Health Policy Insights

Rising Concerns For Pharmaceutical Innovation in Japan

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Japan is an aging society and the prevalence of cancer and cardiovascular diseases is increasing. In order to help tackle this growing burden, patients and healthcare practitioners need access to innovative medicines.

Japan used to be a country that fostered innovation, but recent reforms are creating an increasingly challenging innovation environment. If the trajectory continues in this fashion, there is a real concern that innovation will stagnate and patients will not have access to the latest treatments. Bayer urges the Japanese government to rethink their health policies and priorities to foster and improve access to innovative medicines.


Japan’s demographic shift brings rising healthcare expenditure

Japan is a super-aging society. As the median age of the population rises, so do the healthcare costs; with aging populations comes a higher prevalence of chronic diseases, including cancer and heart and blood diseases. The government has been trying to curtail healthcare spending, but the reforms currently focus on the developers of innovative medicines – one of the key pillars to tackling the rising incidences of chronic disease in an aging population. Drug spending accounts for just 25 percent of the healthcare budget and the pharmaceutical industry believes costs could be saved in tackling inefficiencies elsewhere in the system. We believe that Japan would profit from creating a positive innovation landscape where new medicines are rewarded for the value they bring patients.


Fixing the flaws in the price maintenance premium

The pricing environment for pharmaceutical products was largely positive in Japan between 2010 and 2015, but has deteriorated since. A reform to the way drugs are priced at the end of 2017 has undermined Japan’s pro-innovation environment and has had a negative impact on the pharmaceutical industry.


The former price maintenance premium (PMP) system protected many new pharmaceutical products from biennial price cuts throughout their period of exclusivity. This was to the patient’s advantage, as it created an attractive environment for innovative pharmaceutical companies, boosting research and development activities and increasing the number of innovative medicines.


However, the reform to the PMP system, in essence, equates innovation with the speed and order in which products launch. The system fails to conduct a science-based evaluation of new medicines. As a consequence, many best-selling global products have been deemed not innovative under the new criteria and consequently stripped of their PMP eligibility. According to the Ministry of Health, Labor and Welfare (MHLW), approximately 30 percent of patented medicines no longer qualify for a PMP1.


Bayer urges the Japanese government to fix the flaws in the price maintenance premium and create a new set of PMP criteria that value scientific innovation of a pharmaceutical product. It is imperative that decisions be made on the scientific assessment of individual molecules, not the characteristics of the companies that advanced them.


Concern that innovation will again be stifled through deficient HTA system

Appropriate health technology assessment (HTA) systems have the potential to assist governments in making informed decisions on allocating healthcare resources. An HTA or cost-effectiveness analysis (CEA) process should value scientific and medical progress and be transparent, scientifically sound and patient-centered. In 2018, a comprehensive policy process took place to introduce HTA in Japan and the decision is expected in February 2019 with implementation expected soon after that in April 2019. The current discussions at the Central Social Insurance Medical Council of Japan (the Chuikyo) suggest that deeper price cuts could be possible for drugs that are not deemed cost-effective.


The pharma industry and Bayer remain very concerned about the current direction of the new HTA system in Japan and its potential to significantly undervalue innovation and ultimately harm patient access to new medicines. The Government of Japan should ensure that when introducing an HTA system, such efforts take place in an open and transparent manner with all stakeholders, and based on learnings from other countries. By no means should results from HTA/CEA processes be used to restrict reimbursement or listing of new drugs. HTA should also not simply become yet another mechanism for price cuts or delay access to innovative medicines. Furthermore, HTA/CEA processes should be open, transparent, scientifically-sound and patient-centered, and should value scientific and medical progress.

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Tobias Helmstorf
Published: 29 Jan 2019
4 min read