4:55 PM
Apr 28, 2017
 |  BioCentury  |  Politics, Policy & Law

Access and innovation in Japan

How Japan’s MHLW is grappling with drug pricing, access and innovation

Regulatory reforms have paved the way for innovative therapies to launch in Japan before anywhere else in the world. This should result in earlier access to more innovative medicines than ever before - but only if policies on drug pricing can catch up.

As the Ministry of Health, Labour and Welfare (MHLW) rushes to implement across-the-board pricing reforms by the start of FY18 next April 1, it has the opportunity to devise a value-based system for breakthrough therapies whose early but limited data make them ripe for novel pricing approaches.

The early signs are this level of regulatory innovation may not be ready to match the ambitions of Japan’s drug approval renaissance, but MHLW says it still will be possible to embrace both innovation and affordability.

Japan controls drug spending via a system managed by MHLW’s Central Social Insurance Medical Council (Chuikyo), a body that imposes mandatory price reviews - and usually reductions - every two years. First-in-class drugs receive an initial price based on a combination of cost-plus and reference pricing methods and can be eligible for premiums. Until recently these drugs were nearly always approved in the U.S. or Europe first.

Next-in-class drugs with proven benefits over a reference drug, Orphan drugs and drugs approved for some pediatric indications also can receive premiums (see “Japan’s Way”).

Ono Pharmaceutical Co. Ltd.’s Opdivo nivolumab, a breakthrough drug launched first in Japan, showed weaknesses in the system. With no foreign price to use as a reference and an initial approval for an Orphan indication, Opdivo garnered a price tag almost three times that of the eventual U.S. listed price.

As the PD-1 inhibitor added large new indications, spending ballooned by more than 150% that expected by the ministry, and Chuikyo conducted an ad hoc assessment, cutting the mAb’s price by 50%.

Now, led by concerns from the Ministry of Finance that other breakthrough drugs could threaten the government’s ability to provide comprehensive healthcare for all citizens, MHLW has outlined reforms that could amount to a complete overhaul.

“The challenge we have now is to review and advise on how to provide a sustainable system for everyone.”

Masami Sakoi, MHLW

“The conventional pricing system could not sufficiently accommodate the market trends with drugs like Opdivo and the hepatitis drugs, so the challenge we have now is to review and advise on how to provide a sustainable system for everyone,” said Masami Sakoi, director of the medical economics division at MHLW’s Health Insurance Bureau.

The proposals include annual repricing for all drugs and additional scheduled reviews for drugs that get expanded labels, along with changes to how reference price is determined.

MHLW also will implement a cost-effectiveness assessment that has been in pilot testing.

The ministry told BioCentury any drug could be subject to cost-effectiveness review, though in practice these would likely be limited to high-cost drugs. There may also be changes to the way Chuikyo determines what drugs will be given premium pricing.

Industry groups think a complete overhaul is unnecessary, and fear it would put at risk the progress gained under the Sakigake accelerated approval pathway, which has led increasing numbers of companies to launch in Japan either first, or at the same time as other major markets.

They also say scrapping mechanisms that allow premiums for innovation could make Japan a less attractive place to launch drugs.

The drug developers think a better solution would be to devise a methodology for pricing drugs approved via Sakigake, and to increase the uptake of generic drugs to create headroom to pay for them.

Many of these drugs will come to market with limited data to support their clinical benefit, making them ideally suited to new pricing models such as indication-based or pay-for-performance arrangements. However, MHLW said it isn’t yet considering these new models.

Industry will make its case at a May 17 public hearing. More details on the reforms could come as early as July, when the Ministry of Finance releases its FY18 budget framework.

Sidebar: Japan’s way

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