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Drug Prices Cut in Japan But Damage is Superficial7 Mar 08Largely as expected, Japan's latest biennial price cut has hit generics as well as drugs to treat hypertension and depression, but the industry should be able to comfortably absorb the 5.2% average reduction in the medium term.
Japan's Ministry of Health, Labour and Welfare (MHLW) has published new prices for more than 14,000 medicines that are reimbursable under the National Health Insurance (NHI) system. The new list will take effect from 1 April. Limiting the element of surprise, officials had already announced what the average overall reduction would be (see Japan: 19 December 2007: Biennial Price Cut in Japan to Be Set at 5.2%). ARBs, SSRIs Feel the Pinch At least in terms of the therapeutic classes that will be most affected by the cuts, the changes fall broadly within industry expectations. Indeed, substantial extraordinary cuts to the market-leading classes such as angiotensin receptor blockers (ARBs) were widely anticipated, as higher-than-forecast sales normally trigger a downward revision (see Japan: 15 January 2008: Takeda Cements Lead in Japan's ARBs Market). ARB sales continue to grow at double-digit rates, and received a cut of 10.1%, affecting Blopress (Takeda), Micardis (Astellas), and Olmetec (Daiichi-Sankyo). Elsewhere in the hypertension segment, Dainippon Sumitomo and Pfizer's (U.S.) Amlodine/Norvasc (almodipine) received a cut of 6.0%, but the molecule is expected to become a "long-listed" drug in 2010 and attract steeper downward revisions at that time. Indeed, the four main SSRI medicines to treat depression—such as U.K. firm GlaxoSmithKline's (GSK) Paxil (paroxetine) and Pfizer's J-Zoloft (sertraline)—were subjected to a very similar reduction of around 10%. Also noteworthy were cuts for Mitsubishi Tanabe's rheumatoid arthritis treatment Remicade (infliximab), reduced by 6.9%, and Astellas's mainstay immunosuppressant Prograf (tacrolimus), with a cut of 8.5%. In the oncology market, meanwhile, steep reductions for Chugai's erythropoietin (EPO) franchise have already attracted media comment. Epogin and Epogin S were respectively cut by 16.9% and 22.3%, partly reflecting international pricing trends for epoetin beta that have filtered down to parent company Roche's (Switzerland) latest financial results (see Switzerland: 30 January 2008: Oncology Portfolio Drives 10% Sales Growth for Roche in 2007). Aside from a higher-than-average cut on Takeda's now long-listed Isovorin, however, cancer medicines such as Chugai's Herceptin (trastuzumab) escaped swingeing cuts this time. Winners and Losers Despite these stand-out cuts to mainstay products, it is not clear that the worst-affected companies will suffer inordinately. For example, generics firms Sawai, Nichi-Iko, and Towa received cuts of between 9% and 12%—steeper than the 5.2% industry average. Nevertheless, generics in Japan are priced at only a moderate discount on their original equivalents by world standards, and some wholesalers are gearing up to improve their availability (see Japan: 3 March 2008: Drug Wholesaler Calls for Market-Based Invoice Pricing in Japan). In the research-based sector, Astellas saw the prices of three leading products reduced—namely Prograf (-8.5%), Micardis (-10.1%), and Luvox (-10.0%). However, observers believe that because this year's cut was kinder to long-listed drugs, and since Astellas has a stable of newer drugs such as overactive bladder treatment Vesicare (solifenacin), the pain will not be as acute as some commentators earlier thought. Products marketed by Takeda, however, received a cut that was on average slightly higher than the industry average, and the cut on Blopress will have material impact. For Chugai, the cuts on EPOs look steep, but the reduction includes a one-off cut from the company in July 2007, which was made to counterbalance the entry of lower-priced competitors Nesp and Espo (Kirin Pharma). Chugai's breast cancer drug Herceptin (trastuzumab) saw a cut of 7.6%, but the drug's sales are known to be increasing at double-digit rates (see Japan: 29 February 2008: Chugai Gets Wider Indication for Herceptin, Files Xeloda Combo in Japan). Even though Chugai's products were hit by an average cut of 7.2%, rising sales of innovative products are expected to offset the damage. Perhaps unjustifiably, the company's forecasts already assume a relatively tough year ahead (see Japan: 30 January 2008: Chugai, Kyowa Hakko Announce Revealing Results in Japan). Outlook and Implications Largely because they were so widely trailed, this year's NHI cuts have failed to generate the controversy that accompanied the much steeper revision of two years ago. Indeed, many Japanese drug-makers have been let off relatively lightly, as the main target this time was successful but older drugs, as opposed to long-listed or highly novel medicines. For example, proton pump inhibitors (PPIs) attracted a cut of 5.4% (Omeprazon; Takeda) to 6.9% (Pariet; Eisai), against a sharp 15% reduction in 2006, and an average cut of 10% for the broad category of ulcer treatments this time around. With segments such as ARBs continuing to grow robustly, it is expected that market growth will offset price cuts to a substantial degree. Japan's drug-makers should, then, be able to absorb the squeeze on well-established but not yet long-listed medicines. On the other hand, now that the scope of the 2008 revisions is known, over the next two years it remains to be seen what market mechanisms—such as generic erosion—will come into play for the ageing portfolios of Japan's leading pharmaceutical firms. |
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