Summary of Research Findings

The drug pricing system used to be imperative for the pharmaceutical industry and the drug wholesalers to grow, because, in many cases, it allowed them to earn regular income from the medicines being on the National Health Insurance (NHI) drug price list. However, the drugs such as antibody drugs and gene drugs have emerged with high prices, because of their difference in manufacturing methods and efficacies from the conventional small-molecule drugs. The government, therefore, decided to drastically reform the drug pricing system in accordance with the changes in the market environment.

On December 20 2017, the Central Social Insurance Medical Council approved in its general meeting about the gist of radical reform of the drug pricing system, which include drastic reform of the Premium System for the Promotion of Innovative Drug Discovery and Resolution of Off Label Use as well as the prices of long-term listed items. Because the reform may deteriorate the sales performance at many pharmaceutical companies, pharmaceutical wholesaling business may not going be as profitable as it used to if clinging to conventional ways of selling drugs. If drug wholesalers wish to build a new business model, quite a few things must be done at an early period as possible. If they are to end up with just examination and avert making decisions for their future, or just watch what other companies do before making their own decisions, their wish for strengthening their business base is hardly likely to be achieved. Such negative attitudes by the management team may adversely affect the lower rank of the organization. This eventually makes it difficult for the management team to guide the entire organization toward improvement and enhancement at this revolutionary time. What is required in pharmaceutical wholesalers now is to look for the brand new future, not the future passed on from the past. The wholesalers are needed to enhance the relationship with the customers and some companies sharing the future views, and to proactively explore the new market.

Noteworthy Topics

How Far Can Government Control Drug Price?

Triggered by the “Radical Reform of Prescription Drug Price System”, the following solutions are to be put into effect: carrying out annual drug price survey and drug price revision, prompt response to the market expansion by adding indications, etc., rectification of evaluating new drug innovation (the Premium System for the Promotion of Innovative Drug Discovery and Resolution of Off Label Use), reexamination of adjustment with overseas average price, introduction of cost effectiveness assessment, reconsideration of the prices of long-listed drugs, and consolidation of generic price.

As can see from the above, though the government states that “innovation will be appropriately evaluated,” the reform pressed ahead with by the government enabled the medicine price to be controlled to a certain degree, placing more importance on keeping new drugs from remaining high prices and on facilitating the shift from long-listed drugs to generic. For pharmaceutical companies, despite Premium System for the Promotion of Innovative Drug Discovery and Resolution of Off Label Use” maintained, their attempts for new drug development became more challenging, as the requirement of lower discrepancy rate than average abolished, premium-applicable products narrowed down to those highly innovative and effective, or those with new mechanism of action or a certain number of clinical tests carried out in Japan, and when conforming to the status of new drugs being on the NHI price list for the past five years.  

Kimriah that Novartis Pharma applied as CAR-T-therapy of cancer treatment was newly approved at a subcommittee of the Pharmaceutical Affairs and Food Sanitation Council on February 20 2019, allowing the company to manufacture and sell the drug as a regenerative medicine product in Japan. In the U.S., the product is super expensive, costing about 50 million yen for a single dose. In Japan, it costs 33,493,407 yen per patient. In order to prevent drug lags, the government has to maintain the system for evaluating new drug innovation, which makes it difficult to suppress the new drug price from the very beginning. On the other hand, when considering more such expensive drugs likely to emerge, the government will have to come up with new measures if the recently established rules are not effective.

Research Outline