Value through Innovation21 April 2014

Health insurance system faces demographic challenge 

Since 1961, Japan has run its universal health insurance system similarly to many European countries. Japan’s system is mainly divided into three categories: employees’ health insurance, run by health insurance associations, public servants’ health insurance, run by central government and local government benefit associations, and selfemployed health insurance, called National Health Insurance, run by the government according to the type of employment. In addition, there is the health insurance system for the late-stage elderly (over 75 years old) run by local government.

Due to the universal health insurance system, medical facilities, such as clinics, hospitals and pharmacies have long been available toJapanese citizens at affordable cost.

However, with the aging population, the health insurance administration sees itself confronted by a deficit in order to be able to treat the increasing number of patients with Alzheimer’s disease, cancer and life-style diseases, such as diabetes and cardiovascular diseases.

The deficit in the health insurance system especially for the elderly is particularly large, as it generally has higher medical expenditure. An overall reform of the system is currently under discussion.

As in European countries, the key focus has been on the balance between cost reduction and retaining a continuous supply of high quality medical services.
Japanese people are especially interested in keeping their universal health insurance system while further reducing costs, such as expenditure on drugs and the service charges of doctors/pharmacists.

Japan is making its utmost efforts to effectively lower medical expenditure, as the country’s healthcare expenditure as a proportion of the gross domestic product was 8.1 % in 2008, ranking it 22nd. Healthcare expenditure per capita was USD 2,729, making it the 20th highest, according to the OECD Health Data for 2010.
Some critics, however, believe that Japan should not reduce its healthcare expenditure, but should raise this indicator (healthcare expenditure as a proportion of GDP) to the level of leading countries, such as the USA (16.0 %), France (11.2 %), Switzerland (10.7 %) and Germany (10.5 %).

Trends in price formation
The world’s second largest pharmaceuticals market will soon enter a new phase. Next year, despite the planned revision of the NHI drug prices, there will be great interest among the participant parties in the pharmaceutical industry regarding the introduction of a permanent ”premium for the creation of new drugs and the elimination of offlabel use of drugs,” which is now under discussion by the Chuikyo (the Central Social Insurance Medical Council). As a considerable amount was achieved during the trial phase for the premium system in the first half of 2010, such as the partial elimination of so-called drug-lag (delayed registration of innovative medicines on the Japanese market) and acceleration of drug development, industry watchers have paid special attention as to whether the premium for new drug development and the elimination of off-label use of drugs will be introduced permanently from 2012.

Under the new premium system, the NHI drug prices for new drugs can be adjusted when the drugs proposed by several medical associations and nominated by the Ministry of Health, Labour and Welfare (MHLW), fulfil various requirements. These cover products which were carried in the NHI drug list during the past 15 years and whose generic versions are not yet on the market, products where the price discrepancy between NHI drug prices and the actual wholesale prices on the market does not exceed the average value of all listed drugs, and products not subject to re-pricing. The new premium system is expected to eliminate druglag because the new system provides pharmaceutical manufacturers with incentives to invest their resources in the research and development of new drugs and with licenses to expand drug indications.

Under the old system, pharmaceutical manufacturers have reduced their R&D resources due to a lack of investment funds, as every two year NHI price reduction for new drugs has had a great impact on their sales and profits. As a result, there was only little interest from the manufacturers’ side in R&D investment.

The Federation of Pharmaceutical Manufacturer Associations of Japan, Japan’s largest pharmaceutical industry organisation, has therefore called for the introduction of a permanent new premium system.

The necessity of introducing the trial phase of the new premium system has been stressed at Chuikyo meetings to date. In this context, the number of unapproved drugs and off-label use drugs decreased during the trial, including the well-known procedures for off-label use drugs.

At present, the new premium system appears to be more favourable to foreign pharmaceutical manufacturers than to domestic manufacturers. In the Top 20 ranking there were 13 foreign manufacturers. Boehringer Ingelheim was 15th with a premium of JPY 1.27 billion for four NCEs or five products with the request for drug development.

Discussions on the introduction of the permanent new premium system are now being accelerated by the again more frequent Chuikyo meetings since October 2011. These sittings had been postponed after the earthquake in east Japan in March 2011. An overall price cut system is to be introduced in April 2012.

Promoting generics
The MHLW is now promoting the use of generic drugs in order to reduce state medical expenditure, just as in the USA and European countries. The MHLW’s target is for generics to have a 30 % share of the whole prescription medicine market by 2012. The tablet share of the generic drugs increased by 3.5 % to 22.4 % in 2010 (from April 2010 to March 2011) compared to 2009 (from April 2009 to March 2010), according to recently published data from the MHLW. However, tablet share of generics was stable at around 22.5 % for the six months to March 2011, so it will be hard for the MHLW to reach its target of
30% by 2012.

The Japanese market is the second largest drug market in the world, attracting many foreign pharmaceutical companies trying to gain a foothold in this market. They expect their companies’ growth and expansion to be driven forward by utilising the market’s potential buying power, backed by the National Health Insurance System and outstanding opportunities for R&D offered by the Japanese pharmaceutical industry and the country’s science base.

The therapeutic area with the largest turnover is for drugs for cardiovascular diseases (JPY 1,770 billion or 19.1 % of the whole market). Second come alimentary & metabolic drugs (JPY1,149 billion or 12.4 %), followed by the anti-neoplastic/immunosuppressive drugs (JPY 1,128 billion or 12.2 %) the nervous system drugs (JPY 960 billion or 10.4 %), according to the data from IMS JPM (August 2011).

In medicines for cardiovascular diseases, the introduction of fixed dose combination (FDC) drugs for the treatment of hypertension, such as the combination of angiotensin II receptor blockers (ARBs) and hydrochlorothiazide, the combination of ARBs and calcium channel blockers (CCBs), has boosted the market in the last two to three years. Among others, Boehringer Ingelheim launched Micombi® (telmisartan + hydrochlorothiazide) in 2009 and Micamlo® (telmisartan + amlodipine) in 2010, thereby extending the Micardis® product line.

In metabolic drugs the launch of medicines in the indication diabetes with new modes of action, such as DPP-4 inhibitors and GLP-1 analogues in 2009 and 2010, has had a positive impact on the market. Trazenta® (linagliptin), the first treatment for diabetes from Boehringer Ingelheim, was placed on the NHI drug price list on 12 September 2011 and launched on 15 September 2011.

The oncology drug category has expanded constantly due to the continuous launches of new therapies, including molecular targeted agents. The sales volume of oncology medicines reached JPY 820 billion, or 8.8 % of the whole market, in August 2011, according to IMS data. The market is expected to grow in the near future due to the increasing number of patients with cancer. According to epidemiological studies, half of the Japanese population gets some form of cancer during their lives and a third die from it. Boehringer Ingelheim is at present continuing the clinical trials of afatinib - its first anti-cancer agent, a global treatment for breast cancer.