new medicines, the program is intended to protect new drug prices throughout the patent life. Japan's drug repricing method of dropping prices every other year has been delayed by the pilot scheme, to the benefit of innovative pharmaceutical companies (Also see "Reimbursement Premiums Down In Japan" - Scrip, 20 Aug, 2013.).
The Chuikyo council could not agree to fully implement the program so it's still a pilot, but there's never been a debate on whether the program would be phased out, Masakatsu Imoto, an official at the health ministry, told PharmAsia News on Jan. 14.
The committee has been discussing changes such as ensuring drugs that would be eligible under this program would be those that are involved in research and development to improve the quality of medicine, said Imoto. MHLW’s deal with the pharma industry exchanges premium prices for new drugs in return for pharma bringing to market off-label indications considered necessary by the medical community, but some Chuikyo members complain companies are not doing the promised research.
Kiyoyoshi Matsubara, drug industry consultant and representative of the Office Medisearch, told PharmAsia News Jan. 17 that the price premium will likely become a permanent rule in the next round of drug pricing discussions for 2016.
Generics Bundled Into Three Price Groups
Imoto said other than extending the price premium program, there are two other major changes coming to drug prices in Japan.
Generic drugs will now be bundled into three different pricing categories. Until now, there were various price variations on generic drugs with the same properties.
“The same generic drug with the same properties could possibly have 10, 20 different prices and we're trying to group them together in three groups,” Imoto said.
For the same generic drugs, the most expensive version of that generic drug will be used as the base number, and:
- Generics priced at 30% of the most expensive version would be grouped into one and priced the same;
- Generics priced at 31-50% of the top price will be grouped together; and
- Generics priced at more than half the price of the highest sticker price would all be bundled into one price.
Generic reimbursement prices are initially set by the government at 70% of the branded equivalent price, or 60% if there are more than 10 generics on the market. Thereafter, the government examines the actual market price every two years and adjusts the reimbursement price accordingly (Also see "Japan’s Pharma Spending Hinges On Generic Promotion Plan’s Success" - Scrip, 6 Jan, 2014.).
Until now, there were more pricing categories for the same generic drug. Using the most expensive version of the generic as the base number, Chuikyo combined the bottom 20% as a group and generics priced at 21-30% of the top price into a separate group. After that, pricing changed in 3% increments.
"There was a lot of feedback that despite the properties for a drug being the same it was hard for [consumers] to understand why the prices varied so much," Imoto said.
Long-listed Drug Price Cuts
In addition, Chuikyo agreed that the prices of some long-listed drugs will drop, depending on how much the generic versions of the drug are being used.
According to the health ministry, the price of long-listed drugs that have generic replacement rates of less than 20% five years after generics become available will be reduced by 2%. Prices of long-listed drugs with a replacement rate of generics less than 40% will drop by 1.75%; and prices of long-listed drugs with a replacement rate less than 60% will come down by 1.5%.
The reduction will happen every two years until the long-listed drug's generic versions reach 60% penetration of the market.
"This change will have some financial impact on pharmaceutical companies with long-listed drugs," said Matsubara said.
Matsubara says prices of 1,100 drug items are expected to be reduced under the new rule and it will replace the current scheme in which long-listed drugs face a one-time price cut of 4-6%.