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JAPAN INITIAL DRUG PRICE REVISIONS SHOULD BE DELAYED

Executive Summary

JAPAN INITIAL DRUG PRICE REVISIONS SHOULD BE DELAYED for a predetermined period of time after a product is introduced, the Pharmaceutical Manufacturers Association urged at a Sept. 30 meeting in Tokyo with officials of the nation's National Health Insurance (NHI) system. According to a PMA statement, the association urged Japan's Chuikyo, the reimbursement-setting council, to adopt a policy under which "NHI prices for new drugs be free from price revision for a period of time from their introduction." Physicians dispense as well as prescribe Rx drugs in Japan, and most patients are enrolled in the country's national health insurance system, which reimburses physicians for the pharmaceuticals. Because physicians receive discounts for the products and the government annually lowers its reimbursement levels to take advantage of the discounts, prescription drug prices in Japan often tend to spiral downward. PMA asked the Japanese to consider measures to stabilize prices to preserve competition and R&D in the country. Delaying price revisions for new products was one "short-term" measure proposed by PMA until Japan establishes a policy to allow free market forces to determine reimbursement rates. Another interim measure which would "alleviate the burdens imposed by the present system" and has "been recently put forward by the Federation of Pharmaceutical Manufacturers of Japan," would exempt drug prices from revision "if they fall within a 'reasonable zone,'" PMA said. The "short-term" measures should be implemented during the interim until Japan moves to a policy of pharmaceutical price setting determined by the marketplace, the association stated, noting that "such a system may take a long period of time to implement." One of PMA's stated goals for the meeting was "to moderate the extremes of the National Health Insurance pricing system." Those extremes, the association said, "have resulted in an aggregate reduction of NHI prices of more than 40% since 1980." Japan's annual price revisions attempt to place the burden of containing health care costs on the pharmaceutical industry, according to the statement. "Japan's National Health Care System can be said to be the most cost effective among developed countries consuming only 5% of GNP [gross national product]," PMA noted. However, "the system of annual price revisions poses a threat to the system because it places a disproportionate burden on the industry in seeking to dampen the inevitable growth in state health care expenditures," the association argued. "The impact is particularly burdensome to the U.S. pharmaceutical firms operating in Japan because as a collection of relatively small companies, we lack the broad product lines and the strong distribution channels deployed by the major pharmaceutical companies." PMA asserted that the "downward spiral of NHI prices" can have a "destabilizing" effect on pharmaceutical R&D, the industry's international competitive position, and the future of the drug industry in Japan. "To stem the downward spiral of NHI prices and the damage it causes, the U.S. PMA has proposed that, over the long term, the government of Japan move to a system which more effectively allows pharmaceutical prices to reach a level determined according to the free competitive dynamics of the marketplace," the association said.

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