Think IRA is tough? Look at Europe or Japan
Meaningful price controls to ensure equitable access are on the cards
By Melanie Senior & Daniel Chancellor
US execs struggling to come to terms with the country’s first meaningful price control measures might take comfort from the fact that their colleagues in Europe or Japan have it worse.
Pharma has for decades been navigating Europe’s patchwork of national price controls, which offer barely any free pricing period at all, let alone 9 or 13 years. Things may tighten further still. European Commission policymakers are proposing to knock two years off new drugs’ exclusivity periods (from 10 to 8) unless they’re launched across all 27 European Union countries within two years. The goal is timely and equitable access. But in practice, launching a product rapidly across nations with often widely different economies and reimbursement timelines is difficult – and unwise commercially. Companies tend to launch first in higher-priced countries like Germany, as these contribute to reference prices used by other nations – a trend that helped create the access disparities that the Commission is now attempting to fight. These proposals still need to be voted through by the European Parliament and are therefore several years from implementation, though.
Japan may offer a more direct parallel with the US Medicare and its 65 million beneficiaries. The country’s National Health Insurance (NHI) scheme has imposed strict price controls since 2010, including biennial price cuts of 5–7%. Additional measures may appear on top: 2023’s “mid-year price cut” aims to cut approximately $2.3bn from national expenditure, including one-off adjustments for drugs that exceed original budget forecasting.
The leading Japanese pharmas typically derive 20–40% of their revenues domestically, while other smaller companies may market almost exclusively to their home audience. Price controls in Japan therefore have a disproportionate effect on domestic companies, whose collective revenues have fluctuated around $100bn in the intervening years. The Japanese R&D engine has also lagged other regions since 2010 in number of assets under development, according to Citeline’s “State of Innovation in Europe” paper.
This adds weight to the pharma lobby’s argument that the IRA will contribute to a loss in R&D spend and fewer new treatments for patients. It’s difficult to definitively link price controls with R&D output, though; the same data shows a modest increase in Europe’s pipeline count over the last decade, despite increasingly stringent curbs. (Neither region can compete with the US on a pure numbers basis.)
Whatever the impact of price controls on Japan’s R&D pipeline to date, the sector is poised to resume growth, according to Evaluate consensus forecasts. Japanese-headquartered pharma are expected to generate $115 billion in combined revenues by 2028, up $18bn from 2002. Already, the sector can lay claim to some of the most important treatment advances of recent years, from bispecific antibodies such as Chugai’s Hemlibra for hemophilia, to Daiichi Sankyo’s world-leading antibody-drug conjugate platform that created Enhertu as standard-of-care for breast cancer. Eisai is the lead developer behind Leqembi, among the first successful drugs for Alzheimer’s disease – a significant breakthrough amid multiple past failures.
The take-home: successful drugs will still emerge, even as price controls continue their inevitable spread. Tougher times may sharpen minds, pushing pharma faster and further toward quality assets with tangible patient impact.
Tougher times may sharpen minds, pushing pharma faster and further toward quality assets with tangible patient impact.
