Japan joins Trump in drug price war crimping pharma profits

Bloomberg

President Donald Trump has pledged to reverse what he describes as “astronomical” drug prices in the US Thousands of miles away, Japan, long a profit sanctuary for multinational pharmaceutical companies, is taking a similar tack.
About $93 billion is spent annually on medications in Japan, and the government plays a key role on prices because it covers about 40 percent of the country’s health spending via its national insurance scheme. In December, officials announced plans to review drug prices more frequently: annually for all therapies and quarterly for the newest and most expensive ones that are used widely.
Over recent months, the price of Opdivo, a blockbuster cancer drug from Bristol-Myers Squibb Co. and Japan’s Ono Pharmaceutical Co., was halved in the Asian country following a 32 percent cut in April for Gilead Sciences Inc.’s hepatitis cure Sovaldi.
The industry fears that could just be the beginning. With the annual price review in place, the sector’s sales in Japan, the world’s third-largest drug market, are estimated to fall by 30 percent to about $62 billion through 2025, according to a study by Pharmaceutical Research and Manufacturers of America, a US lobbying group.
Japan runs the risk of multinational companies redirecting their investment in drug development elsewhere, said Amy Jackson, Japan representative of PhRMA. “There will be huge disincentives to invest, to do clinical trials here,’’ said Jackson. If that happens, Japanese patients may have to endure longer waits for access to new medicines and treatments, she said.
Japan is the world’s most indebted nation, and curbing the outlay on pharmaceuticals is a part of Prime Minister Shinzo Abe’s strategy to halt increases in health-care spending.
“We think it’s important to strike a balance between the continuity of a universal health insurance system and innovation as we pursue the reform,’’ said Yoshiro Meguro, an official at the health insurance bureau of the Japanese health ministry. “The new system has to provide benefit to people in terms of cost and quality.’’
For local and international companies, which have long seen Japan as a source of steady profits, the new price cuts are a blow. They come at a time when Trump is promising to seek better bargains for government health programs in the US, the world’s biggest pharma market.
US lawmakers like Bernie San-
ders have also been critical of high drug prices and other countries like China are also scrutinizing the cost of treatments.
More medicines were developed and introduced to Japan after it promised in 2010 to keep prices of
new drugs at levels initially set by the government, said Jackson. Japan has said in recent months that it would overhaul the 2010 rule and introduce a new pricing system that evaluates innovation and how cost effective drugs are. Some pharmaceutical companies are already seeing the hit to their profits.
In November, the government unexpectedly decided to slash the price of Opdivo by half to 75,100 yen ($660) for 20 mg bottles after an oncologist estimated that it could cost the national health system $15 billion annually. That forced Ono, the company that co-developed the drug with Bristol-Myers and sells it in Japan, to lower its profit outlook for the current fiscal year by 25 percent.