U.S. 'Disappointed' by Japan's Plan to Cut Drug Costs

TOKYO—The U.S. government has written to a senior aide of Japan's Prime Minister Shinzo Abe, calling on Tokyo to reconsider a plan that would allow more frequent pharmaceutical price cuts.

The letter from Secretary of Commerce Penny Pritzker describes how the U.S. is "disappointed" by the Japanese plan to reduce drug prices. Tokyo's policies "raise serious concerns about the incentive structure for health-care products, as well as about the market's predictability and transparency," it said.

Representatives of the U.S. Embassy in Tokyo and the prime minister's office declined to comment on the letter, dated Dec. 2 and seen by The Wall Street Journal. A Commerce Department representative didn't immediately have a comment. It wasn't clear whether the letter was formally delivered to the aide, Chief Cabinet Secretary Yoshihide Suga.

The U.S. Chamber of Commerce said it also sent a letter to Mr. Abe making similar points.

"The letters from Secretary Pritzker and U.S. Chamber of Commerce President Tom Donohue underscore the importance to patients in Japan of a good climate for innovation," said Mark Grayson, a spokesman for Pharmaceutical Research and Manufacturers of America, a group representing drug companies.

Japan is one of the world's biggest pharmaceutical markets, contending for the No. 2 position with China behind the U.S., the biggest market. Japan's total spending on pharmaceuticals reached ¥ 7.9 trillion ($69 billion) in the year ended March 31.

The Japanese government controls drug prices by setting the price paid by its national health-insurance system. This makes Japan's policy on drug pricing a matter of concern for U.S. drugmakers such as Merck & Co. and Pfizer Inc., which sell their products in the country.

Mr. Abe's government, facing large budget deficits, took steps recently to curb its rising pharmaceutical bill. First it slashed by half the price it pays for the cancer drug Opdivo—effective Feb. 1, 2017. The cost for a typical patient using Opdivo for a year will fall to roughly $150,000 from $300,000.

Then, on Nov. 25, a council led by Mr. Abe called on the government to consider reviewing drug prices annually instead of every two years. The move would enable the government to reduce the cost of high-price drugs more quickly, formalizing the tactic it used in the Opdivo case.

Supporters of the changes say that Japan has been paying more than other nations for Opdivo and that the government needs flexibility to keep a lid on medical costs.

Without mentioning Opdivo by name, Ms. Pritzker's letter said she was disappointed by "ad hoc changes to reduce pharmaceutical reimbursement prices."

Japan's move on Opdivo followed publicity in the local press about the high price of the drug, which came after a similar backlash over drug costs in the U.S.

Bristol-Myers Squibb Co. markets Opdivo in the U.S., while Osaka-based Ono Pharmaceutical Co., which was involved in developing the drug in its early stages, markets it in Japan. In the half-year ending in September, Ono said it recorded ¥ 53.3 billion ($468 million) in Opdivo sales.

An Ono spokesman said the company accepted the Japanese government's decision to reduce the price of Opdivo. "We see the importance of maintaining the public health insurance system for the whole nation," the spokesman said.

Thomas M. Burton and William Mauldin contributed to this article.

Write to Eleanor Warnock at [e-mail] and Megumi Fujikawa at [e-mail]

(END) Dow Jones Newswires

December 06, 2016 02:35 ET (07:35 GMT)

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