Ministers Agreed on Off-year Revision – Settled on Coverage of “Deviation Rate of More than 5%”, Prices to be Reduced for 70% of All Products

2020年12月29日 (火)

Minister of Finance Taro Aso, Chief Cabinet Secretary Katsunobu Kato and Minister of Health, Labor and Welfare Norihisa Tamura discussed the FY2021 budget on December 17, 2020 and agreed that the off-year revision of NHI prices in next April would cover products with a deviation rate of more than 5.0%, which is 0.625 time the average deviation rate 8%. The revision will apply to 12,000 items, or 69% of all products, and the price of each product will be reduced to the actual selling price added with 2.8% of the selling price consisting of 2% adjustment range of weighted average of selling prices and 0.8% “Special exception for new coronavirus infection.” About 60% of new drugs and 80% of generic drugs will be affected and the expected reduction of drug cost will be about 430 billion yen (or about 100 billion yen on a national expenditure basis).

While an off-year revision was implemented in October, 2019 when the consumption tax was raised, the next fiscal year will essentially be the first year of annual NHI price revisions.

The average deviation rate in the drug price survey in September was 8%, and it has been decided that products with a deviation rate more than 0.625 time the average deviation rate 8% will be subject to price revision.

The revision will cover 12,000 items, or 69% of approx. 17,600 items sold in the market, which include 1,350 new pharmaceuticals and 240 pharmaceuticals with price maintenance premium, which account for 59% and 40% in the respective markets.

More than 80% of items will be affected including 1490 items (88%) of long-listed pharmaceuticals and 8200 items (83%) of generics. The coverage also includes 1340 items (31%) of “other pharmaceuticals” that were listed not later than 1967.

With regard to the impact of the new coronavirus (COVID-19), the hike in average deviation rate by 0.8% from 7.2% 2 years ago at the increase in the consumption tax will be taken into account as the effect of the new coronavirus, and the NHI price reduction will be relaxed by 0.8% as the “Special exception for new coronavirus infection”.

In ordinary revision of NHI drug prices, a 2% adjustment range calculated based on the weighted average of actual selling prices has been added across the board for stabilizing distribution in the market. In the revision in April 2021, however, 2.8% will be added to the weighted average of actual selling prices.

The reduction in drug costs is expected to be about 430 billion yen, or about 100 billion yen on a national expenditure basis. The Ministry of Health and Labour and Welfare (MHLW) initially estimated the items to be covered and the impact on medical costs in 4 categories: not less than 1 time, 1.2 times, 1.5 times, and 2.0 times the average deviation. Having second thought, the MHLW decided that it would be appropriate to cover as wide scope as possible for reducing the burden on the public, and studied inclusion of items with a deviation rate less than 1 time the average deviation rate.

Based on the result of the FY2015 NHI price survey, it was estimated that a half to three- quarters of a 2-year price deviation would occur in an NHI price revision year, and discussion was made with an estimated value “0.5 to 0.75 times” that corresponds to a half to three-quarters of the average deviation rate “1 time.” Finally, it was decided that items with a large price deviation more than 0.625 times, which is the intermediate value of 0.5 times to 0.75 times, should be included in the scope. The decision was tough on the medical community and the pharmaceutical industry which had been demanding that the scope of the off-year revision should be minimal and include items with a deviation rate 2.0 times or more the average deviation rate. The decision will likely give a significant impact on the business performance of companies since revision will apply to a wide range of products including new drugs, generics, and long-listed products.

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