Pricing Reforms Approved By Japan Reward Innovation But Also Present Industry Challenges

A raft of changes endorsed in December by Japan’s key policy-making body on drug and medical device pricing would reform the costs of healthcare products in ways designed to reward innovation and stabilize pricing and supply. But the reforms, set to go into effect in April,  would also present significant challenges for the pharma industry.

The positive changes approved by the Central Social Insurance Medical Council (Chuikyo)  would boost the number and type of products eligible for the price maintenance premium (PMP), a mechanism that adds price premiums to innovative new drugs and protects this price for the duration of the period of exclusivity or patent period. The PMP helps offset research and development costs incurred by pharma companies, making it more attractive for them to develop new drugs for Japan early. The proposed reforms are still subject to discussion and final approval by the Ministry of Health, Labor and Welfare,

Other positive reforms approved by Chuikyo include a new rule that delays price cuts on a one-time basis to drugs that have not generated better-than-expected sales growth.

However, on the negative side,  changes proposed to the cost-based pricing method for new drugs could negatively impact the reimbursement and development of new drugs.

The prices of medicines in Japan are set by the government and their use is subsidized by the country’s public health insurance system.

Simultaneously, there is expected to be a change to the rules governing reimbursements for software as a medical device (SaMD) products.  SaMD manufacturers could benefit from the rule change which rewards such devices that are proven to benefit overall healthcare and consumers.