Japan Pharmaceutical Market Update 2020

Background information

Japan is the third-largest drug market in the world with a market size of about $95 billion in 2019. With about 30% of the population over 65 years old, it has a very large number of people who need drugs. Healthcare in Japan is quite different than healthcare in the West, where the average hospital stay can be 30 days. While the Japanese government provides universal health insurance, it has been trying to reduce costs and hopes to reduce the overall healthcare budget by about $1 billion dollars this year. Accordingly, they have also reduced the reimbursement of drugs over the last few years. On the other hand, to beat the drug lag which historically caused registration to be 3-5 years behind the US and EU approvals, the Japanese government has tried to expedite approvals and be more open-minded with respect to foreign clinical trial data acceptance.

Classification of drugs

Drugs are classified in Japan as ethical or OTC. Ethical drugs require an Rx and include about 9 different categories and over 1,000 approvals. OTC drugs are broken into 2 main categories – pharmacist intervention required medicines and general OTC. Pharmacist intervention required medicines include switch OTC and direct OTC. General OTC products include 3 main classes depending on the risk. Narcotics and psychotropic drugs are designated as controlled substances. Quasi-drugs are outlined in the Japanese pharmacopoeia to prevent certain diseases and also include a category called medicated cosmetics. Orphan drugs are well-defined in Japan, can have a maximum of 50,000 patients and need MHLW approval. In some instances, the Japanese government will reimburse orphan drug development costs to the applicant.

Drug registration

Drug registration in Japan closely follows the standards of The International Council for Harmonisation of Technical Requirements for Pharmaceuticals for Human Use (ICH). Japanese Clinical studies are regulated by the PMD Act and Japanese GCP. Clinical trial protocol must be reviewed by the Institutional Review Board of the hospital and the MHLW before a trial can be initiated. While Japan is more open to accepting drug studies abroad, some trials on Japanese patients are usually required.  Detailed informed consent forms must be signed by all patients. In addition to strong clinical trial results, to succeed in Japan, a drug application with many detailed attachments and non-clinical studies using GLP, must be submitted. Foreign Manufacturing Registration (FMR) is also a must. The PMDA will review the dossier for its quality, the drug’s safety and effectiveness, and confirmation that the applicant has a business license.

Expediting Drug Approvals

As mentioned above, Japan has lagged drug registrations compared to the West. In the past, the time for the PMDA to review and approve a drug in Japan took several years. To alleviate this problem and speed up registrations, Japan has implemented a number of regulatory changes. Starting from December 2020, Japan will have 5 approval categories for innovative drugs. For standard innovative drugs, the approval time will now be 12 months; for prioritized, orphan and conditional early approval drugs, the time will only be 9 months; for Sakigake pioneering drugs only 6 months. There is also now a new category for – specific use drugs that are geared toward pediatric care. Drugs are categorized depending on the specific disease, safety, and efficacy. Some of these categories will have priority for PMDA consultations and preliminary reviews.

Priority drugs are geared toward drugs that have better outcomes for serious indications. These are drugs for diseases for which there are currently no effective treatment methods, or drugs whose clinical outcomes are superior to outcomes from drugs on the market. Conditional approval drugs are for drugs that have limited initial clinical trials because of a small number of patients, but require extensive post-market studies. Sakigake approvals have been around for about 5 years, and focus on innovative drugs that are first developed in Japan. Sakigake products will have a “PMDA concierge” and generally have an extended re-examination period.

An example of expedited drug approval is Remdesivir, which was approved in May 2020 as a special drug approval – without certain drug requirements due to the pandemic.

Reimbursement today in Japan

While reimbursements in Japan for drugs have historically been high, the Japanese government (MHLW) is cracking down in an effort to reduce prices and reduce overall healthcare costs. Normally, drug prices are cut by about 2%-7% every year. In April 2020, 17 drugs saw reduced pricing with an average price cut of about 4.5%. Drugs that are big sellers (with high volumes) in Japan saw even higher price cuts.  Patient co-pays are normally between 10%-30%.

The Central Social Insurance Medical Council (CSIMC) first decides whether a drug can be reimbursed or not. If so, then the National Health Insurance Act has issued the NHI Drug Price Standard (DPS) which covers most drug reimbursements. Besides these price standards, the MHLW will get opinions from various health associations, KOLs, etc. Generally, similar products get similar reimbursements and for novel innovative products, various premiums (correction and usefulness) can be added. If there are no similar products in the DPS, then a cost accounting system, weighted average price, or other various premium adjustments can be added. Despite the overall cuts in drug prices, orphan drugs are well-reimbursed once approved. Normally, applications for reimbursement can be made within one week of the drug approval, and most pricing decisions are made within 3-4 months. If the applicant is not happy with the final price, they can appeal to the CSIMC.

Patents and Exclusivity in Japan

Patents are good for 20 years in Japan and can be extended given some conditions, up to an additional 5 years maximum. While there is no data exclusivity, there is an “examination period”, which provides similar benefits. In Japan, the drug originator may request that the PMDA stop reviewing a similar drug where they believe their patent has been breached. The examination period is 8 years from the approval. The examination period for orphan drugs is longer at 10 years.