Japan cuts Opdivo price in half as costs surge

After Japan's prime minister weighed in, officials in Japan have slashed in half the price of Bristol-Myers Squibb's Opdivo in the country, taking the cut more than a year ahead of the med’s regularly scheduled price review.

Health ministry officials originally planned a 25% cut, but recently came back with new figures to warrant a bigger chop, Nikkei reports. Starting in February, Opdivo will run half of its current $320,000 per patient per year cost.

Opdivo's price in Japan, set when it was approved for melanoma only, runs twice the med’s U.S. cost and more than five times its sticker in the U.K.

Typically, prices for individual drugs go under review every other year in Japan, with Opdivo’s examination set for 2018. But with its high cost and increasing frequency of use, authorities felt the need to make a drastic change.

Under a commercial partnership, Ono Pharmaceutical markets the blockbuster Bristol-Myers Squibb cancer fighter in Japan, one of the world’s top drug markets.

Ono estimated Opdivo’s Japan sales at 126 billion yen ($1.2 billion) on a yearly basis, a number that would have warranted a 25% price cut based on guidelines of 100 billion to 150 billion yen in sales, according to the news service.

After prime minister Shinzo Abe and other critics weighed in, though, health ministry officials submitted an estimate of 151 billion yen ($1.4 billion) in costs while including distribution and other expenses. At more than 150 billion yen in yearly costs, Opdivo qualified for a bigger price cut, Nikkei reports.

Since Opdivo won an initial nod in melanoma in the country, authorities have approved it in non-small cell lung cancer and renal cell carcinoma, upping the number of eligible patients and putting more and more pressure on the country’s strained healthcare budget.

Not surprisingly, pharma isn’t happy about the price cut move.

For one, the International Federation of Pharmaceutical Manufacturers & Associations said the move "is a major departure from the current rules and should never be repeated," according to Nikkei. Ono said the move will hurt its earnings. Its shares were down about 2% Thursday.

In the bigger picture, the price cut could signal trouble for the industry in a top drug market as Japan, with an aging population, seeks to rein in costs.