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JAPANESE DRUG APPROVAL TRANSFERS TO U.S. FIRMS TO GET "SPECIAL TREATMENT" UNDER PROPOSAL BY JAPAN GOVT. IN TRADE TALKS; 18-MONTH APPROVAL CLOCK ALSO PROPOSED

Executive Summary

Japan's Ministry of Health & Welfare (MHW) will give "special treatment" to U.S. drug firms seeking to obtain marketing approval for products previously licensed to Japanese firms, according to a plan proposed by the Japanese govt. during pharmaceutical trade negotiations with U.S. govt. officials. According to an unofficial, intragovernmental memorandum of the meeting that was drafted by the Treasury Dept. and recently released, new applicants will be required to submit only copies of original documents submitted by the Japanese licensee and MHW's review process will be "expedited." Formerly, pharmaceuticals developed by foreign mfrs. had to be licensed to a Japanese firm in order to obtain approval. However, because the Ministry of Health & Welfare issues approvals in a company's name, if a U.S. mfr. now wishes to terminate an earlier marketing agreement with a Japanese firm in order to sell the product there itself, the U.S. mfr. must acquire the Japanese firm's consent. If the Japanese firm chooses not to transfer the license back to the U.S. mfr., the U.S. firm's only alternative currently is to go through the entire regulatory review process in order to obtain marketing approval for the drug under its own name. The Treasury report notes that the U.S. delegation at the talks "acknowledged the creative effort made by the Japanese but accepted none of the proposals, pending further study." The negotiations were held in Hawaii, Aug. 20 ("The Pink Sheet" Aug. 26, T&G-2). Under the proposal, the expedited handling of approval transfers will occur if two conditions are met, the report states: ** "Applicants must possess the same information (i.e., original documentation plus adverse reaction history) as those ]applicants[ given 'friendly' ]voluntary[ transfers." ** The previous marketing approval holder must "cease producing the drug." In addition, the Japanese govt. "may wish written certification that relations between the transferor and transferee have ceased." Both Sides Set Close Of 1985 As Target Date For Resolving Four Major Drug Trade Issues "There can be one and only one approved mfr. of a drug" under the Japanese Pharmaceutical Affairs Law, the Treasury Dept. said. According to the memo, Asst. Secty. for Internatl. Affairs David Mulford, PhD, who headed the U.S. delegation, remarked that "each time he hears Japanese rationale, he becomes less and less convinced that the Japanese position can be justified and cannot see how Japanese law justifies the one particular system MHW defends." Japan's proposals also included the establishment in October of an 18-month time limit for MHW processing of new drug applications, the memo reports. "Unlike the U.S., Japan has a time-consuming council deliberation system. Deadline would be 18 months for new drugs, one year for new medical equipment, six months for in vitro devices, and four months for latecomer devices," Treasury said. "The clock would start after document examination and applicants' submission of any necessary additional data. When the clock elapses without action, MHW's reasons will be expeditiously communicated to applicants," the report states. To facilitate establishment of a time clock by October, the memo states, the Japanese govt. agreed to submit a detailed written description of the proposal to the U.S. delegation "within one week." The U.S. govt. has received the write-up and has agreed to "respond to Tokyo with questions and comments a week after receipt of the Japanese proposal." * The U.S. delegation proposed that the two sides set the close of 1985 as a target date for resolving the major issues of the pharmaceutical/medical trade negotiations, Treasury said. The major topics for discussion include "transparency" for Japan's health reimbursement system and the approval and reimbursement rate-setting of procedure kits, as well as approval transfers and MHW review time. The Japanese officials agreed to the target date and to a plan for semi-annual follow-up/ monitoring meetings for the following 18 months, the memo reports. "Transparency," or the ability of U.S. firms to monitor and/or participate, in the drug price-setting process will be established through procedures for notice, comment, and hearings, under another Japanese proposal. Drug reimbursement/price levels are set by the govt. in Japan. According to the memo, new drug prices will continue to be listed twice yearly, but under the proposed system, "applicants may apply directly (a new policy) or indirectly through the PMA of Japan," and "MHW will hold pricing hearings to hear applicants' views." After such pricing hearings, the memo continues, MHW "will compute a prospective price and inform applicant of its preliminary indication. If applicant objects, MHW will conduct a further hearing at which applicant may make a presentation. Final prices will be published in the official gazette." The Japanese further proposed that to revise prices, MHW will notify the public of a timetable by which the govt. would conduct surveys and prepare a report. "A week or 10 days before the planned implementation date," the memo explains, "MHW will notify the PMA of Japan and other concerned parties, including foreign firm groups." Under the proposal, "current and revised prices will be publicly available. Hearings will take testimony from interested parties, and foreign firms will have the opportunity to testify." Home Procedure Kits With Already Approved Drug/Device Components Will Not Need Safety/Stability Data The U.S. delegation "responded that transparency proposals appeared to have correct intent but could not be fully evaluated until presented in writing," the Treasury report states. However, the delegation said that "one serious offsetting disadvantage may be the lack of change in the semiannual listing schedule." Regarding the approval and pricing of procedure kits for home use, the Japanese delegation pointed out that most kits used in the U.S. constituted a combination drug/device under Japanese law. With respect to approvals, the memo states, "MHW proposes that if the drugs or devices are already approved, the approval procedure for the kit will be simplified and safety/stability tests will be unnecessary." However, the Japanese cautioned that "problems may arise if one element of the combination" has nutritional effects "or if two drugs are combined, because the question of 'medical reasonableness' of the kit may be raised." On the other hand, the memo notes, "MHW already has announced that it will accept foreign-generated stability and sterility data, including accelerated test results." Regarding the pricing of procedure kits, because of the "cost savings in hospitals that kits produce in terms of inventory or wastage control and manpower savings," prices will be based on "medical merits" in four areas: "reduced risk of infection, reduced risk of error, faster treatment, and higher quality." The memo adds that the proposal "would price kits as pharmaceutical products based on these four criteria."

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