Reporter points to collusion in the drug industry

TOKYO —

According to an OCED survey, Japanese annual per capita outlays for medications came to $556, putting the country in 9th place. The U.S. per capita figure, by contrast, is $947. But as medical journalist Hayanari Ito writes in the March issue of Sapio, there’s a lot more to be said on the subject than mere outlays.

For one thing, despite the scheduled increase in the consumption tax from 5% to 8% from April 1, the government has instructed drug prices to be revised downward by 1.36%. Nevertheless there are few reasons to rejoice. While generic drug formulations in the U.S. or Europe can be obtained for as low as 7 to 9% of the predecessors’ prices, in Japan, the powerful Central Social Insurance Medical Council (Chuikyo for short) maintains the prices at an artificially high 70%. While pressure from the Ministry of Health, Labor and Welfare finally obtained a concession to drop this figure to 60%, they are still far too high. According to one survey by a research group at the University of Tokyo, the average prices of 77 medications in Japan were approximately double those of the UK and France, and 1.5 times higher than those of Germany.

Because Chuikyo’s fixing of drug prices, the pharmaceutical companies continue to profit from existing drugs, and have much less incentive to develop new formulations.

While 340 pharmaceutical firms operate in Japan, only 228 actually produce and sell medications. But 75% of the new medications approved for use in Japan were developed overseas. Thus, Japan’s drug companies are able to survive by existing in a protected market without competitive pressure and while this continues they are losing their ability to develop new drugs. And as they are just selling them, that means their profitability is heavily influenced by pricing competition, which has led to the current distorted market situation.

To keep the physicians happy, the MRs (marketing representatives) of the drug firms are accorded lavish budgets to wine and dine their customers.

“The MRs invite us to luncheon seminars to promote their company products,” says a physician at a university hospital in Kawasaki City. “Unlike the situation abroad, however, in Japan no differentiation is made between academia and commercial businesses.”

In 2013, it became known that the Connecticut, U.S.-based pharmaceutical giant Pfizer spent some 24 billion yen in various promotional activities.

“In the end, those costs are borne by the patients,” said a medical school professor. “Originally this should not have been done by sales competition, but through competitive pricing. The national system of price setting is the reason why it’s not working right.”

Considering that Tadaharu Goto, current director of the Japan Pharmaceutical Manufacturers Association (JPMA) is a former bureau head from the Ministry of Health, Labor and Welfare,such cozy arrangements should hardly come as any surprise.

Reforms can be deceptive. In December 2013, the revised law concerning sales of pharmaceuticals made it possible for 99.8% of all prescription medications to be sold via the Internet (just 28 drugs were excepted). While the media celebrated this “deregulation,” in fact it was no such thing, because the revised law still requires a patient to “receive an explanation” directly to his or her face from a licensed pharmacist to make sure they understand what they’re being prescribed.

Furthermore over-the counter medications in Japan are but a tiny fraction, around 6%, of the 10 trillion yen in overall annual drug sales, and the members of the Japan Pharamaceutical Association, who work out of 53,000 drug stores nationwide, is strongly disinclined to relinquish its virtual stranglehold on distribution.

What outrages Ito most of all is that all too often, the cozy relationships between physicians and the drug companies means that despite the huge outlays by patients and the insurance system, erstwhile clinical testing is no assurance of a drug’s efficacy.

The recent scandal involving Novartis Pharma KK and its blood pressure reducing drug Diovan (generic name Valsartan) underscored the sometimes murky relationships between medical practitioners and drug manufacturers. In January, the Health, Labor and Welfare Ministry filed a criminal complaint, alleging the firm exaggerated its advertising claims for Diovan by tampering with data from clinical studies at five medical universities, which was allegedly intended to make the drug appear more effective in preventing strokes and heart attacks than rival medications.

  • 7

    FizzBit

    Now THAT'S journalism. Well done!

    One slice of the extra Large pizza of corruption in Japan. No different from the Dems and Reps in my country, the USA Inc. Obamacare is not socialist, its all for the private insurance companies. It really amazes me how much control they have over the media and elections in both countries, or to put it another way, how stupid the people can be.

  • 1

    Reckless

    I am in the National Health Insurance scheme with my family and I think the prices for visits and medication are reasonable, perhaps even cheap.

  • 0

    Jaymann

    will the TPP not be beneficial to this as well?

  • 0

    sighclops

    @Reckless

    Yeah, well it's the singles that slave away to support the system. At one stage I was paying almost ¥60,000 A MONTH. For frickin' PUBLIC health care!

    So be THANKFUL.

  • 0

    Reckless

    @sighclops, I am sure I slaved away long before you did when single and visit a doctor perhaps once every two years to tell me I have an anal fissure from hemorrhoids which only needs a dap of apple cider vinegar anyways,,, in time you may appreciate the system, or not.

  • 2

    Scrote

    Does this collusion explain why aspirin costs about 10-20 times more in Japan than in the UK?

  • 0

    Peacetrain

    "Now THAT'S journalism. Well done!"

    That's why those magazines are worth looking at.

  • 3

    HongoTAFEinmate

    But 75% of the new medications approved for use in Japan were developed overseas.

    And there in lies another problem. To be marketed in Japan, medications have to be clinically tested here as well specifically for this market. This results in two major issues. Firstly, there is an ever widening gap between the latest medications overseas and what is sold here in Japan. Big Pharma used to have a number of R&D facilities in this country, but the economy of scale of having to trial here just to placate the Japanese bureaucracy is both time consuming and expensive. Thus there is a drug lag.

    The other issue is that many drug companies here in Japan are not developing their own drugs. This means that some of the world-leading basic science being done at places like Kyodai, Todai, Tokodai, etc., is not getting pushed across into meaningful advances at private sector R&D facilities.

  • 2

    GalapagosnoGairaishu

    Recent experiences at Japanese hospitals have revealed to me that doctors prescribe low dosages on the presumption that patients will suffer side effects and therefore it's preferable to first give them subtherapeutic dosages until they become more accustomed to taking a drug. The prescribing of medications that cannot do what they are supposed to do is not just crazy, it's criminally crazy. I've also found that they're still dispensing certain medications in oral form that are hard on the digestive system, when most countries administer the same thing in the form of a skin patch that releases the drug gradually over one or two days. After reading this article, the only thing I can conclude is that countless numbers of patients are being denied essential treatment in order to protect the vested interests of the bureaucrats, drug industry, hospitals and pharmacies. It makes me feel like screaming out loud. Excuse me while open a window, lean out and yell, "I'm mad as h**l and I'm not gonna take it any more!!"

  • 4

    sangetsu03

    Honto-ni? Doesn't "collusion" exist in every industry and trade in Japan? If they are going to prohibit drug companies from colluding with each other, they should also prohibit car manufacturers, trading companies, banks, real estate agents, movie theaters, trucking companies, car rental agencies, bicycle shops, construction contractors, etc. etc. etc. from doing the same.

  • 1

    Utrack

    I wonder if this is why J Govt has to import and stock pile the radiation emergency kits. They are supposedly only good if you have a certain amount of internal contamination. If the Kit were manufactured in Japan. It could be dispensed more readily in emergency situations. The Kit includes Prussian Blue (Ferric Hexacyanoferrate) for the removal of radioactive Cesium absorption in the body. Zinc and or Calcium DTPA (They do the same thing but the Zinc DTPA is more easy on the system) for the removal of radioactive Plutonium, Yttrium, Amercium, Uranium(good within the first 4 hours for Uranium removal). Sodium Alginate along with Calcium Gluconate and Ammonium Chloride for the removal of radioactive Strontium. Potassium Phosphate for the removal of radioactive phosphate. Penicillamine for the removal of radioactive Cobalt, Iridium and Palladium

    All of these ingredients could be manufactured in Japan.....

  • -3

    wipeout

    Yeah, well it's the singles that slave away to support the system. At one stage I was paying almost ¥60,000 A MONTH. For frickin' PUBLIC health care!

    The system is there for everyone, including you. The idea is not that you get more or less than the rest of us, or that you are repaid exactly what you put in (and your 60,000 yen is pretty worthless by itself....see how this works?). I don't see why anybody should thank you for anything. I am thankful, however, that there is a system I can use, that my family can use, that other people can use, and that you can use.

  • 1

    gonemad

    Collusion? In Japan? When both public and private entities are involved? Who would have thought...

  • 0

    Utrack

    Totally Irresponsible too. For J Govt to not have Emergency Radiation decontamination Kits available for the folks who were caught up in the aftermath of the explosion at Daiichi. We all know some folks were in the path of the Radiation emanating from Daiichi. Also there should be Kits available in every Prefecture with NPP's.

  • 1

    sf2k

    Not really a surprise. Japan Inc. has always been an apt name and correctly describes for whom the government and its agencies serves

  • 0

    kurisupisu

    Drugs here are massively overpriced! The cost to the patient here is what I can buy over the counter outside Japan. Doctors are wined and dined by drug companies to buy ' their' drugs -never mind the price tho.....

  • 0

    sangetsu03

    Drugs here are massively overpriced! The cost to the patient here is what I can buy over the counter outside Japan. Doctors are wined and dined by drug companies to buy ' their' drugs -never mind the price tho.....

    It costs in excess of $1,000,000,000, and as long as a decade to bring a new drug to the market. If the drug companies can't charge enough for the drug to pay for the time and expense, why should they bother? The cost is much more than auto makers spend to design and produce a new car model. Should car makers spend $50,000 to build a car, and then sell it to you for $500?

    Don't say that the government should subsidize the cost of developing drugs, it is government subsidies which have driven up the prices of medicine, and healthcare in general.

  • 2

    jerseyboy

    Thus, Japan’s drug companies are able to survive by existing in a protected market without competitive pressure and while this continues they are losing their ability to develop new drugs. And as they are just selling them, that means their profitability is heavily influenced by pricing competition, which has led to the current distorted market situation.

    The same could be said about most industries in Japan. Like the electronics sector, mobile phones, agriculture, etc.

  • 0

    almxxx

    Until there is a limit on profit margins it will only get worse forever.

  • 0

    James Dean Jnr.

    @Reckless:

    I have an anal fissure from hemorrhoids which

    Overshare dude.

  • 1

    Nessie

    It's not just collusion, it's a classic example of privatizing the profits and publicizing the losses, as we see with expressways and michi-no-eki. Hospitals are losing money, and the health care infrastructure is unsustainable. The overcharges that are going to pharmaceuticals should be going to medical care.

    Does this collusion explain why aspirin costs about 10-20 times more in Japan than in the UK?

    In the U.S. you can buy a bottle of 500 aspirin for less than $5, so the price differential is more like 50 times the U.S. price.

  • 0

    sangetsu03

    What the typical Japanese doesn't understand is that this common practice of companies colluding to fix minimum prices is one of the main reasons Japan is declining. Price fixing has allowed old and inefficient business practices to continue, while quashing innovation. Price fixing has greatly increased the cost of living in Japan, which is the single largest factor behind the declining population; people simply can't afford to raise children. The failure of Japan to implement real antitrust regulation and enforce existing laws against price fixing has more or less doomed the economy.

  • 0

    kurisupisu

    @sangetsu3

    It seems that you have little or no experience with buying drugs in various countries.

    The drug companies,like any other big wealthy trade sectors are well protected in many countries and they will charge what the market wherever will pay for them.

    As to subsidies pushing up the cost?

    This cannot explain why 'Bufferin' aka as Asprin is 20 times the cost per tablet as in the UK,Thailand or Hong Kong etc

    No, it is pure greed...........and Japan badly needs deregulation to protect its consumers

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