Market Access in Japan: New Challenges and Opportunities for the Pharmaceutical Industry

Is the world's second largest pharmaceutical market primed for new growth? Although Japan is the second largest pharmaceutical market in the world, regulatory hurdles, a diffi cult pricing and reimbursement environment, and the steady erosion of prices as a result of government cost-containment measures have often deterred foreign manufacturers from launching their drugs in this market. The most recent government reforms, implemented in April 2010, have imposed new price cuts, but they also introduced a premium to reward patented drugs to promote the development of new drugs and the elimination of off-label use. The changing market access climate is encouraging many multinationals to think afresh about the opportunities presented by both the branded and generics markets in Japan.

Questions Answered in This Report:

• Japan's new democratic government has pledged to increase healthcare spending as a percentage of gross domestic product to an average level in member states of the Organisation for Economic Co-operation and Development. How will the aging of the Japanese population impact demand for healthcare services?
How is the level of national debt likely to infl uence healthcare spending?
• Drug prices in Japan are generally marginally higher than European prices but lower than U.S. prices. How do drug prices in Japan compare overall with pharmaceutical prices in the United States? To what extent do the prices of biologics differ between Japan and the United States?
• The National Health Insurance system uses three methods to set drug reimbursement prices. Which approach is most advantageous to drug manufacturers? In recent years, which method has been used most commonly to set the prices of new drugs? What effect has the launch of growing numbers of innovative drugs had on the choice of pricing methodology?
• The most recent biennial revision of NHI reimbursement prices took effect on April 1, 2010. What percentages of prices were reduced, increased, or left unchanged? What was the average price reduction? Which drug classes were subject to especially large price cuts?
• Effective April 1, 2010, the Japanese government introduced a "premium for the development of new drugs and elimination of off-label drug use." What conditions must drugs satisfy to qualify for this premium?

How is the premium calculated? How many drugs have been awarded the premium in 2010? What are manufacturers expected to do in return for the new premium, and what are the penalties for failing to meet the government's requirements?

• The Japanese government has set an ambitious target for generics: to account for at least 30% of prescriptions by the end of fi scal year 2012. What accounts for the relative underdevelopment of the Japanese generics market at present? What measures has the government adopted to promote generics substitution in retail pharmacies and more extensive use of generics in hospitals? How is the competitive landscape in the generics market changing?

Scope:

• Overview: organization and funding of the Japanese healthcare system; soaring growth of the country's healthcare expenditures; prescription drug prices in Japan compared with other major markets.
• Price setting: initial pricing of branded drugs; similar-effi cacy pricing methods; price premiums;cost-calculation method; foreign price adjustment rule.
• Postmarketing price changes: the government's biennial National Health Insurance price revisions;price cuts for long-listed drugs; repricing in response to market expansion; premium for drug development and elimination of off-label use.
• Promoting the use of generics: evolution of the Japanese generics market; generics substitution; use of generics in hospitals; increasing competition in the Japanese generics market; biosimilars.
• Outlook for the Japanese pharmaceutical market: recent and projected growth rates; increasing interest of multinationals in the untapped potential of the Japanese market; projected impact of recent government cost-containment measures and the premium for drug development and elimination of off-label use; industry hopes and concerns for the future direction of government policy.

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