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.