Japan Pharmaceutical Update


Many U.S. Pharmaceutical executives praised the summit report on the Enhanced Initiative on Deregulation issued after meetings between President Clinton and Prime Minister Obuchi in the spring of 1999. During the talks, the Prime Minister announced the following points in the medical area:

1) The government has decided not to consider reference pricing further;
2) The government will attempt to accelerate the approval process for new medicines;
3) The government will promote easier acceptance of foreign clinical data;
4) The government will increase deregulation in Japan’s healthcare sector;
5) The government recognizes that Japan needs to restructure its healthcare delivery system for the 21st century.

This article will focus on some of the above as well as other related issues.


Japan’s official pharmaceutical pricing system was introduced in 1950. This system reimbursed medical agencies for drugs with similar effects at the “official” price regardless of the actual purchasing price. The system was adjusted in August 1997 under the Ministry of Health and Welfare‘s (MHW) revised health insurance system so that the “market” would determine pharmaceutical pricing. The “market” price will be determined through public proceedings by a committee of specialists on market prices, medical value of drugs, foreign prices, and the market size.

Last year (October 1998), a working team within the MHW submitted a report to the Ministry that proposed reference pricing. Reference pricing is used in Germany and other European countries. Under this system, health insurance pays for standard-priced drugs. The Pharmaceutical Research Manufacturers Association (PhRMA) strongly opposed this scheme; they claimed that it would increase government regulation, and stifle the innovation of new drugs. PhRMA proposed an alternative scheme that included the following key points:

1) To fill the price gap between market price and the NHI (National Healthcare Insurance) drug price, a medical institution should be reimbursed at the price at which the drug was actually purchased;
2) To increase patients’ recognition of the value of drugs, patients should pay an equivalent of a certain ratio of the market price; and
3) More information should be offered to the public regarding the effects of drugs that they can select.

On August 2, 1999, a subcommittee of the MHW’s advisory body – Chuikyo – said that it would set up working groups to study the National Health Insurance price-setting rules for drugs and medical materials. Further, the MHW will prepare a survey schedule and will also hold meetings with pharmaceutical industry representatives.

Following the withdrawal of its reference price system, the Liberal Democratic Party (LDP) has begun a study to prepare an alternative drug pricing reform proposal. A draft bill will be submitted during the current session of the Diet for reforms that require amendments.

The party’s handling of this issue could possibly face criticism when the draft bill is submitted to the Subcommittee on Institutional Planning. A basic framework on drug pricing reform was being drawn up and being studied by the Health Insurance Bureau. The zero yakkasa (the difference between the price of the drug and the reimbursement price) policy has not changed. Divergent reactions from the Japan Medical Association (JMA), industry and other concerned parties indicate that the issue of drug pricing reform is proving difficult.

Thus, the pricing debate continues with no clear-cut policies to date.


As mentioned in the introduction, Japan plans to ease the use of foreign clinical test data for domestic product approval. Again, changes have been slow in this area and PhRMA has made the following points, among others, on this issue.

First, the current documentation on harmonization is too vague and leaves the MHW with too much leeway on decisions.

Second, MHW reviewers are not experienced or trained to evaluate foreign clinical data.

Third, the MHW has limited the areas for which diagnostic criteria and practices in medical care are similar between Japan the U.S. to cancer drugs and antibiotics.

Fourth, the MHW will determine whether foreign data is acceptable but what the term acceptable means is unclear.

Japan counters PhRMA’s claims and says it has made concessions recently. For example, until a few months ago, Japan had a unique New Drug Application (NDA) system that accepted only published data in applications for drug licensing. This regulation in effect gave free access, through published papers, to a company’s drug information. Obviously, foreign drug companies have been reluctant to release unfavorable results of their products. The MHW has given in to the demands of foreign drug companies and has announced that unpublished work can be submitted in NDA’s from April 2000.

In addition, the MHW will:

1) Oversee the creation of 40 posts for specialized clinical test coordinators; applicants will be required to undergo a two month training program;
2) Upgrade its standards, requiring testers to fully explain to patients or others involved the content and purpose of the tests and obtain prior agreement to cooperate in writing;
3) Test drugs that had been prohibited once the developers had applied for an NDA are now available to be used in all cases after the trials are over;
4) Should testees suffer adverse effects from new drugs the manufacturers will be required to pay the additional costs incurred to treat them; and
5) The MHW will also provide subsidies to cover a third of the costs incurred by hospitals in order to improve their facilities for clinical tests.

Also of note, in the past Japanese clinical trials needed to be conducted in Japan. Under the altered laws, trials can be conducted outside Japan provided those involved in them were holders of Japanese passports and had two Japanese-born parents.

Despite the above, there are still disagreements between the MHW and companies regarding various clinical trial conditions. As Viagra is the only example for which overseas data has been accepted so far, it is still unclear as to how overseas data should be accepted. Japan should be able to accept overseas data on drugs that are needed for medical treatment. The present guidelines, however, do not appear to be efficient in this regard.


Japan overhauled its system for approving drugs in April 1999. This was a welcome move for both foreign and domestic pharmaceutical companies. Under the new regulations, MHW’s evaluation and licensing team will initially have one year to consider every new drug. Drug-makers will then have a year to submit any additional data needed. The rules will require the Ministry to decide on new drugs within two years. Currently, there is no time limit. While this time frame does not compare in speed to the approval process in the U.S., where approval by the Food and Drug Administration takes a year at most, it will cut down the approval time in Japan by about a third.

Before the changes come into force, the Ministry plans to abolish the first of three decision-making panels at the Central Pharmaceutical Affairs Council, an advisory body on drug approval. Instead of the first panel, the Ministry will draw from a list of several hundred specialists from whom to seek advice.

Japan has also initiated a so-called fast track evaluation process. While this has only been used in a few situations to date, things may change. For example, Vertex Pharmaceutical Incorporated announced in early July that Kissei Pharmaceutical Co., Ltd. (Matsumoto-City, Japan) has filed for approval in Japan of Prozei – an oral HIV protease inhibitor developed by Kissei in Japan – as part of this speedy evaluation process. In conjunction with the filing, Vertex received a $1 million milestone payment.

Further, the MHW has declared that as a rule it will accept an application filed by drug makers for approval of an additional new drug application or applications in tandem with the original application. The new system called “multi” or double NDA (New Drug Application) aims to speed up procedures for the approval of new drugs. In the past, Japanese authorities did not accept the extension of new drug applications before a decision had been reached on the initial application – either approved or turned down. This latest step is in keeping with the MHW’s attempt to shorten the time necessary for the evaluation and approval of new drugs.

While PhRMA acknowledges some of these changes, it still has unresolved issues with respect to the approval process.

First, companies have still been experiencing increased waiting periods for their initial meeting with a reviewer for drug development. On average, it takes 4 – 6 months to set up this appointment. The MHW intends to hire additional reviewers to improve the current situation.

Second, currently the MHW is calculating the 12-month review period as 12 months allotted for the MHW and 12 months for the industry. In order to streamline this regulatory process, it is necessary for the MHW to specifically define the reasons for a “time out” as well as its length. The MHW has stated its intention to work with industry to develop a comprehensive plan for calculating time outs. This plan is not yet complete.

Third, the amount of raw data required also has to be clarified. The information required should be similar to that demanded in the U.S. or the European Union (EU). Japan, however, asks for additional tabulations of foreign data, beyond international standards. This excessive data requirement is possibly indicative of a misunderstanding of how foreign data is generated or of the safeguards used to ensure data quality.


First, in May, the MHW started to develop a “pharmaceutical information provision system.” Its intention is to use this system to provide medical personnel such as physicians, dentists, and pharmacists with information about various drugs and possible side effects over the Internet and its aim is to promote the safe use of pharmaceuticals. This new system is part of a series of efforts by the Ministry to promote transparency in the system, partially in response to the controversial case where a number of Japanese patients were infected with the HIV virus through faulty blood products.

Second, patient disclosure of medical records is still a difficult subject in Japan. In the past, patients knew nothing about their medical status or treatments. Recently a subcommittee of the government’s medical reform council put together a report addressing this issue. The relevant parties, however, could not agree if a patient’s medical records should be available on request. The powerful Japan medical association’s disapproval of a law to make this obligatory has curtailed much of the progress to date.

Despite slow progress, it is important to note that some more forward thinking medical practitioners already provide patients with their records and discuss their problems and prescriptions in detail. Such practitioners are far from abundant, however, and this has caused a number of groups to fight for mandatory disclosure. Proponents of this disclosure policy believe that the request for information should be left up to the patient as there are some individuals who would prefer not to know the details of their illness and its treatment and the wishes of these people should be respected. The report recognizes the need for greater transparency and is urging medical personnel to develop standardized document formats and terms for use on medical charts within the next three years.


The success of international pharmaceutical companies in Japan will increase as key executives stay on top of these new and evolving regulatory issues. And with patience and tenacity some of these issues can be manipulated to one’s advantage if such companies stand up individually, via an association (PhRMA) or some other influential body.


  • U.S. – Japan Trade Talks Hopeful. Atlanta Journal, May 4, 1999.
  • Japanese PhRMA Pricing Moves Ahead of April 2000 System Changes. Marketletter, July 5, 1999.
  • Japan’s Loss of Leadership Role in Access to Drug Data. The Lancet, June 12, 1999.
  • Japan Chemical Week: in the West. Japan Chemical Week, May 26, 1999.
  • Three Schemes for Drug Evaluation Proposed: JPMA. Comline Chemicals and Materials, July 20, 1999.
  • Kissei Pharmaceuticals is Seeking Approval in Japan for its HIV Protease Inhibitor, Prozei.
  • Marketletter, July 12, 1999.Note: In addition to the above sources, information for this article was obtained from the following Japanese newspapers: Nihon Keizai Shimbun, Yomiuri Shimbun, Asahi Shimbun.