Japan Announces April Price Changes for Devices and Drugs

In April, Japan will adjust its prices for medical devices and drugs.

The device price changes this year will be minor, as there will be no change to the Foreign Average Price (FAP) multiplier. The FAP multiplier is determined by the average of the prices of the product in the U.S., England, France, Germany and Australia, and is one of the key ways Japan adjusts prices. The Japanese government said that the multiplier will stay the same at 1.3X for all new C1 and C2 products and all existing products. Also, the U.S., which normally has the highest prices, will still be included as one of the foreign countries used to determine the average.

There will be some small changes in medical device prices for new C1 and C2 products and existing products if one of the following situations occurs. First, if the price of the product in one of the comparison countries is more than 2.5X the price of the product in the lowest FAP country, the highest priced country will be discarded and the FAP price will be determined on the basis of the remaining four countries. That ratio is a reduction from the previous figure of 3.0X. In addition, if the highest price is more than 1.8X the average of the other 4 countries, the maximum price will be set at 1.8X. That is down from the previous ratio of 2.0X. Device prices will continue to be adjusted every 2 years.

For drug prices, the Japanese government said the prices are set to fall 1.45 percent in the year starting from April 2018. That price drop for drugs could extend to 1.74 percent if reform steps—including a change to surcharges for new drugs—are taken into account. The health ministry said last October that it will set a rule to cut the price of new drugs if their annual cost is at least 5 million yen (USD $47,000) more than existing treatments. The new system would be considered for 13 drugs, including the cancer treatment Opdivo, which has an annual cost per patient of 14 million yen (USD $131,000).

Last month, Japan’s health reimbursement agency, Chuikyo, finalized the drug pricing reforms set to take effect on April 1. The reforms narrow down the type of drugs eligible for the country’s price maintenance premium, which exempts drugs from mandatory repricing. The designation would be limited to first-in-class therapies and the two next-in-class therapies launched within three years of the listing of the first-in-class drug. Other drugs entitled to the premium include orphan drugs and drugs developed at the health ministry’s request. Previously, drugs were exempt from mandatory repricing if they had been marketed for less than 15 years and if no generics exist. These changes are expected to reduce the pool of drugs eligible for the exemption by about 35 percent. Also, beginning in fiscal year 2021, select drugs will be subject to price cuts every year, instead of every two years.