Top News Press Conference of the President of the Pharmaceutical Manufacturers Association of Japan held. Aiming for a country where innovation is dynamic

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On February 15, 2024, the "Pharmaceutical Association of Japan (PSA) Presidents Press Conference" was held at Bellesalle Iidabashi Station (Chiyoda-ku, Tokyo) in a hybrid format of on-site participation and online. At the beginning of the press conference, Hiroaki Ueno, Chairman of the Pharmaceutical Manufacturers Association of Japan (PMAJ), expressed his condolences for the Noto Peninsula Earthquake of 2024, which occurred on January 1, 2024, and then gave a presentation titled "Toward a Nation Dynamic in Innovation". In his presentation, he explained the importance of proper evaluation of innovation and the direction of the pharmaceutical industry's efforts to strengthen Japan's drug discovery capabilities, and engaged in a lively Q&A session with the 35 members of the press from 21 companies who attended the event. The following is a summary of Chairman Ueno's presentation and the Q&A session.

1. Introduction

Recognition of the Environment Surrounding the Pharmaceutical Industry

Figure 1 Recognition of the environment surrounding the pharmaceutical industry (from last year to this year)

Aiming for a Virtuous Circle

Since assuming the position of Chairman, I have been working to contribute to the extension of healthy life expectancy of the Japanese people and the development of the Japanese economy by realizing a virtuous cycle of "strengthening Japan's drug discovery capabilities," which is the main mission of the pharmaceutical industry, and "appropriate evaluation of innovation" through environmental improvement. Today, I would like to talk about these efforts to "strengthen Japan's drug discovery capabilities" and "appropriate evaluation of innovations," as well as our future policy.

2. appropriate evaluation of innovation

Current status and factors of drug lag/loss

One of the major challenges facing the pharmaceutical industry is to deal with the drug lag/loss, in which new drugs approved overseas do not enter the domestic market. This issue is becoming increasingly recognized by many. Drug lag/loss has already become apparent and is increasing every year. The risk of potential drug lag/loss has also been suggested. The Pharmaceutical Research and Manufacturers of America (PhRMA) reported that 71% of new drugs in Phase 3 trials in the U.S. and Europe have not yet been developed in Japan. If this situation continues without even being developed in Japan, there is concern that it will lead to an increase in drug lag/loss. In order to overcome this situation, we have analyzed the causes of drug lag/loss, compiled a list of necessary measures, and proposed them to the government and administrative agencies.

There are various factors that contribute to drug lag/loss, but we believe that they can be broadly categorized as pharmaceutical-related factors and drug price-related factors. As an example of regulatory factors, some inadequacies have been pointed out in Japan's clinical trial environment, particularly with regard to the simultaneous development of drugs overseas. As examples of drug price factors, various factors were identified, such as lower prices at the time of NHI listing compared to overseas countries, lower drug prices after listing even during the patent period, and low predictability of sudden drug price reductions due to market expansion re-calculation, etc. Based on the analysis of these factors, we have stated our requests at the Central Social Insurance Medical Council (Chuikyo) and other forums in preparation for the NHI price revision in FY2024.

NHI Reform in FY2024

The first of the requests from the pharmaceutical industry associations for the reform of the NHI drug price system in FY2024 is "appropriate evaluation of innovations at the time of NHI price listing. Second, we have requested a review of the additional fee for new drug creation, etc., to "maintain the NHI price of innovative new drugs during the patent period. The Pharmaceutical Manufacturers Association of Japan (PMAJ) requested, among other things, a review of the co-participation rule for reimbursement and opposition to the expansion of the scope of NHI price adjustment for cost-effectiveness evaluation. The Pharmaceutical Manufacturers Association of Japan (PMAJ) asserted that the realization of these will lead to the elimination of drug lag/loss and contribute to improved patient access to innovative new drugs.

In the FY2024 NHI drug price reform, as a result, with regard to "appropriate evaluation of innovation at the time of NHI price listing," an additional fee for expedited introduction was introduced, but a new value evaluation mechanism is still under consideration. With regard to "maintaining the NHI price of innovative new drugs during the patent period," the corporate category for the additional payment for new drug creation was abolished, and the requirements for items such as pediatric drugs were expanded. Furthermore, with regard to the "reimbursement for market expansion" for similar products, the Chuikyo specified the areas in advance and excluded the application of reimbursement for similar products in those areas. The scope of the "cost-effectiveness evaluation system" was limited to the special treatment of recanemab.

As described above, the FY2024 NHI drug price reform incorporates many of the requests of the pharmaceutical industry associations, and we believe that a certain level of innovation has been recognized, and that this is the first step toward eliminating the drug lag/loss and encouraging innovation in Japan. On the other hand, during the discussion at the Chuikyo, there were many opinions that the reforms requested by the pharmaceutical industry associations should be verified to see if they truly lead to the elimination of the drug lag/loss. The Pharmaceutical Manufacturers Association of Japan (PMAJ) will actively cooperate with the government in verifying the effectiveness of the reform, and will continue to discuss a new value evaluation system ( Figure 2 ).

Figure 2 Main contents of the FY2024 system reform

Future Initiatives

The basic approach of the Pharmaceutical Manufacturers Association of Japan (PMAJ) to the reform of the NHI drug price system is, first of all, to cooperate with the government and other industry organizations to promote measures to eliminate drug lag/loss, and also to study and implement the verification of the effectiveness of such measures. Specifically, we will continue to improve the NHI drug price system, clinical trials, and other aspects of the environment, and disseminate information, especially overseas, about the NHI drug price reform and the NHI system reform. Furthermore, regarding the verification of the effects of the NHI drug price reform, we will examine how the awareness and behavior of companies have changed, as well as confirm how the drug lag/loss situation has actually changed. What is particularly important is to ensure that these efforts, on an ongoing basis, will lead to the elimination of drug lag/loss in the future.

And as we work toward further improving patient access to innovative new drugs in FY2025 and beyond, we believe that the first priority is the "appropriate evaluation of innovations at the time of NHI drug price listing," which was a continuing discussion in the FY2024 NHI price revision. For example, we will deepen the discussion toward the NHI price revision in FY2026 with the aim of establishing a NHI drug price system appropriate for the innovative nature of new drugs, such as new modalities and drugs that have never existed before ( Figure 3 ).

Figure 3 Toward further improving patient access to innovative new drugs

Accelerate the new drug discovery cycle through appropriate evaluation of innovation

In order to create new drugs, it is essential to invest in research and development over many years, and it is also necessary to continue to invest large amounts of money on an ongoing basis, with a low probability of success. To achieve this, once a new drug is launched, the innovation must be properly evaluated and generate revenue commensurate with the investment made up to that point, or the cycle will not be able to continue. In order to turn the cycle around quickly, it is important to maintain a certain NHI price for new drugs during the patent period, and when the patent expires, it is important to hand over the role to generics and quickly turn the profits gained into the next investment. In this sense, it is significant that the NHI drug price maintenance during the patent period has been restored for innovative new drugs in the current NHI drug price reform.

3. strengthening Japan's drug discovery capabilities

Recognition of the Current State of Drug Discovery in Japan

The following are some facts about the current status of drug discovery and drug discovery capabilities in Japan. First, the top 100 ethical drugs in the world in terms of sales are originated from the United States, which accounts for about half of the total sales in both 2008 and 2021. Japan, on the other hand, was once said to be one of the leading countries in terms of new drug creation, ranking second only to the U.S. in 2008, but in 2021 it has dropped to fourth place, with the number of new drugs falling from 13 to 9. This is true not only for the top 100 products in terms of global sales, but also for sales below that level.

One of the factors leading to this situation is the change in pharmaceutical modalities: since 2000, biotechnology has made significant progress, and a number of biopharmaceuticals, mainly antibody drugs, have begun to appear on the market. This shift is not limited to antibody and protein drugs, but also extends to gene therapy and nucleic acid drugs, which are now referred to as "new modalities. A comparison of the sales of the top 100 global pharmaceuticals in terms of sales between synthetic and biopharmaceuticals shows that between 2008 and 2021, sales of synthetic pharmaceuticals have remained constant, while sales of biopharmaceuticals have grown over time, and by 2019 they will reverse. A comparison of the change between synthetic chemical drugs and biopharmaceuticals for the top 10 products in global sales between 2001 and 2021 shows that the percentage of biopharmaceuticals has increased dramatically over the past 20 years.

When the top 100 products in terms of sales in 2021 are divided into synthetic chemical pharmaceuticals and biopharmaceuticals, the United States is the number one creator of each category. Japan, on the other hand, ranks third with seven synthetic chemical drugs, but sixth with only two biotech drugs. In other words, it may be said that the shift from synthetic chemical drugs to biotech drugs has not been sufficient in Japan. This may also be true for the UK and Germany, which used to be good at chemical synthesis along with Japan.

There are two major reasons for the diversification and change in pharmaceutical modalities: first, changes in the diseases for which drugs are needed, and second, changes in the targets for drug discovery, In the late 1980s to early 2000s, lifestyle-related diseases became a major problem, and the control of blood pressure, lipids, and blood glucose was emphasized in order to overcome these diseases. On the other hand, in recent years, the average life expectancy has increased in many countries and the number of people suffering from cancer has increased, resulting in an increased need for anticancer drugs, and the need to treat rare diseases has also changed drug discovery targets. Another is the significant advances in science and technology to achieve treatments for these diseases. For example, the causes of diseases have been elucidated at the genetic level, and gene therapy and nucleic acid medicine, treatments that control genetic abnormalities, have emerged. Furthermore, modalities with more complex mechanisms, such as cell therapy and regenerative medicine, have emerged.

Against this backdrop, the current status of drug discovery in Japan can be summarized as follows,

1.	The number of new drugs created in Japan is gradually declining.
2.	The global environment for drug discovery is rapidly diversifying in terms of pharmaceutical modalities.
3.	In such a changing environment, Japan is lagging behind in the discovery of new drug modalities.

In order to strengthen Japan's drug discovery capabilities in the future, we believe that it is important to urgently enhance drug discovery capabilities in new modalities, while maintaining our existing strength in small molecule drug discovery.

Changing Styles of Drug Discovery with Changing Modalities

I would like to talk about what will be required as modalities change and diversify. In the past, when small molecule drugs were the main modality, the infrastructure for small molecule drug discovery and manufacturing was basically owned by each pharmaceutical company. We also collaborated with academia, ventures, and contract research organizations (CROs)/contract manufacturing organizations (CDMOs), but this was basically a one-on-one collaboration.

On the other hand, in drug discovery using new modalities, few pharmaceutical companies have the technology to produce the initial substances for drug discovery research, and it is essential to collaborate with venture companies and CDMOs that can produce the initial substances needed to confirm the usefulness of targets discovered in academia and in research papers. In addition, the stage of confirming a concept in a non-clinical setting is also a critical stage. In addition, even at the stage of confirming a concept in a non-clinical setting, there are many cases where it is difficult to use conventional animal models, and collaboration with a CRO or other external party is necessary for the creation of the evaluation system. In other words, even at the stage of launching a drug discovery theme or confirming a preclinical concept, it is difficult for a pharmaceutical company to conduct drug discovery alone. Therefore, the necessity and importance of the so-called "drug discovery ecosystem" has come to be recognized in order to efficiently promote collaboration among multiple players.

Current status of the drug discovery ecosystem in Japan

I will discuss what is a drug discovery ecosystem and what is a "drug discovery ecosystem suitable for Japan. When we talk about drug discovery ecosystems, the first ecosystem that comes to mind is the one in Boston, USA. It is home to world-class universities such as Harvard University, Massachusetts Institute of Technology, and Boston University, as well as several world-class hospitals in the surrounding area. The region is also home to a variety of ventures, start-ups, and venture capital firms, as well as major global pharmaceutical companies. In this localized area, information is exchanged on a daily basis, and innovations for drug discovery are born. The innovations that emerge are not confined to this ecosystem, but are connected to other regions of the U.S. and abroad, where projects are nurtured and developed. On the other hand, the United Kingdom also has a drug discovery ecosystem known as the "Golden Triangle," which consists of three biotech clusters in London, Oxford, and Cambridge. The UK is characterized by the fact that the clusters are well coordinated and operated in an integrated manner.

What is the situation in Japan? Let us introduce an ecosystem called Greater Tokyo Biocommunity (GTB), which is formed in the Tokyo area. The key points here are the clustering of each ecosystem and the mechanisms that connect them to other ecosystems, which I would like to discuss further. In Japan, drug discovery-related bioclusters exist in various regions from Hokkaido to Okinawa, including GTB in the Kanto region (introduced earlier) and Biocommunity Kansai (BiocK) in the Kansai region. The existence of such clusters in various regions is a good thing in itself, as they are all creating results by taking advantage of their unique characteristics and contributing to the revitalization of their respective regions. However, considering the examples of the U.S. and the U.K., it is expected that the bioclusters in these regions will be more effective if they are linked to each other and further deepen their collaboration, which is an important point in considering a "drug discovery ecosystem suitable for Japan" ( Fig. 4 ).

Figure 4 Comparison of drug discovery ecosystem with other countries

The following is a basic idea of how the linkage should be achieved. In considering the drug discovery ecosystem, it is important to consider the three elements of "people," "goods," and "money," and the element of "information" related to each. Here, "people" refers to the players in the drug discovery ecosystem, such as academia, startups, and pharmaceutical companies, while "products" include the seeds that lead to drug discovery and even pharmaceuticals, the end substances that control them, and the elemental technologies required to make them into pharmaceuticals. The "money" includes public funds and private funds from venture capitalists. The first priority is to strengthen and enhance "people," "products," and "money," and the people and organizations responsible for each of these roles are considered to be the key players. On the other hand, information related to the above is basically collected and exchanged among the players, but I believe that a mechanism to make this happen more smoothly and effectively can be established artificially. In this respect, Boston is a place where "people," "goods," and "money" spontaneously accumulate, and "information" is gathered and connected simply by being physically present in the area.

Toward the creation of a drug discovery ecosystem suitable for Japan

First of all, we need to look at the direction of strengthening and enhancing "people," "goods," and "money," respectively. In the area of "people," the basic approach is to develop human resources in each player, but we should also promote mobility to facilitate the transfer of human resources from one player to another, and enhance opportunities for exchange, including information and personnel exchanges. In the area of "products," it has been pointed out that the seeds of academia and startups do not easily lead to products. In addition, new modalities are often commercialized by combining multiple technological elements, so it is important to have ideas and perspectives on what kind of technological elements should be combined. Regarding "money," public funds are often dispersed and inefficiently managed. On the other hand, it is said that venture capital has limited capacity to invest and support venture businesses.

What is even more important is how the elements of the ecosystem, "people," "goods," and "money," are connected, as is the case in other countries. Only when there is a mechanism to aggregate and connect the "information" of the elements, can the actual "people," "goods," and "money" be connected. We believe that the establishment of a mechanism to aggregate and connect such "information" is the key to a "Japanese-style drug discovery ecosystem. We will request the government to establish such a system, and the Pharmaceutical Manufacturers Association of Japan (PMAJ) will actively cooperate with the government. Such a mechanism will also make it easier to connect with overseas ecosystems ( Figure 5 ).

In order to make the drug discovery ecosystem even stronger and to ensure that results are continuously generated from it, it is also important to develop the infrastructure that supports the ecosystem. These include "manufacturing facilities for new modalities," "clinical trial environment," and "environment for the utilization of health and medical data. All of these elements are essential for the smooth commercialization of pharmaceutical seeds created by the drug discovery ecosystem. Strong leadership from the national government is essential for these improvements, and the Pharmaceutical Manufacturers Association of Japan (PMAJ) will cooperate in this effort. I am confident that once such a Japanese-style drug discovery ecosystem is established, Japan's drug discovery capabilities will be further strengthened and connected to the global drug discovery ecosystem, positioning Japan as an indispensable country for drug discovery in the world.

Figure 5 Image of a drug discovery ecosystem suitable for Japan

Aiming to be a country where innovation is dynamic

Today, I have discussed the past efforts and future direction of the Pharmaceutical Manufacturers Association of Japan (PMAJ) with regard to its main activities, namely "strengthening Japan's drug discovery capabilities" and "appropriate evaluation of innovation. While each of these initiatives is of course important, it is even more important for them to form a virtuous circle. As a result, Japan's drug discovery capabilities will be strengthened and the drug lag/loss will be eliminated, so that innovative new drugs can be delivered to patients.

We believe that this virtuous cycle will lead to an increase in people's healthy life expectancy, improved wellbeing, increased labor productivity, and economic growth, and that the profits generated will lead to investment in further innovation, in other words, a virtuous cycle for society as a whole ( Figure 6 ). With this in mind, we will continue to drive the activities of the Pharmaceutical Manufacturers Association of Japan (PMAJ). We look forward to your continued support and encouragement.

Figure 6 Toward a country where innovation is dynamic

Main Questions and Answers

Q&A session

	The Pharmaceutical Affairs and Food Sanitation Council has asked the pharmaceutical industry to show what kind of behavioral changes and awareness reforms it will make in response to the drug price reforms in FY2024.
	First of all, individual companies are the main actors in drug development. Many of the drug lags and losses are based on the business decisions of individual overseas pharmaceutical companies and bio-ventures. The Pharmaceutical Manufacturers Association of Japan (PMAJ) would like to disseminate information on the NHI drug price and pharmaceutical affairs system reforms so that these companies will change their behavior. If the drug lag/loss is not improved, we will further investigate the causes and countermeasures. Minister of Health, Labour and Welfare Keizo Takemi has stated in a speech to the Diet that the entire country is committed to improving drug lag/loss, and the Pharmaceutical Manufacturers Association would like to cooperate in this effort.
	I understand your awareness of the issues related to the drug discovery ecosystem, but how do you plan to consolidate information?
	Even today, there are many biotech clusters in Japan. It is important that information related to "people," "products," and "money" in these clusters be connected throughout the country so that they can function effectively in combination. However, if information related to drug discovery can be shared in a positive manner while maintaining confidentiality, and if those with discernment can access the information, it will be easier to put the information to practical use. We hope to create such a system. Boston is the place where this can be done naturally. I would like to ask for the government's support to make this happen.
	The stable supply of pharmaceuticals is an issue for the industry as a whole. What measures are you taking to address this issue? We would also like to know what you are doing with regard to the mid-year revision.
	We take the issue of stable supply very seriously, regardless of whether it is a new drug or a generic. The NHI price revisions have supported the prices of highly necessary drugs in particular, and the next question is how to ensure a stable supply of these drugs. The industry is also discussing the mid-year revision, but we will basically maintain our position of opposition.
	What do you think is the reason for the NHI drug price reforms, which you believe were fairly successful in meeting the industry's demands? What do you think is the reason for this? Also, how do you think the industry will verify the effectiveness of the revisions?
	We positively evaluate the fact that many of the industry's requests were reflected in the NHI drug price reform. Although the industry has been aware of these issues for some time, the drug lag/loss and stable supply problems have emerged over the past few years, and a shared awareness of the crisis has led to the current reform. As for the drug lag/loss, it will take time to resolve it in the form of approval of unapproved products in Japan, but behavioral changes, such as decision-making on domestic development of products approved overseas but not developed in Japan, should become visible in a relatively short period of time. While considering separately what can be verified in the short term and the long term, we will appeal to the parties concerned to change their behavior.
	Some say that the size of Japanese pharmaceutical companies is small and that they should be encouraged to reorganize, and that the top management of each company should be asked to make decisions. What are your thoughts on this opinion?
	Since it depends on the strategy of each company, I will answer this question as a personal opinion. Considering that many of the innovations that have been born in recent years are of venture origin, it is not necessarily a question of scale. On the other hand, scale is necessary in the case of global business. Therefore, we believe that the appropriate scale depends on the type of business each company is aiming for.
	I understand that each player in the drug discovery ecosystem needs to be strengthened. There has been talk of information sharing programs and compound library exchanges in the early stages, but these have not always been successful.
	The most important part is to determine whether innovations in academia can be the seeds for drug discovery, but a large investment is needed from the point of testing them. In terms of manufacturing in particular, with small molecules, it was possible to use libraries to find hit compounds and confirm their physiological effects, but even this is difficult with the current modality. It is necessary not only to provide financial support but also to combine multiple technologies. The key point is what kind of steps can be taken, and from this perspective, how to gather information is also important. Even if the seeds of academia exist on their own, they will not be able to move forward.
	You seem to have reached the end of your positive evaluation of the NHI drug price reform, but what is the next step?
	The first step is the appropriate evaluation of innovation. Modalities that cannot be evaluated by the conventional similar drug effect comparison method or cost accounting method, and cases that have a large impact on rare diseases are emerging. How to value these cases will be an essential discussion, but we will start as soon as possible.
	How do you see the U.S. presidential election affecting the pharmaceutical industry?
	In the U.S., former President Donald Trump also saw high drug prices as an issue. If the argument that drug prices in the U.S. are high is repeated, it will affect companies operating in the U.S. And we believe that this will ultimately affect the global pharmaceutical market as well.
	Rather than reforming the NHI drug price system, the R&D tax system should also directly lead to enhanced earnings, but are you not seeking this? Also, wouldn't it be more direct to eliminate drug lag/loss not only through the NHI drug pricing system, but also through the pharmaceutical affairs system?
	Although the tax system was not mentioned in this presentation, we are positive that an innovation box tax system has been established. On the other hand, the R&D tax system is also important for the creation of new drugs, and we believe that the innovation box tax system is only possible if this system is firmly maintained. We also view the pharmaceutical affairs system as very important. What kind of system will bring new drugs to Japan is a matter for individual discussion, but we will continue to consider this issue while watching the discussions of the Pharmaceutical Affairs Study Group.
	Regarding the drug discovery ecosystem, it is said that Japan does not have a fluid human resources.
	In Japan, the concept of side hustles and dual jobs is rapidly spreading. Pharmaceutical companies should be able to create such a flexible system. On the other hand, it is also important for the recipient side to consider, for example, whether it is possible to acquire desirable human resources. It is necessary to create a system for matching and other measures based on the "information" that has been gathered, including such information.
	Examples of successful drug discovery ecosystems include Boston and Moderna. What kind of goals do you have for Japan?
	What constitutes success varies from person to person. In the case of Moderna, there was the special situation of the coronavirus vaccine. An easy-to-understand target would be the number of seeds from academia and venture companies that have been put into practical use. From this perspective, there have already been successful cases in Japan where pharmaceutical companies have collaborated with academia and others to commercialize products. We must consider what is needed to make this more efficient.

( Nobuyuki Kobayashi, Industry Promotion Subcommittee, Industrial Policy Committee; Hajime Fukuda, Innovation Promotion Subcommittee)

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