Over the past five years, Japan’s central government has made great strides in streamlining the approval process for new drugs and medicines. The reduction in the so-called drug lag has led to a drastic improvement in approval times for medicines available to patients in other countries.
According to the European Federation of Pharmaceutical Industries and Associations (EFPIA), other government measures including an “innovation premium” have also helped get new and innovative medicines into the hands of Japanese patients. In an interview with EURObiZ Japan, EFPIA’s Chairman Dr Carsten Brunn explains this concept.
Your mission is to promote the “early introduction of innovative medicines and vaccines”. In what ways are you working towards this goal?
Historically, there was something called a drug lag in Japan, which was, depending on the category, about a 5-to-10-year delay between approval in Europe or the US and here. And also, many products were just not available at all in this country — about 10% of the world’s top 100 drugs, in fact. So it was a significant amount. In 2010, the government introduced the so-called “innovation premium”, which made it more attractive for companies to [profit from and] invest in this market. So we’ve significantly invested and, as a result, we have closed that drug lag. This not only benefits us as a business, but patients here as well. And that’s really thanks to the government. Along with the innovation premium, the PMDA [or drug review authority] has also significantly increased its staff and reduced its review times, so now Japan is often ahead of the European approvals. So it’s been quite a great progress.
Can you provide background on this “innovation premium”?
The system prior to 2010 was that every two years, regarding drug pricing, there was a revision down: reduced drug prices. However, so-called “innovative products” have been excluded under the “innovation premium”. This makes investment more attractive for us financially. It’s very expensive to develop products and bring them to market. So that led to an increase in clinical trials and, ultimately, approvals of drugs. That’s the mechanism that’s linked to the innovation premium.
What can the government do to further promote innovation?
It’s very simple, actually. First of all, [it needs] to maintain the innovation premium. I think the current system works quite well, actually. It’s a system where we still have biennial price revisions. We’ve actually done a study … and found that drug costs will stay mainly flat over the next 10 years. And you see an increase in generics that more than offsets the innovation premium. It’s actually a pretty healthy system, so we think it’s also fair for the government because drug costs are well controlled. That’s our main message: don’t fix what’s not broken.
Can you tell us why you believe annual price revisions are a bad idea?
There’s a perception out there that costs are out of hand. Yes, healthcare costs in general are increasing because of the rapidly ageing population. But if you look at drug costs themselves, they will remain flat over the next 10 years — even if we maintain the innovation premium and the biennial price revisions. But if we go and increase generic penetration, abolish the innovation premium and enter [annual] price revisions, we will have negative market growth — which then goes back to “do we really invest in this market, then?” And will patients have access to innovations?
Governments are trying to control health costs, but you argue that lowered prices limit innovation and the introduction of potentially life-saving products? It’s a fine line, isn’t it?
It’s a balance, for sure. We fully appreciate that the government has to control costs, absolutely. But we have shown with hard facts — with this study — that there’s no radical change needed to control costs. It’s quite a good system.
What kinds of other barriers remain in the way of introducing new products to this market?
In general, you can say that Japan is a very pro-innovation country now, but there are still a couple of things which we think need to change. One is the regulation which is left over from the 1950s and early ’60s — it’s the two-week restriction. Early on, in the 1960s, Japan was not part of global clinical trials. So then the government, as a safety precaution, made the rule: for the first year after approval, physicians could only write prescriptions for two weeks. And, of course, that’s not very convenient for patients, having to go back to doctors or hospitals every two weeks. So, in essence, for the first year after approvals, sales don’t really take off, and many patients don’t have access to the treatments. But a system is in place [now] that makes this rule obsolete. That was probably a key barrier compared to other markets.
How can Japan become a more dynamic market for pharma companies to invest in?
The first important message is that investment is becoming more competitive. Pharma companies invest a lot into emerging markets, so we’re competing with resources to get investment into Japan. The reason Japan is attractive is it’s a fairly predictable environment and innovation is rewarded. So I think that’s the key for Japan: to maintain that innovation mind-set. And the key for us is to reward innovation. That’s what we think is necessary to have Japan as a key market for us for investment. That’s critical … that’s been the stance of EFPIA Japan, to maintain that innovation premium.© Japan Today