Japan's Price Cuts Slated For April Bring Old, New Blues For Industry
Xolair, Lixiana, Keytruda Hard Hit
Executive Summary
Next month’s regular reimbursement price cut in Japan includes some large reductions for big-selling drugs, while one new rule has been applied for the first time.
Japan’s next regular revision of drug reimbursement prices will see an average cut of around 4.4% across the pharma industry, although the impact by individual company varies widely according to discounting practices and product mix, ranging between 1-9%.
The new tariff prices under the country’s universal national health insurance (NHI) scheme will come into effect on 1 April, and as usual follow a comprehensive survey last October of actual market prices at thousands of wholesalers and medical facilities.
The country has long imposed regular reductions on medicines reimbursed under the NHI system, in a policy designed to bring government-set prices more in line with real (discounted) levels. The ultimate policy goal is to control rising costs within the wider health care system as the population rapidly ages.
Japan’s drugs bill accounts for around 20% of national medical expenses, which in turn are equivalent to some 11% of GDP, versus around 17% in the US.
The hardest hit individual products this time, all with 20%-plus price cuts, were Novartis AG/Genentech Inc.’s respiratory drug Xolair (omalizumab), Merck & Co. Inc.’s immuno-oncology blockbuster Keytruda (pembrolizumab) and Daiichi Sankyo Co. Ltd.’s Lixiana (edoxaban), a Factor Xa inhibitor anticoagulant.
Repricing Triggers
All three were slammed by special one-off price cuts under provisions that allow the government to cut reimbursement if sales expand beyond defined levels and initial official projections, under the complex formulae of Japan’s pricing system.
If total annual sales (at reimbursement prices) rise to between JPY100-150bn ($950m-1.43bn) and exceed 1.5 times initial official sales projections, prices can be cut by up to 25%. This year, Lixiana fell under this rule and will have its price slashed by 25% next month.
Keytruda meanwhile, will receive an additional 20.9% cut in April following on from a 17.5% reduction in February, under a related rule that allows price cuts of up to 50% for products for which annual sales have risen to more than JPY150bn and have also expanded by at least 1.3x the initial projections during the original price-setting process.
But the biggest single reduction this year, of 37.3%, is for Xolair, an anti-IgE antibody that has been used mainly for asthma in Japan. However, its use was extended to pollen allergies last December, which has significantly expanded its potential patient population given the high number of sufferers in Japan, mainly from spring cedar pollen.
The drug becomes the first to be considered under a new rule that allows one-off repricing in the event of approval of a major new indication; the process involves a comparison with other existing treatments when revising the price.
In all, 17 active ingredients across 55 products were subject to special repricing rules this year, and although some specific criteria have been changed, there are multiple precedents for similar moves. Most notable was probably that in 2016 for Ono Pharmaceutical Co. Ltd.’s PD-1-targeting antibody Opdivo (nivolumab), which had its reimbursement price slashed in half after usage – and costs to the health system – surged following an approval for lung cancer in addition to its initial melanoma indication.
Post-Launch Utility
In other developments this year, a handful of products have been granted a post-launch assessment for clinical utility, a policy designed to recognize product benefits in actual use. This can be triggered by data showing outcomes or if use is expanded into new indications, usually in orphan or pediatric settings.
This has resulted in a 5% premium (price rise) being granted to two antidiabetics, AstraZeneca PLC/Bristol-Myers Squibb Co.’s Forxiga (dapagliflozin) and Mitsubishi-Tokyo Pharmaceuticals Inc./Daiichi Sankyo Co. Ltd.'s Canaglu (canagliflozin), and also Sanofi/Regeneron Pharmaceuticals Inc.’s cholesterol-lowering drug Praluent (alirocumab).
However, the net impact is also determined by any other price modifications made in relation to the market price survey, and on balance may not result in much increase.
Some other former big sellers, now genericized, will be hit by price cuts determined by a complex set of rules around generic substitution rates. Original products still listed for at least 10 years after their first generic and with very high (80%-plus) generic penetration in the same indications will be subject to the “G1 rule”. This will see their prices reduced initially by 2.5x the weighted mean of the generics’ prices.
Teva Takeda Yakuhin Ltd.'s blood pressure drug Blopress (candesartan) is among those affected by this rule.
Price Maintenance Premiums
Introduced on a pilot basis in 2010, Japan’s system of price maintenance premiums (PMPs) originally granted all new drugs exemption from the regular biennial price cuts until patent expiry, effectively maintaining initial reimbursement prices. (Also see "EFPIA Wants Continued And More Inclusive Japan Policy Dialog " - Pink Sheet, 27 Sep, 2019.)
However, changes made in April 2018 narrowed considerably the scope for eligibility as the costs of funding the program grew, and limited the premium to only the first three best- or first-in-class products or similar products launched within three years, while adopting a new “company scoring” system.
The original PMP system was initially warmly welcomed by the research-based industry as a strong incentive for R&D and innovation, and as latecomer products can often bring improvements in terms of efficacy, safety, or convenience.
But the number of eligible drugs has been falling from more than 900 in the first years of the scheme to 600 or fewer due to the stricter criteria. This April, the PMP has been granted to a total of 555 products, continuing the downward trend.
Nevertheless, the top beneficiaries (in terms of eligible drugs) continue to be multinationals.