Japan's Plan to Curb Drug Spending

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    A woman looks at items at a pharmacy in Tokyo.
    ENLARGE

    A woman looks at items at a pharmacy in Tokyo.


    Photo:

    Reuters

    TOKYO—Japan said Tuesday it plans to review drug prices annually instead of once every two years in an attempt to curb rising health care spending, rebuffing criticism from the U.S. government and pharmaceutical companies.

    The move reflects global concern over high pharmaceutical prices, an issue that President-elect Donald Trump has said he wants to address. Stocks in the industry fell earlier this month after Mr. Trump told Time magazine, “I’m going to bring down drug prices.”

    The Japanese government has long reviewed the prices of all drugs it pays for under its national insurance program every two years. Chief Cabinet Secretary Yoshihide Suga said ministers approved a blueprint for opening an additional review in the off-years focusing on a smaller set of cases where there is wide divergence between the government-set final price and the wholesale price.

    The government also plans quarterly reviews in limited cases of drugs that are selling significantly more than expected.

    It is hoping to save on its sharply rising annual bill for prescription pharmaceuticals, which cost Japan some ¥9.2 trillion ($79 billion) annually, including those distributed in hospitals, according to an official survey cited by health minister Yasuhisa Shiozaki. Along with China, Japan is one of the biggest global pharmaceutical markets after the U.S., which is the biggest.

    “This policy will sustain both the continuity of the health-insurance system for all people and the promotion of innovation,” Mr. Suga said.

    Industry representatives and doctors reject that view, saying the changes will increase unpredictability and possibly deter drug companies from introducing advanced products in Japan.

    A statement this month from U.S. and European drugmakers said annual repricing “would add another significant burden on manufacturers’ ability to invest in innovation in Japan. This in turn would damage public health in Japan.”

    In advance of Tuesday’s move, the Japanese government in November went outside the usual channels and decided to cut the price for cancer drug Opdivo, developed by Japan’s Ono Pharmaceutical Co. and New York-based Bristol-Myers Squibb Co., in half to around $150,000 annually for a typical patient.

    U.S. Commerce Secretary Penny Pritzker sent a letter to Mr. Suga, the chief cabinet secretary, this month in which she said she was disappointed with “ad hoc changes to reduce pharmaceutical reimbursement prices.” She didn’t mention Opdivo by name.

    Under the policy disclosed Tuesday, the special quarterly reviews would look in particular at drugs that have suddenly surged in sales because they have recently been approved for new uses—formalizing the procedure used in Opdivo’s case.

    Prime Minister Shinzo Abe’s government faces mounting medical and pension costs due to an aging population. Citing the nation’s sluggish economy, Mr. Abe has twice postponed an increase in the national sales tax to 10% from 8%, a move that would have raised funds for spending on the aged. The increase is now set to take place in 2019.

    Write to Eleanor Warnock at eleanor.warnock@wsj.com and Peter Landers at peter.landers@wsj.com