Health ministry eases on planned reform for new drug surcharges

December 13, 2017

Tokyo- The Japanese health ministry on Wednesday eased off on a planned reform for a system allowing the government-administered prices for new drugs to stay at high levels for a while after their releases.

The ministry plans to narrow the scope of companies and drugs to which the surcharges are granted. In response to requests from the drug industry, however, the ministry decided to make the planned measure milder than initially proposed.

The ministry submitted to the Central Social Insurance Medical Council, which advises the health minister, modified plans to revamp the drug pricing system, including the milder reform proposal for the surcharges.

Under the pricing system, Japan lowers drug prices every two years in line with market prices. At present, surcharges for new drugs are approved for nearly all new products, and their prices are kept at high levels regardless of the levels of their innovativeness.

To curb Japan's ever-increasing medical expenses, the ministry last month presented its initial proposal to tighten the criteria for granting the surcharges in full to only the top 5 percent of drug makers in rankings of companies contributing to innovative drug development.

Industry groups in and outside Japan called for a change to the proposal as they are concerned about resultant drops in drug sales. The ministry responded by deciding to grant the high prices in full to the top 25 percent of drug makers in the rankings.

Lower-ranked companies will see their surcharges trimmed according to their standings.

The ministry intends to reflect drug-pricing reform measures in the government's draft budget for fiscal 2018 to secure financial resources to carry out a revision to government-set medical service fees.

The planned pricing reforms include a new rule to allow the government to reduce the prices of expensive drugs up to four times a year from fiscal 2018, which starts next April.

Subject to the rule are drugs whose annual sales have exceeded 35 billion yen after their newly recognized effects are added to the coverage of the health insurance system.

The prices of off-patent drugs will be gradually cut to the same levels as those of their generic counterparts.

The ministry also plans to introduce a new system in which cost effectiveness is reflected in the prices of expensive new drugs, such as the anticancer agent Opdivo.

Under the reforms, the government-administered drug prices will be reviewed every year from fiscal 2021. Jiji Press