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Pricing/Reimbursement/Parallel Trade Reports

Pharmaceutical Pricing & Distribution in Japan: The Keys to Success in the World’s Second Largest Market


Publication Date: June 2008

Pages: 110

Purchasing Info

No serious multinational can afford to ignore Japan, but it remains a tough and highly competitive market to crack, with the environment for developing and marketing medicines dominated by price. Virtually no new prescription brand can be introduced without a yakka (reimbursement price) set by the government. Innovative new drugs receive price premiums while others are capped at the price of older entrants. Discounting to the trade is inescapable, but is punished by downward price revisions on a scale and frequency unseen elsewhere. Big selling brands and now others in the same class are subject to special price cuts. Distribution is inherently linked to the pricing process and is particularly opaque to outsiders.

Whether the challenge is entering the Japanese market for the first time, moving up the all important ranking there by market share, or negotiating with a local in licensing partner, this report is designed to help.


Features Include:

  • New drug pricing and price revision processes explained
  • Written by an acknowledged expert on the Japanese market with 20 years’ experience
  • Fully researched through field interviews conducted in Tokyo and Osaka with industry leaders, government officials and others during March 2008
  • Incorporates all pricing rule changes that came into effect from April 2008
  • Progeneric measures critically appraised
  • Key role of wholesalers and how they are paid clarified
  • Prospects for future reform to the P&R processes discussed


Report Methodology
This report is largely based on field research and interviews with some of the most important individuals having an effect of Japanese pharmaceutical pricing and reimbursement structures. Interviews were conducted with the following groups:

  • the Ministry’s Health Insurance Bureau
  • the PhRMA representative in Japan
  • chairman of the EFPIA (European Federation of Pharmaceutical Industries and Associations) Japan drug pricing group
  • the JPMA (Japan Pharmaceutical Manufacturers Association)



‘A superb report…to understand Japan there is nothing better’
PhRMA Japan

‘This report is really useful for our business’
Japanese subsidiary of leading European pharmaceutical company


About the Author
With well over 50 major titles to his name, Donald Macarthur is one of the world’s most experienced and widely read commercial biopharmaceutical writers. Known for his clear, succinct and eminently readable style, where the emphasis is on imparting understanding. Every report deals with the subject comprehensively in a neutral, fact-based manner. Each is based on up-to-the-minute research by the author himself - largely primary research in the field - among government officials,industry and other experts on the topic concerned. Rather than a rehash of the published literature readers will find detail, insight and forecasts not found elsewhere.

For two years up to June 2007, Don Macarthur was senior consultant with the strategic international pharmaceutical pricing, reimbursement and market access consultancy PriceSpective. From 2001-2005, Mr Macarthur was Secretary General of the European Association of Euro-Pharmaceutical Companies, the grouping of national associations and individual firms involved in parallel trading of medicines with membership from 16 EEA countries.

His current role as independent consultant and analytical writer also occupied the bulk of the 16 years preceding 2001, with a focus on drug cost containment policy worldwide, pricing and reimbursement, hospital access, European integration and enlargement, wholesale and retail distribution, mail order, homecare, orphan drugs, generics, parallel trade, Rx-to-OTC switching, and several aspects of the Japanese market and industry.

He has written over 50 major reports. Published by Scrip, IMS Health, Financial Times/Informa, Taylor Nelson Sofres Healthcare, Decision Resources, Droit & Pharmacie, PPR Communications and himself, several have become industry standards. He also founded, edited and published for four years the world’s first periodical on drug pricing and reimbursement, Pharma Pricing Review.

Consultancy clients have included the European Federation of Pharmaceutical Industries and Associations - he was the very first consultant ever used by EFPIA - Pharmaceutical Research and Manufacturers of America (PhRMA), the European grouping of national full-line pharmaceutical wholesaling associations (GIRP), the UK’s Office of Fair Trading, other government agencies, and many major multinational biopharmaceutical manufacturers, legal and financial firms.

Numerous presentations have been given at international conferences, and he has testified both at a US Senate Committee hearing and at the HHS Secretary’s task force hearing on prescription drug importation. His articles have appeared in many English language pharmaceutical business journals, with some translated into Japanese, German and Turkish.

Qualifying as a pharmacist from the University of London, Mr Macarthur’s early career involved community and hospital pharmacy practice, 16 years in development, regulatory affairs and medical department functions in the pharmaceutical industry in the UK (Fisons, 1969-72; Parke-Davis, 1972-75; Roche, 1976-78; Serono, 1978-82; Lundbeck 1982-84), one year in Japan, and four years with PJB Publications (publishers of Scrip).


Table of Contents


Executive Summary

1. Organisation & Funding of Healthcare System
1.1 Key Actors
1.2 Health Insurance
1.2.1 Schemes Managed by the Government
1.2.2 Schemes Managed by Large Companies
1.2.3 Schemes Managed by the Municipalities
1.2.4 Health Insurance for the Elderly
1.2.5 Nursing Care Insurance
1.2.6 Health Insurance for Late Stage Seniors
1.3 Private Insurance
1.4 Healthcare Providers
1.5 Healthcare Benefits
1.6 Remuneration of Providers
1.7 Mixed Medical Care
1.8 Healthcare Expenditure
1.9 Pharmaceutical Costs

2. Regulatory Environment
2.1 Intellectual Property Protection
2.2 Regulatory Approval
2.3 Delays in Accessing the Japanese Market
2.3.1 Drug Lag
2.3.2 Vaccine Lag
2.4 Orphan Drugs
2.5 National Health Insurance Reimbursement

3. Pharmaceutical Business Environment
3.1 Market Components
3.2 Pharmaceutical Industry
3.3 Leading Companies
3.4 Leading Products
3.5 Sales and Marketing
3.6 Formulary Access
3.7 Consumption Tax
3.8 Exchange Rates

4. Launch Price Setting
4.1 Outline of Procedure
4.2 Data Requirements
4.3 Summary of Methodology
4.4 Similar Efficacy Comparison Method I
4.4.1 Price Comparator
4.4.2 Price Premiums
4.5 Similar Efficacy Comparison Method II
4.6 Inter Specification Adjustment
4.7 Inter Formulation Adjustment
4.8 Line Extensions
4.9 Cost Calculation
4.10 Foreign Price Adjustment
4.11 Role of Pharmacoeconomics
4.12 Further Case Studies
4.13 Sources of Price Information

5. Price Revision Process
5.1 Drug Price Margin
5.2 Biennial Revision
5.2.1 Price Survey
5.2.2 Calculation of New Tariff Price
5.2.3 Results
5.3 Repricing
5.4 Longterm Listed Brands

6. Other Cost Containment Methods
6.1 Adjustment of Medical Fees
6.2 Separation of Prescribing and Dispensing
6.3 Diagnosis Procedure Combinations
6.4 Denial of Reimbursement/Delisting
6.5 Prescription Limitation
6.6 Patient Copayment

7. Other Market Segments
7.1 Generics
7.1.1 Market Size and Evolution
7.1.2 Generic Encouragement Measures by Government
7.1.3 Generic Companies
7.1.4 Introductory Pricing
7.1.5 Price Revision
7.1.6 Distribution
7.1.7 Generic Company Strategy
7.1.8 Impact on Innovative Manufacturers
7.1.9 Biosimilars
7.2 Over the counter Medicines
7.2.1 Distribution
7.2.2 Pricing
7.2.3 Rx to OTC Switching
7.3 Vaccines
7.4 Quasi Drugs

8. Distribution
8.1 Wholesaling
8.1.1 Wholesaler Customers
8.1.2 Leading Companies
8.1.3 Relationship with Manufacturers
8.1.4 Economics of Wholesale Distribution
8.1.5 Payment Terms
8.1.6 Hospital Bidding System
8.2 Pharmacies and Drugstores
8.2.1 Dispensing Fees
8.3 Mail Order/Internet Pharmacies

9. Future Prospects
9.1 Registration
9.2 Pricing
9.2.1 Industry Proposals
9.2.2. Reference Pricing
9.3 Diagnosis Procedure Combinations
9.4 Generics
9.5 Vaccines
9.6 Distribution

List of Tables
1.1 Japan’s healthcare in perspective
1.2 Main health insurance schemes
1.3 Numbers of medical institutions
1.4 Main disease classifications of patients attending hospitals
1.5 Growth in national medical care expenditure
1.6 Distribution of medical care expenditure burden
1.7 Number and share of people older than 65 years by country
1.8 Evolution of drug cost and its share of total medical expenditure
1.9 Per capita expenditure growth in drug costs by country
2.1 Japan’s drug lag with specimen products
2.2 Share of Japan origin drugs under development by patent date
2.3 Average time to launch foreign origin new drugs
2.4 Numbers of orphan drug and medical device designations
2.5 Regulatory approval dates with specimen orphan drugs
2.6 Numbers of drugs listed in NHI tariff
3.1 Share of global prescription drug sales by region
3.2 Breakdown of prescription drug market by customer group
3.3 Top 20 pharmaceutical companies in Japan
3.4 Leading companies in Japan by sales through wholesalers
3.5 Share of global sales of Japanese majors by region
3.6 Percent of company sales by portfolio age
3.7 Key franchise sales in Japan
3.8 Top15 therapeutic classes in Japan
3.9 Top10 bestselling products in Japan
3.10 Trends with yen exchange rate against other major currencies
4.1 Evolution of introductory price premiums
4.2 Numbers of new products awarded price premiums
4.3 Examples of formulation categories for pricing purposes
5.1 Change in drug price margin
5.2 NHI drug price revisions since 1981
5.3 Introductory pricing of statins
5.4 Examples of major originator brands affected by above average cuts
5.5 Breakdown of price revisions by numbers of affected products
5.6 Examples of repricing, 1996-2006
5.7 Drugs repriced in 2008
6.1 Growth in prescription numbers
6.2 Share of wholesaler sales by customer group, 2006 vs 1992
6.3 Diseases attracting a ceiling on copayment
7.1 Growth in generic penetration
7.2 Generic sales through wholesalers
7.3 Consolidated sales of leading generic manufacturers
7.4 Recent NHI price erosion with Mevalotin and generic pravastatin
7.5 Numbers of newly listed generics
7.6 Examples of generics newly listed in tariff
7.7 Average OTC price build up
7.8 International comparison of OTC prices
7.9 International comparison of ingredient numbers in OTC brands
7.10 Examples of ingredients recently switched to OTC
8.1 Financial situation of wholesalers
8.2 Bar code requirements
8.3 Evolution and breakdown of sales by wholesalers
8.4 Wholesaler sales by customer group
8.5 Change in numbers of FJPWA members
8.6 Consolidated sales of top10 wholesalers, 2007
8.7 Consolidated sales of top10 wholesalers, 2000
8.8 Manufacturer shareholdings in leading wholesalers
8.9 Debt and credit of wholesalers
8.10 Leading drugstore chains

List of figures
4.1 NHI pricing process for new drugs

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