Joint Statement by Three Pharmaceutical Associations from Japan, the U.S., and Europe:
Proposals for the FY2024 (Reiwa 6) Drug Pricing System Reform
April 14, 2023
Japan Pharmaceutical Manufacturers Association (JPMA)
Pharmaceutical Research and Manufacturers of America (PhRMA)
European Federation of Pharmaceutical Industries and Associations (EFPIA Japan)
The Japan Pharmaceutical Manufacturers Association (JPMA), the Pharmaceutical Research and Manufacturers of America (PhRMA), and the European Federation of Pharmaceutical Industries and Associations (EFPIA Japan) represent the world’s leading research-based, innovative pharmaceutical companies operating in Japan.
We are calling for the establishment of a drug discovery innovation ecosystem that fosters the creation of new medicines critical to patients. The ecosystem we advocate begins with research and development aimed at addressing unmet medical needs, is supported by internationally harmonized regulatory frameworks that enable the rapid approval of safe and effective medicines, and is underpinned by health insurance reimbursement systems that appropriately value innovation.Within this framework, all elements of the ecosystem must function smoothly to ensure patients have stable and timely access to new medicines and to enable companies to reinvest in next-generation therapies and vaccines.
Japan has long been a global leader in the life sciences sector and is a crucial partner in developing new medicines for patients worldwide.However, in recent years, repeated changes to drug pricing rules and annual price revisions for new drugs during their patent terms have placed Japan’s drug discovery innovation ecosystem at a competitive disadvantage. Currently, Japan is viewed as a market with negative growth, and investment in the life sciences sector continues to decline, in contrast to the global upward trend.As a result, Japan’s share of the early-stage pipeline has declined, and new clinical trials have stalled. Furthermore, “drug lag”—a situation where innovative medicines addressing unmet medical needs are not launched in Japan in a timely manner, or are not launched at all—is reemerging.Amid these circumstances, the
drug
pricing system reform scheduled for fiscal year 2024 (Reiwa 6) presents a critical opportunity to reverse this negative trend
.
We believe that strengthening the drug discovery and innovation ecosystem—including reform of the drug pricing system—is an urgent priority to ensure that Japan regains sustainable market growth and is not left behind in the development of and access to the world’s latest therapies and vaccines.Therefore, we propose three reform proposals to the Ministry of Health, Labor and Welfare’s “Expert Panel on Comprehensive Measures for the Rapid and Stable Supply of Pharmaceuticals” (hereinafter referred to as the “Expert Panel”) that we believe should be prioritized for consideration in the fiscal year 2024 (Reiwa 6) drug pricing system reform.
Proposal 1: Maintaining Drug Prices During the Patent Term
Due to significant changes in the criteria for applying the New Drug Creation Surcharge and the introduction of annual drug price revisions, approximately half of innovative pharmaceuticals are currently subject to annual price reductions.Furthermore, even for products eligible for the New Drug Creation Surcharge, the prices of innovative medicines may be subject to substantial and repeated reductions due to market expansion reassessments.
As a result, many innovative medicines in Japan face business uncertainty, in contrast to other developed countries.
To address these challenges, we propose excluding innovative pharmaceuticals during their patent term from price revisions based on prevailing market prices. We also propose continuing discussions toward transitioning to a system that prevents excessive drug price differentials and their uneven distribution. Furthermore, based on the current challenges raised by the Expert Panel, we propose improvements to the “market expansion reassessment” and the application of the(tied adjustment) rules.
Proposal 2: Improving Drug Price Calculation for New Drugs
The current method for calculating drug prices for new drugs is based on restrictive criteria that fail to reflect the value of innovation. Two-thirds of innovative pharmaceuticals do not receive a price premium upon listing in the Drug Price List, and even when a premium is granted, it is almost always minimal.In particular, highly innovative pharmaceuticals featuring new therapies or modalities face a difficult situation under the current calculation standards because they lack appropriate comparable drugs; consequently, despite providing significant value to patients, the healthcare system, and society, they are not adequately recognized.
As a result, the sales prices of new drugs in Japan—particularly first-in-class products—are diverging further from those in other developed countries, leading to a decline in incentives for early market launch in Japan.
To improve the pricing of new drugs, we recommend expanding the evaluation criteria to allow for a more comprehensive assessment of the value of pharmaceuticals that are difficult to evaluate under the current requirements, while also broadening the scope of comparable drugs used for comparison.
Recommendation 3: Reducing Inefficient Spending on Non-Innovative Pharmaceuticals
We hope for the sustainable growth of the innovative pharmaceutical market in Japan, and we believe there are many opportunities within the healthcare system as a whole to create the fiscal space necessary to implement the above recommendations.We, as pharmaceutical companies, also wish to play a role in implementing the cost-reduction measures proposed by various stakeholders, such as reducing duplicate prescriptions and polypharmacy, promoting the adoption of clinically appropriate generic drugs and biosimilars, and facilitating rapid price reductions for long-listed drugs while ensuring a stable supply.
The Need to Strengthen Public-Private Dialogue for Policy Formulation and Implementation
We understand that these policy changes are not straightforward, but we believe that the best solutions will emerge when all stakeholders come together and collaborate as partners toward a common goal. To ensure the success of these necessary reforms, we hope to see regular and fruitful dialogue between the Japanese government and innovative pharmaceutical companies—both domestic and foreign.
Our industry is on the verge of one of the greatest medical breakthroughs in recent decades—discoveries that have the potential to transform people’s lives in ways that were unimaginable just a few years ago.We will work together with the Japanese government to address the challenges involved in realizing a robust drug discovery and innovation ecosystem that promotes science, economic growth, and timely access to new medicines for patients in Japan. We are confident that by joining forces, we can achieve these shared goals.
Organization Overview
Japan Pharmaceutical Manufacturers Association (JPMA)The JPMA is a voluntary association comprising 71 research-and-development-oriented pharmaceutical companies (as of October 1, 2022).Established in 1968, the JPMA has contributed to global healthcare under the motto “Realizing Patient-Centered Healthcare” through the development of groundbreaking new prescription drugs.
JPMA carries out multifaceted initiatives, including addressing common issues facing the pharmaceutical industry, promoting a deeper understanding of pharmaceuticals, and fostering international collaboration. Furthermore, JPMA is committed to the sound development of the pharmaceutical industry, particularly through strengthening policy formulation and advocacy, responding to globalization, and enhancing public relations efforts.
Pharmaceutical Research and Manufacturers of America (PhRMA)
PhRMA is an organization representing the world’s leading research-based biopharmaceutical companies. Its member companies discover and develop new medicines and strive to help patients live longer, healthier, and more active lives.Cumulative investment by member companies in new drug research and development has exceeded $1.1 trillion since 2000, with an estimated $102.3 billion invested in 2021 alone.
European Federation of Pharmaceutical Industries and Associations (EFPIA Japan)
Established in April 2002, EFPIA Japan comprises 23 European R&D-focused pharmaceutical companies operating in Japan. In 2021, the combined sales of its member companies accounted for approximately 26% of the Japanese pharmaceutical market.EFPIA Japan’s mission is to “contribute to healthcare and patients in Japan through the early introduction of innovative medicines and vaccines.” EFPIA Japan aims to strengthen dialogue with policymakers to improve healthcare in Japan.
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