NHI drug pricing system and price revision system
In this study, we investigated the relationships between NHI price revisions and anticancer drug characteristics over time. The results suggest that the achievement of additional indications and compound type are significant explanatory factors. Furthermore, although future quantitative investigations are needed, a development strategy with cancer affecting a small number of patients as the primary indication, followed by one or more major cancers as additional indications, will result in the highest drug price reduction in the Japanese drug pricing system. The NHI pricing method used in Japan is unique and complex [1, 17]. In principle, for the initial pricing, cost price calculation and similar-efficacy comparison are made . Among the drugs priced using the latter, premium rewards are added to some, such as for innovation and/or usefulness. These include orphan disease drugs and drugs for pediatric use and/or sakigake (i.e., accelerated approval of drugs designated as breakthrough therapies and that address unmet medical needs) [18, 19]. Furthermore, revisions may include price adjustment for consistency with overseas prices, inter-specification adjustments, and different dosage forms . This system is relatively non-transparent, because the process involves decisions made after repeated negotiations between pharmaceutical companies and governmental agencies.
The health technology assessment (HTA) performed in all developed countries has no more than a supplementary role within the Japanese drug pricing system . In Japan, HTA was only introduced after a prolonged debate . It was first performed at a pilot scale, and then introduced full-scale [23, 24]. Thus, it is not used when calculating drug prices; it is merely used to supplement judgment about the appropriateness of drug prices in the Japanese system. Furthermore, in the Japanese drug pricing system, the same price is not retained once it has been calculated, and the price may be reduced based on market price assessments, which are performed once every 2 years and are to be performed annually from 2021. In addition to NHI price revisions based on market prices, prices may be reassessed according to special rules, and preliminary investigations of the approach for drug price reduction have been performed [25, 26]. These special rules are usually applied for market expansion-related repricing and price reduction for drugs listed long term. Price reduction is sometimes performed due to orphan diseases as additional indications , and it involves top-down decision-making, centered on the Central Social Insurance Medical Council, and without negotiations with pharmaceutical companies. Similar to the drug pricing method, the process is also non-transparent.
NHI price systems in other countries
Efforts to balance cost containment and oncology drug access are not unique to Japan. In 2018, China proposed a volume-based procurement program to optimize drug pricing [27, 28]. Furthermore, the National Reimbursement Drug List was formally established in 2000. It covers 52% of China’s population under government urban health insurance programs and serves as a means of drug price negotiation for high-cost drugs . Although it is potentially aimed at price renegotiation at 2-year intervals or new indication inclusion, there has been limited effect on patient access to most anticancer drugs . In contrast to re-pricing in Japan, renegotiation and re-pricing of drugs occurs at either the end of the 2-year contract duration or the addition of new indications for reimbursement. Considering likely pricing pressure and market dynamics, the re-pricing often results in significant price reduction .
Alternatively, Korea was one of the first Asian countries to mandate pharmacoeconomic data submission for reimbursement decision-making. In Korea, reimbursement assessments and price negotiations are mandatory for new drugs. While cost effectiveness, as assessed by the Health Insurance Review of Assessment Service, is used to determine reimbursement, prices are fixed through negotiations with the National Health Insurance Service. Importantly, Korea has also implemented three methods to improve patient access to high-cost drugs: risk-sharing agreements, essential drug designation, and a waiver for cost-effectiveness analysis . In the case of drug post-listing re-pricing, expanded indications also often trigger a post-listing price-cutting .
In several Western European countries, re-pricing is often triggered by either a new product entry or an expansion of the indications. However, in many instances, a more robust evaluation requiring an updated dossier and economic models is required. In these cases, the results of re-pricing are often not clear, and there is a significant variability in re-pricing although the most frequent result is price reduction .
The expansion of indications for an anticancer drug often resulting in re-pricing is consistent among China, Korea, and Western European countries. However, the level of detail and the focus of the evaluation process have some variabilities. Most re-pricing cases result in a price reduction and are driven by various factors such as market dynamics and the economic effect of additional volume.
Discussion on results of the present study and difficulties related to appropriate NHI price revisions
In the present study on the Japanese drug pricing system, we focused on NHI price revision and factors such as the effects of drug pharmacological and regulatory characteristics, and development methods were investigated. There are several studies on factors related to premium rewards during initial drug pricing in Japan [35, 36]. However, to our knowledge, this is the first study on the factors affecting NHI price revision for anticancer drugs, methods for additional indication achievement, and NHI price revision.
Regarding development strategies for anticancer agents, development for cancer types with major unmet medical needs is invariably considered first, and such cancer types are often orphan cancers. In the Japanese drug pricing system, typically, if the indication at the time of new drug approval is an orphan cancer, the NHI drug price is awarded a premium and subsequently not readily reduced. However, the findings of the present study do not support the hypothesis that drugs for orphan cancers are not readily subject to NHI price revision (Fig. 3), suggesting that even in the case of orphan anticancer drugs, other factors lead to drug price reduction.
Future issues and proposals
In 2018, clear standards were established for additional indication-related repricing for market expansion. These standards specify that market expansion-related repricing is applicable when market expansion due to additional indications results in sales of more than ¥35 billion per year. This change in the system was associated with the innovative anticancer drug nivolumab. Nivolumab, first developed in Japan, was approved for melanoma, an orphan cancer, and thus achieved a high drug price; thereafter, it was approved for non-small-cell lung cancer. Therefore, its sales increased rapidly, leading to a prompt reduction in the price by 50% as a matter of urgency . We consider this price reduction to be irrational and excessive. The reasons for the significant differences based on the types of compounds, shown in Fig. 2, are that these drugs are affected by major reductions in the drug prices of similar compounds.
The changes in the drug pricing system in 2018 resulted in clear criteria for additional indication-related repricing for market expansion. However, there has been no change in the difficulty in predicting the sales associated with additional indications or the situations in which development costs can be recouped. Drug price reduction due to market expansion-related repricing has the potential to discourage innovative drug research and development .
In the United States and European Union, an indication-based pricing system has been examined recently. In this system, a drug does not have a single price, but its price is calculated separately for each indication, according to its value for that indication [39–42]. If indication-based drug pricing were to be introduced in Japan, it would probably result in a more objective and transparent system. Furthermore, when developing anticancer drugs, development starting with orphan cancers, based on unmet medical needs, is a sensible approach. From the perspective of drug pricing system or NHI price revision, it is considered unacceptable to hinder patients’ access to innovative drugs. Thus, we consider indication-based drug pricing an appropriate system.
This study had some limitations. First, this was a retrospective survey using publicly available information. Second, the study involved drugs that were approved and had NHI price listings. Drugs whose development was discontinued and had not been approved were not included. Third, the classification of development methods was qualitative, based on the number of patients and principal cancer type. In future studies, it will be necessary to perform quantitative classification with the number of patients and sales as indices.
In conclusion, we found that the presence/absence of additional indications and compound type were significant factors for the occurrence/non-occurrence of NHI price revision. Furthermore, the NHI price revision was influenced by the strategies for additional indication achievement for anticancer drugs. If the primary indications were rare cancers and the additional indications were cancers affecting more patients, drug prices decreased.