MHLW Proposes Relaxation on Average Overseas Prices Calculation, Biosimilars to Receive 10% Premium

Japan's MHLW has proposed a series of reforms to the country's National Health Insurance (NHI) pricing system during a meeting of Chuikyo's (Central Social Insurance Medical Council) Expert Subcommittee on NHI Drug Pricing Affairs on 11 December. According to Pharma Japan, the MHLW proposed that premiums given to unapproved drugs or indications be removed if a drug maker fails to meet the designated timeframe without any justifiable reason in terms of clinical study advancement and regulatory filing. The requested timelines to be followed include the filing of regulatory approval applications within six months of the availability of relevant data and information, and the initiation of necessary clinical trials within one year after the receipt of unapproved drug development requests.

MHLW Revises Previous Proposal with Ease-Up in Average Overseas Prices Calculation

At the meeting, the MHLW put forward a more relaxing calculation method for consideration than the previous way it proposed in terms of average overseas prices. Currently, if a drug under pricing consideration is available in two or more of the four countries in Japan's international price reference matrix, namely the United States, the United Kingdom, France and Germany, and the highest price is over five times higher than the lowest one, the drug's NHI pricing in Japan will exclude the highest price in its calculation of the average overseas price. Prior to the latest proposal, the MHLW has suggested a stricter standard to exclude the highest price if it is over two times higher than the lowest price. Due to the opposition for this proposal, the MHLW is therefore easing up a bit and suggested that the current calculation ruling be kept. However, if the considered drug is available in three or more reference markets, and the highest price is less than five times but over two times higher than the average price, the average overseas price will be calculated as twice the average price.

Biosimilars Expected to Receive 10% Premium over Generics Pricing

During the meeting, the MHLW also proposed that new biosimilars should be given a premium of up to 10% on the basis of the current pricing for biosimilars and generics, 70% of their original innovative drugs' prices. The premium proposal is based on the opinion that the cost of biosimilars' development is higher than non-biologics generics as a result of clinical and other studies requested to prove the bioequivalence, added the source. The premium rate will therefore be decided on the level of clinical studies.

Outlook and Implications

The aforementioned measures are still subject to further discussions before a final decision is reached, however, the MHLW has clearly shown its suggestions on the NHI pricing of certain types of drugs to meet the central government's pharmaceutical regulation target. The tightening ruling of premiums granted to unapproved drugs or indications is a move of the Japanese authority to push the fast development of drugs or indications unavailable in Japan but already approved in other markets. In order to benefit from the price premium, drug makers will have to accelerate their pace for the said drugs' clinical trial and regulatory application should the proposal finally go through.

On the other hand, the latest proposal on average overseas drug price calculations seems a step back by the MHLW, giving in to opposition pressure; however, it still doesn't bode well for drug makers as the authority is seeking to reduce the average reference price for drugs falling into a new category in addition to the existing calculations. This proposal is therefore likely to see prices lowered for relevant drugs subject to the suggested changes, which reflects the potential reduction of the NHI expenditure on drugs.

The premium proposed for the biosimilars' pricing is poised to be a promising change for biosimilar makers as they will benefit from higher prices than non-biologics generics. If the suggestion is put into place, biosimilars will be priced at a maximum of 77% of their original version and therefore enjoy higher margins. It is therefore likely to encourage the development and marketing of biosimilars in the Japanese market to reduce NHI expenditure on original biologic drugs. Japan okayed its first biosimilar in June for Sandoz's biosimilar Somatropin, which was priced at 70% of its innovative version, Pfizer's (U.S.) Genotropin.