Hoping to revamp its pharmaceutical landscape, Japan is trying to balance the scales of drug pricing, innovation, and access to cutting-edge medications. These efforts, led by the Ministry of Health, Labour and Welfare (MHLW) and the Drug Pricing Organization (DPO), reflect a multifaceted approach to address the challenges of drug lag, supply shortages, and the need for innovation within the pharmaceutical sector.
Japan Drug Pricing Mechanisms
At the core of Japan’s strategy is the Price Maintenance Plan (PMP), a pivotal program allowing for an additional premium on specific drug prices. A recent recommendation by the DPO aims to expand the eligibility of more pediatric drugs under the PMP and employ the plan more aggressively for innovative and new overseas drugs that promise significant benefits once introduced to the Japanese market. The aim is to incentivize pharmaceutical companies to prioritize the development and introduction of groundbreaking therapies by ensuring a more lucrative return (given higher drug prices) on their innovative products.
In addition, Japan has introduced the “rapid introduction premium,” targeting drugs that either meet critical review criteria or are approved in Japan ahead of Western markets. This premium is part of a push to fast-track the availability of essential drugs and to reward innovations that address unmet medical needs or demonstrate clinical superiority over existing treatments.
Supporting Research and Development through Fiscal Incentives
Recognizing the importance of sustained investment in research and development (R&D), the Japanese government has proposed the “innovation box” tax program. This initiative offers tax breaks on income derived from drug-related intellectual property. By reducing the tax burden on pharmaceutical companies, Japan seeks to cultivate an environment where innovation is encouraged and rewarded.
Adjusting Drug Prices
In March 2024, the MHLW announced a 4.7% reduction in prices for approximately 13,000 drug products in its 2024 fiscal year revision. This update affects a broad spectrum of medications, including oral drugs, injectables, and topical agents. This reflects Japan’s commitment to maintaining a balance between encouraging pharmaceutical innovation and ensuring the affordability of medicines.
To offset these price reductions, an additional $310 million USD has been allocated for higher pricing under the PMP for patented drugs. However, this increase is accompanied by a retraction of similar benefits for products where the patent has expired.
Japan’s comprehensive approach to overhauling its drug pricing and innovation ecosystem reflects a strategy to nurture Japan’s pharmaceutical industry that is both competitive and accessible.
Written by: Ames Gross – President and Founder, Pacific Bridge Medical (PBM)
Mr. Gross founded PBM in 1988 and has helped hundreds of medical companies with regulatory and business development issues in Asia. He is recognized nationally and internationally as a leader in the Asian medical markets. Mr. Gross has a BA degree, Phi Beta Kappa, from the University of Pennsylvania and an MBA from Columbia University.
Source used in the article: https://www.pharmaceutical-technology.com/analyst-comment/japan-fy-2024-pricing-reform-expected-to-favour-new-listed-innovative-drugs/