Japan Proposal Aims to Reduce Drug Prices

In an effort to cut high health care costs, Japan’s Ministry of Health, Labor and Welfare released a proposal on November 15, 2017 to revise the country’s drug pricing system. In contrast to the dominance of generic drugs in the U.S. market, Japan is still primarily a pricey brand market. The country’s overall health care costs exceed 42 trillion yen ($371 billion) a year, with branded drugs accounting for more than a fifth of that figure.

The new proposal aims to cut the price of off-patent drugs and limit prices of innovative treatments. According to the proposal, and the Nikkei Asian Review, prices would drop in increments for off-patent drugs whose generic versions have been available for 10 years in Japan, eventually coming down to the level of generics. If generics have replaced more than 80% of the originator drug’s market share, the price of that drug would drop to 250% of the generic at the 10-year mark, to 200% after two more years, and to 150% four years later. Accordingly, the price would be on a par with generics six years after the cut begins. If the substitution rate is under 80%, the originator drug would fall to 150% of the generics over 10 years. The proposal would also affect new drugs, with the ministry seeking to narrow the list of manufacturers and drugs protected under Japan’s Price Maintenance Premium (PMP). The PMP allows drug makers to maintain prices of innovative drugs for a period of time to help them fund R&D.