The Journal The Authority on Global Business in Japan

Japan accounts for 7.3 percent of the global pharma­ceuticals market. But what impact will the recently announced National Health Insurance (NHI) price revisions have?

On March 14, Alan Thomas, director of thought leadership at health analytics company IQVIA, spoke to members of the American Chamber of Commerce in Japan (ACCJ) about the challenges, opportunities, and outlook through 2022. The event was hosted by the ACCJ Healthcare Committee in partnership with the Pharmaceuticals, Medical Devices and Diagnostics, and Regenerative Medicine and Bioscience Subcommittees.

While pressure to lower prices and shift to generics may impact potential profits, Thomas sees the future as bright for phar­ma­ceutical companies which continue to invest in research and development (R&D) and innovation. “Japan is, and will continue to be, the second-largest pharma opportunity for innovative manufacturers. I am very confident that we will see a noticeable increase in the share of sales for speciality and biologics from Japan.”

In terms of product segments, he noted a drop in volume across all categories from 2016 to 2017. This includes premium brands, standard brands, repricing, long-listed products, generics, and others.

“There has been considerable accele­ration in the use of generics. This is a result of Ministry for Health, Labour and Welfare (MHLW) policy and the emergence of authorized generics.”
As of Q4 2017, if a generic is available it is dispensed 69.4 percent of the time. This puts Japan on track to hit its 80-percent utili­zation target in 2019. Today, ¥2 trillion is being saved because of this.

Thomas acknowledged that the increased use of generics could be a risk to those with a minimal R&D presence. “If you are a truly R&D-driven company, you will be investing in launch, you will be investing in specialty, you will be invest­­ing in those opportunities that still remain relatively strong.”

One of Japan’s biggest challenges is its aging population. Those aged 65 years and older account for 56.5 percent of healthcare spend. And as the number of seniors rises, one would expect extreme stress on the system.

“Interestingly, the 65-plus population today is actually far healthier than they have been, and the annual drug and healthcare spend per capita in that age bracket is actually starting to shrink.”

But the balance between a growing elder population and shrinking workforce means the burden on individuals will increase. By 2020, two workers (those aged 15 and over) will be supporting one elderly person. In 1970, each elderly person was supported by 9.8 workers.

Thomas noted one possible solution. “There are a number of discussions on extending the retirement age by allowing individuals to work until they are 70 or 71, on the assumption that they will get a slightly higher pension on retiring.”

The NHI price lists released on March 5 will continue to reduce cost. There is a projected ¥750 billion to ¥760 billion in savings with the new 2018 NHI revision. This, in part, due to how product segment sales and shares are defined.

To be eligible for the new price main­tenance premium from April 2018, a product must be:

  • Designated as an orphan drug
  • Developed at the MHLW’s request
  • Granted one of the pricing premiums
    at launch
  • And have a new mechanism of action that meets the MHLW’s innovative/usefulness criteria or a second or third product to market with new mechanisms of action, launched within three years of the first-in-class product.

Looking ahead to 2022, the NHI price revisions are not necessarily truly nega­tive. “The market will go from around ¥10.7 trillion today to just over ¥10 trillion in 2022. This does not mean it’s a bad market. It’s a flat market, yes, but there are continued opportunities for growth, and these will stay relatively unchanged over the next five years—in specialty, biologics, and launch.” Thomas added: “This all hinges on whether or not you continue to be rewarded for your investment in innovation.”

Maxine Cheyney is a staff writer at Custom Media for The ACCJ Journal.