Japan’s FY2024 drug pricing reform and current system
Over the past decade, Japan’s aging population has significantly increased the financial burden on its public health system, leading to stricter regulations on drug pricing through cost-effectiveness assessments and repricing rules. These measures have stifled the growth of Japan’s pharmaceutical market, with overseas manufacturers showing less interest in the country as an early launch market.
To address these challenges, at the end 2023, Japan’s Central Social Insurance Medical Council (Chuikyo) approved the framework for its drug pricing and repricing reform, which took effect in April 2024. The update aims to address delays in marketing authorisation and ensure a stable supply chain for National Health Insurance (NHI)-listed drugs.
Key reforms on NHI price listing
The FY2024 reform focuses on expanding price premiums for innovative therapies, both during initial pricing and post-launch repricing. A key highlight is the establishment of a new “rapid introduction” premium, offering a 5-10% price increase for therapies that meet the following criteria:
- inclusion in multinational clinical trials based in Japan, or conducting clinical trials in Japan no later than in other markets
- eligibility for priority review under the Pharmaceuticals and Medical Devices Law
- filing and approval in Japan either first or within six months of overseas filing/approval1
In addition to this new premium, the Ministry of Health, Labour and Welfare (MHLW) has enhanced existing premiums. This includes broadening the criteria for the “usefulness premium”, to award products with a differentiating mechanism of action compared to existing therapies1. Furthermore, the premium for pediatric drugs has been increased from 5-10% to 5-20%, awarded to products demonstrating clear efficacy, effects, dosage, and usage for children.
Listed therapies within the past 8 months
Between April 2024 to October 2024, a total of 35 therapies received reimbursement from the MHLW. 14 reimbursed therapies were designated as orphan drugs by the MHLW and 8 were pediatric drugs.
Thus far, 2 orphan drugs were granted the new “rapid introduction” premium
Out of the 35 new therapies, 2 products (Adzynma from Takeda and Voydeya from Alexion) received the new “rapid introduction” premium. Both products received orphan designation which enabled priority review. Adzynma attained a 5% premium given it was developed through an international joint clinical trial and was approved in Japan within 6 months of its earliest approved in the US. Voydeya fulfilled the above requirements but attained a higher 10% premium than Adzynma due to earlier approval than in the US/EU and also considering its joint clinical trial was relatively large (table 1).
7 products received an uplift in innovativeness/usefulness premium at NHI price listing
At the same time, 7 products received an uplift in innovativeness/usefulness premium due to qualification of the expanded evaluation framework (table 2). Notably, Sargmalin from Partner Therapeutics received a 75% innovativeness premium due to demonstration of 1) a new MoA, 2) treatment modifying effects and 3) a high efficacy or safety compared to the comparator drug, which conventionally need to be shown in a head-to-head trial, but has now expanded to include single-arm trials with appropriate justifications, such as limited number of patients.
Similarly, Vyxeos from Jazz Pharmaceuticals, Voydeya from Alexion and Reblozyl from Bristol Myers Squibb attained >40% usefulness premiums, supported by these new evaluation items including demonstration of clinical improvement via secondary endpoints, and if no new drug with a new mechanism of action has been listed for a protracted period of time in the same disease area.
7 products were granted a 5-15% pediatric premium
7 products received a pediatric premium ranging from 5 to15% (table 3). Again, Adzynma from Takeda attained a 15% premium due to clear demonstration on the efficacy, effect, dosage and usage for children, and that the target patient population was considered small.
The short-term effect of the reform is evident based on uplifting the premiums on NHI prices for innovative products, but the long-term impact will need to be informed by drug repricing policies
In a bid to eliminate drug access delays in Japan, the authorities have demonstrated a strong commitment to reforming the drug pricing system. A review of recently reimbursed products suggests that the new measures in the pricing reform favour improved access to innovative therapies, particularly those targeting rare diseases without comparator treatments. The introduction of new premiums and the enhancement of existing ones appear to benefit orphan drugs, as products priced via the cost accounting method have successfully secured higher premium levels.
However, the increase in attained premiums seen so far may be an optimistic projection on the effectiveness of the reforms, as manufacturers with relevant products may have postponed launch to after the reform to be eligible for the new incentives. On the other hand, reform measures on drug repricing, which are not addressed in this blog, have been reported by manufacturers to result in significant post-launch price reductions. These price cuts could offset the positive impacts of the reforms discussed.2
Thus, it may be premature to assess the full positive impact of the reforms on pricing and access. This includes the overall impact on average timelines between marketing authorisation in the US or European Union and reimbursement filing in Japan. Continuous review on manufacturer launch planning and further revisions to existing pricing policies by the MHLW will be essential to ensure that patients in Japan have timely access to the latest treatment options.
