Top News Press Conference of the President of the Pharmaceutical Manufacturers Association of Japan held. Toward Full-Scale Discussion of Pharmaceutical Industry Policies: Current Situation and Recognition of Issues

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On January 20, 2022, the "Pharmaceutical Manufacturers Association of Japan Press Conference" was held at Nomura Conference Plaza Nihonbashi (Chuo-ku, Tokyo). Yasushi Okada, Chairman of the Pharmaceutical Manufacturers Association of Japan (PMAJ), gave a 25-minute presentation focusing on "At the Start of Discussion on Pharmaceutical Industry Policy: Current Status and Recognition of Issues". Although the event was webcast from the viewpoint of preventing the spread of infectious diseases, 40 people from 21 media companies attended the event and engaged in a lively Q&A session. The following is a summary of Chairman Okada's presentation and the Q&A session.

About the "FY2022 Reform of the NHI Drug Price System

1. contribution of innovative drugs to medical care

What I would like to share with you once again is the significant contribution that innovative pharmaceuticals have made. I am convinced that the pharmaceutical industry has made a tremendous contribution in bringing hope to patients who want to somehow cure their diseases, making the impossible possible, and extending healthy life spans.

In the case of HIV drugs, HIV was once considered an incurable disease, but the establishment of multidrug therapy with innovative drugs has greatly reduced the number of deaths. HIV was said to be incurable, but with the establishment of multidrug therapy using innovative drugs, the number of deaths has been greatly reduced. Even those infected with HIV can lead a long-term life, and their life expectancy is now the same as that of non-infected people.

A prime example of how breakthrough drugs have dramatically changed disease treatment is the introduction of innovative hepatitis C drugs, which have greatly reduced the number of patients with hepatitis, liver cirrhosis, and liver cancer.

As for cancer, which is now the leading cause of death among Japanese people, the development of groundbreaking drugs, combined with medical advances in surgery, diagnostic techniques, and other areas, has led to an increase in the five-year survival rate for patients with stage 4 metastatic colorectal cancer, breast cancer, and prostate cancer, all of which are increasing every year. Dr. Yasuhiro Fujiwara, President of the Pharmaceuticals and Medical Devices Agency (PMDA), who is also a cancer specialist, recently told us that the benefits brought about by anticancer drugs have been extremely significant. He said that in the past, patients diagnosed with cancer often died within just a few months, but now, with the advent of innovative anticancer drugs, it is possible to greatly prolong their lives while maintaining their quality of life.

Another benefit brought about by innovative new drugs is the diversification of modalities. From traditional drug discovery centered on low-molecular-weight compounds, the development of biotechnology has given rise to antibody drugs and gene therapy. The development of digital technology has also given rise to digital medicine, known as digital therapeutics (DTx), of which a smoking cessation app approved in 2020 is a prime example. In addition, overseas, efforts have begun to utilize AI and other technologies to perform everything from diagnosis to issuing prescriptions unattended, and we are confident that groundbreaking medical care utilizing digital technology will continue to progress and spread in the future.

2. toward realization of total healthcare solutions

In order to utilize new drug discovery technologies to create innovative new drugs, it is necessary to establish a solid foundation for the pharmaceutical industry in Japan. To this end, it is important that the three gears of the "life science cluster," the "big data infrastructure," and the "drug pricing system" work in tandem.

I believe that the role of the pharmaceutical industry is no longer limited to the creation of new drugs. In addition to the creation of innovative new drugs, activities under the public healthcare insurance system must also make full use of real-world data and digital technologies such as AI to improve the quality and efficiency of healthcare. In the utilization of big data on health and medical care, for example, we are now in an era of detailed analysis of what kind of background makes people susceptible to disease, what happens before the onset of disease, and so on. In the future, the pharmaceutical industry must collaborate with IT digital companies and companies that handle data to provide solutions in the areas of prediction, prevention, and prognosis, such as disease risk prediction and lifestyle improvement applications, as well as outside the scope of public medical insurance. How to draw the line between areas covered by public medical insurance will be a major point of contention in the future from the perspective of both promoting innovation and ensuring the sustainability of universal health insurance.

In order to realize a total healthcare solution, the utilization of health and medical big data and the development of an enabling environment are extremely important. Genome information and detailed medical information are necessary to predict the risk of disease onset and develop lifestyle improvement applications, etc. We would like to be more proactive in discussions with various stakeholders to establish a health and medical big data infrastructure and an environment that enables its utilization.

It is symbolic that the seeds for vaccines against new coronavirus infection came from venture companies and academia, but today, most new drugs are derived from venture companies and academia. In other words, it is important to build an innovation ecosystem in Japan where venture companies can emerge one after another. It is important to create a role model in Japan that will serve as a successful example, and I strongly believe that the pharmaceutical industry will play a key role in this endeavor.

3. growing global market and flat Japanese market

Looking at the pharmaceutical market, the global market has grown 1.3 times in the last five years. In contrast, the Japanese market has declined slightly. What is happening in the Japanese market?

The composition of the pharmaceutical market clearly shows that the market for long-term listed drugs has shrunk significantly and the market for generics has grown, in line with the basic policy of the Japanese pharmaceutical industry to shift from a model that relies on long-term listed drugs to an industrial structure with greater drug discovery capabilities. On the other hand, the market for patented products has remained flat.

The NHI prices of patented products that ranked in the top 10 in terms of sales from 2015 onward are set at 100% of the NHI price at the time the product was listed on the insurance market, and the subsequent changes in NHI prices show that due to various re-calculations and fundamental reforms of the NHI drug price system, the prices of most products have not been maintained and have been reduced. By reducing the NHI prices of the top 10 largest market items, or, to put it another way, items that are highly valued in the market, the growth of the patented product market has also been suppressed.

On various occasions, the Pharmaceutical Manufacturers Association of Japan (PMAJ) has strongly advocated maintaining the price of new drugs during the patent period. In Germany, a leading advanced drug discovery country, more than 10 of the top 10 drugs in terms of sales since 2015 have been priced at 100% or more of their original cost. price. The reality that the value of drugs is protected in Europe and the U.S. and reduced in Japan is readily apparent ( Figure 1 ). Even if NHI prices in Japan do not deviate significantly from those in Europe and the U.S. at the time of NHI price listing, the prices may be reduced during the patent period, resulting in a large deviation from overseas prices.

Fig. 1 Divergence from the world in the evaluation of innovation

In terms of the number of drugs sold overseas but not yet approved in Japan, of the 246 drugs approved in the U.S. and Europe over the past five years, 72%, or 176 drugs, are not yet approved in Japan. While this cannot be attributed solely to drug price reductions during the patent period, we believe that this may be having an impact. We recognize that there are other reasons for this, such as the fact that more and more new drugs are originating from overseas ventures and academia and are not being developed in Japan, or the fact that there is no medical need for them in the Japanese market to begin with. In other words, the Japanese market has become less attractive and development has become less of a priority in Japan. In other words, we have a strong sense of crisis as a sign of a drug lag.

I would like to touch briefly on our market forecast for the next five years: IQVIA forecasts that the global market will continue to grow by 3-6%, while the Japanese market will remain negative or flat ( Figure 2 ). We cannot afford to let these market forecasts become reality. We must face the fact that we are reaching the limits of continuing the conventional policy of drug price reductions by extension.

Fig. 2 If this market forecast becomes a reality...

4. how to continue to deliver the world's highest level of medical care to the people of Japan

As insurance finances become even tighter in the future due to the aging of society and other factors, it is necessary to discuss issues beyond the existing framework in order to strike a balance between innovation and universal health coverage ( Fig. 3 ). National discussions on the scope of public medical insurance benefits and the review of the burden structure will also become indispensable. We believe that it will also be necessary to review the current situation in which all drugs, from "new drugs" that bring breakthrough therapeutic effects to "drugs that have changed their clinical status since their launch," are covered by the public health insurance system. In addition, it is clear that the factors and roles of price components are different when broadly classifying new drugs, long-listed drugs, and generics during the patent period. We believe it is also necessary to discuss how prices should be in accordance with their characteristics and from the perspective of global standards. With regard to innovative new drugs, the Pharmaceutical Manufacturers Association of Japan (PMAJ) has recently insisted that not only medical value but also various other values, such as improvement of labor productivity, should be evaluated. On the other hand, we are naturally aware that there is a debate about further strengthening the merit of drug prices among new drugs.

Fig. 3 How can we continue to deliver the world's highest level of medical care to the public

We would like to face the discussions on the "Pharmaceutical Industry Vision 2021" in the public and private sectors based on the recognition of the current situation and issues I have explained above.

Main Questions and Answers

Q&A session

	How should the current system be changed in Japan, where drug prices are falling even during patent periods? Are there specific aspects of the NHI drug price system and the public medical insurance system that you would like to see improved?
	We are still pondering how far we should specifically expand the scope of our requests for improvement. The pharmaceutical market should grow, but we do not believe that everything should be covered by public medical insurance, and we need to discuss how to draw that line, which is not an extension of the existing system. The Pharmaceutical Manufacturers Association of Japan (PMAJ) has intensified its advocacy activities in response to the very strict mid-year revision in 2021, and is discussing the issue with various government officials and others who have an influence on policy making. Regarding social security, we have reached a common understanding with various stakeholders that the social security system cannot stand without discussions on benefits and burdens. With regard to the pharmaceutical market, we believe that unless we go beyond the traditional line of extension and discuss areas outside the framework of public medical insurance, the compatibility of Japan's social security system, the promotion of innovation, and the sustainability of universal health insurance will become a given.
	What kind of advocacy activities and messages will be conducted for the upcoming policy discussion timetable, including the formulation of the "Kotto Policy," the mid-year NHI price revision, the next NHI price revision in FY2024, and other milestone discussions?
	There are two major areas of discussion: discussions on individual issues, including the mid-term NHI price revision and the range of adjustment, and discussions on mid- to long-term pharmaceutical industry initiatives, which will proceed in parallel. We would like to ensure that the latter discussion is not limited to the former. As you have pointed out, there will be milestones, such as the formulation of the "Kotta Policy," budget compilation for FY2022, and discussions at the Central Social Insurance Medical Council (Chuikyo). The Pharmaceutical Manufacturers Association of Japan (PMAJ) will respond to these milestones as they arise. In this sense, we would like to continue our advocacy activities in the future.
	When you say that "not everything should be covered by public medical insurance," do you mean "the scope that is not covered by public medical insurance should be strengthened" or "the framework of the insurance system itself should be changed for the areas that have been covered by insurance"?
	Both meanings are indicated. Providing solutions for outside of public health insurance as enhancements related to prevention and prognosis, of course, but not discussing the parts currently covered by public health insurance would also discourage innovation, which is the germ of growth in the pharmaceutical market.
	It is likely that a mechanism for expedited approval will be established by the end of FY2022, including the establishment of a new emergency drug approval system by the Ministry of Health, Labor and Welfare. What is the Pharmaceutical Manufacturers Association's (PMA) position on these matters? If you have any suggestions or requests for improvements, not limited to the approval system, please let us know.
	We recognize that the emergency approval system is a decision reached in response to the delay in the development of domestically produced vaccines against novel coronavirus infection, and we are grateful for the various measures taken by the authorities. We believe that while the triggering of emergency approval, which incorporates a presumption of efficacy, will increase the number of approval options, safety monitoring after the product is launched is extremely important. The discussion on the emergency approval system was summarized by the Pharmaceuticals and Medical Devices System Subcommittee of the Health Sciences Council on December 27, 2021. The pharmaceutical industry will take this into account and work to develop emergency treatments and prophylaxis with predictability in response to this discussion. Since it is clearly stated that efficacy is to be presumed and safety is to be fully confirmed, we will work to create a system to generate such evidence as speedily as possible. The Pharmaceutical Manufacturers Association of Japan (PMAJ) committees are currently discussing feasible measures that the Japanese pharmaceutical industry can take and how to make them happen, based on the efforts made in the last two years to deal with the new coronavirus. In addition, we are also looking into and sharing the various forms of support from Western governments, in response to the National Strategy for Vaccines presented in June 2021, and to respond firmly to the related budgetary measures provided for in the supplementary budget for FY2021. The government, companies, and academia must work together.
	The budget related to novel coronavirus infection has been expanded from FY2020, and there is an impression that the government is serious about responding to the situation. On the other hand, the government's decision to reduce NHI drug prices in FY2022, despite the addition of innovation evaluation in the NHI drug price system, seems contradictory. What is your view on this point?
	Various national budgets have been allocated for vaccines. In particular, countermeasures against pandemics and infectious diseases are the most important policy issues in national security and crisis management. Based on this recognition, the government considers it an issue that should be prepared for by the nation in times of peace, rather than by each company individually. Therefore, we are very grateful that the government has made a serious effort to allocate funds for this issue in this budget. We also believe that this is an issue that should be tackled jointly by industry, academia, and government. On the other hand, it is noted that there has been a cutback in the price of new drugs. While there is concern about the decline in Japan's drug discovery capabilities, there is also a national debate on the pharmaceutical industry policy. The contradiction is precisely what we want to stop this trend and have a discussion that is not an extension of the previous one.
	We believe that it is important not only to increase the number of unapproved domestic drug items, but also the types of drugs. If the reality is that even drugs that fulfill unmet medical needs are not approved, this is a very serious problem. Any additional analysis would be appreciated.
	Drugs developed by emerging foreign biopharmaceutical companies have not yet been approved in Japan, and most of them are "oncology" and "infectious disease/virus-related" drugs. We will analyze this in cooperation with the National Institute of Pharmaceutical and Industrial Policy, and will explain again when the results are available.
	The widening disparity between the rich and the poor is seen as a problem in the coronary disaster. The review of public medical insurance could contribute to further widening disparities. What are your views on this disparity issue and the discussions within the Pharmaceutical Manufacturers Association of Japan (PMAJ)?
	We are now at the stage where the public is involved in discussions on the extent to which social security should be involved in self-help, mutual aid, and public assistance, and we believe that it is important to make the public aware of this issue through advocacy and other efforts.
	In the announcement, you mentioned "at the start of discussions on pharmaceutical industry policy," but I think the discussions have been going on for some time. What is the intention behind the phrase "start of discussion?"
	We believe that discussions from the broad perspective of extending healthy life expectancy and supporting national growth have not really started. For this reason, we dared to use the phrase "to start a full-scale discussion" and also with the thought that this is the last chance to do so.
	With regard to the "discussions we are aiming for," as you mentioned today, do you have any plans for the establishment of working groups, etc., medium- to long-term discussions, and the announcement of the results of such discussions?
	With regard to medium- to long-term discussions, we are exchanging opinions with the relevant parties of the Ministry of Health, Labor and Welfare on how to proceed with the study toward the realization of the "Pharmaceutical Industry Vision 2021". Since many have pointed out that "the Pharmaceutical Manufacturers Association insists on only doing something about its own field without facing reality too directly," we will face reality and hold discussions with relevant parties, including those who are influential in policy making.
	Junichi Shiraishi, President of the Pharmaceutical Manufacturers Association of Japan (PMAJ), responded that future policy discussions will be handled based on the schedule for formulating major policies, etc. However, will this be only a counter to the authorities' proposal, and will it be a defensive proposal? Do you have any plan or other information that shows the overall picture of the discussion proposal that the Pharmaceutical Manufacturers Association of Japan (PMAJ) is aiming for?
	We will at least fully discuss with the government on how to face the industrial policy when proceeding with the discussion. We would like to present an image of the industries we should aim for, including numerical indicators.
	Given the current difficult financial situation in Japan, how will you present your vision as a pharmaceutical association in order to gain public understanding?
	It is necessary to present a vision not only to the Pharmaceutical Manufacturers Association, which is composed of R&D-oriented companies, but also to the industry associations, but we feel that it is very difficult to reach a consensus on a vision beyond the industry associations. Since we feel strongly about the need to eliminate drug lag and to address prevention, we would like to present a vision for the Japanese pharmaceutical industry, regardless of whether or not a global consensus can be formed immediately.
	Do you have a specific vision for the pharmaceutical industry at this time?
	Our basic stance is to "support the extension of healthy life expectancy of the Japanese people and be a leading industry that can drive the Japanese economy," as we stated today. Furthermore, the ecosystem that contributes to the growth of the Japanese economy is the foundation on which innovation is born in Japan, and we believe that "Japan as a country has no future" unless we make firm efforts to build the ecosystem. The major points are not only the final drug price, but also the ecosystem that generates innovation, and the development of an environment that enables the utilization of Japanese data, which leads to overwhelming efficiency gains. We are determined that the pharmaceutical industry must take the lead in these discussions.
	What is your stance on the current NHI drug price system, which revises NHI prices and adjustment ranges every year?
	With regard to the mid-year NHI price revision, we need to go back to the original discussion on the scope of revision and the rate of deviation. With regard to the adjustment range, although there is some debate as to whether the current 2% is theoretically correct or not, a minimum of 2% has been set as a function to absorb economically rational price fluctuations, and is necessary for the stability of drug distribution. Therefore, with regard to the discussion of lowering the adjustment range, we do not believe that it should be revisited at this time.
	It has long been said that clinical trials are difficult to proceed in Japan, and my impression is that the delay in starting clinical trials for the development of a vaccine against novel coronavirus infection has also led to a delay in the approval of the vaccine. What improvements do you think are necessary in this regard?
	Regarding the delay of clinical trials in Japan, the motivation of healthy adults to participate in clinical trials, especially under the universal health insurance system, is weaker than in other countries. For drugs originating in Japan, international cooperation is needed, especially in efforts to expand the network of clinical trials with Asian countries. Since it is difficult to change the clinical trial environment in Japan immediately and dramatically, we believe that the emergency approval system was considered based on a thorough understanding of the actual situation in Japan.
	I believe that the fact that real-world data is not fully utilized in Japan is also leading to delays in drug development.
	What is your view on this? There have been discussions about aligning various standards and specifications for real-world data. Until now, it has been a request to "let us use it," including the use of electronic medical records, but we are now at the stage of "making a commitment to use it for drug discovery and post-marketing surveillance, and creating it together" through consolidated specifications of data that set specific standards, and such discussions are taking place in various places. We are aware that this is the case.

( Naoyuki Iwata, Media Relations Subcommittee, Public Relations Committee)

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