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Full Paper (English): TAG Paper: Observations on Drug Pricing and Innovation in Japan ENG

Full Paper (Japanese): TAG Paper: Observations on Drug Pricing and Innovation in Japan JPN

Key Findings

As the Government of Japan (GOJ) seeks to re-invigorate Japan’s pharmaceutical industry as a sector for innovation and growth, it can make impactful changes to specific pricing policies that will support Japanese patients’ access to the most innovative medicines.

The Asia Group (TAG) has identified two specific pharmaceutical pricing measures that directly undermine the government’s goal of promoting startups and bringing innovative new pharmaceutical products to market. The negative impact of these policies is particularly severe for innovative drugs for rare diseases, for which there are often no alternative treatments:

1. Strict cost disclosure requirements, especially the “co-factor zero” rule introduced in the cost-based price calculation method in 2022, are effectively canceling out many premiums that were intended to reward innovation and novelty.
2. Corporate status criteria associated with the Price Maintenance Premium (PMP) system favor companies with a long track record of business in Japan and limit premium benefits for new market entrants.

The intended purpose of these rules is to improve transparency in a product’s total cost and provide incentives for drug launches in Japan. But the two-fold impact of these rules, particularly penalizing new market entrants and foreign entrants, has undermined the intended effect of these measures.

Eliminating these two specific punitive pricing policies represents “low-hanging fruit” for policy change, which can have an immediate impact on the availability of novel drugs, while having a relatively low impact on Japan’s healthcare budget. These changes will stimulate future successful launches and early entrance to Japan, benefitting patients.