Opdivo price cut may be just the beginning as Japan looks to expedite drug pricing reviews

Japan is likely to revise its current drug pricing review frequency to every year.

As it turned out, Japan’s price cut to cancer med Opdivo was not a one-off move on a pricey drug. The unconventional timing looks to be the prelude to a permanent change to the country’s drug review timeline, as the Shinzo Abe administration tries to curb rising healthcare spending.

Charged by the administration to recommend a new process, advisers at the Council on Economic and Fiscal Policy suggested prescription drug prices—which are set by the government in Japan—be reviewed at least annually, instead of once every two years as the current policy requires, Reuters reported.

The proposed changes also include quarterly reviews of drugs that add more indications to their profiles and hence enjoy larger sales than originally expected. That was the case with Bristol-Myers Squibb’s immuno-oncology drug Opdivo, marketed by Ono Pharmaceutical in Japan.

Since its approval in Japan in September 2014 to treat malignant melanoma, the PD-1 inhibitor has added non-small cell lung cancer and advanced renal cell carcinoma to its profile, giving a huge boost to its sales. The government last month responded by slashing Opdivo's price by half, more than one year before the scheduled price review date. Before the cut, the drug's price in Japan was $320,000 per patient per year, twice as much as the med’s U.S. cost and more than five times than in the U.K.

Even so, the industry didn’t respond well to the news of the change in review time. A top official for international affairs at the Biotechnology Innovation Organization warned the country that its “ad hoc” decision is making Japan “less predictable.” 

Like other countries, the government in Japan has been homing in on drug prices as healthcare spending has taken a bigger share of its GDP in the past few years. Japanese life expectancy has reached 83.7 in 2015, beating Switzerland and Singapore to top the chart, according to data from World Health Organization. 

According to numbers released by Japan’s Ministry of Health, Labour and Welfare (MHLW), as quoted by Nikkei, Medical spending in Japan reached an estimated 41.5 trillion yen ($360 billion) in fiscal 2015, up 3.8% from the previous year, growing for the 13th year consecutively. Newly approved drugs have been a big factor in the 9.4% growth to pharmaceutical spending—including drugs and pharmacists’ costs—Nikkei reported. Per capita pharmaceutical spending has reached $752 per year, lagging only behind the U.S.’ $1026. 

MHLW also expects a huge demand for hepatitis C treatments starting this winter to further push up the country’s medical expenses.

The government has been trying to use cheaper generics to fight the current drug price problem. Usage rate of generics has reached 63.1% in 2015, up 4.7%, Nikkei reported, but still accounting for only 12.4% in terms of value, or 33.5% in terms of volume of the market, according to data from the Organisation for Economic Co-Operation and Development. 

The advisers, including Sadayuki Sakakibara, head of Japan’s largest business lobby Keidanren, also argued that generic drugs’ prices should be lowered to reflect the trend of overall market.

The proposed changes have received opposition from Japanese and foreign drugmakers, which argue that the changes will stifle innovation, which is a key component of Abe’s economic growth plan.

Chief Cabinet Secretary Yoshihide Suga supported the overall proposal, and Health Minister Yasuhisa Shiozaki submitted a similar plan at a meeting on Dec. 7. Abe ordered that basic guidelines be outlined by the next meeting later this month, with the hope of implementation for fiscal 2018.