Drugmakers say Japan R&D spending at risk after government forces price cuts

[TOKYO] Global drugmakers said they could cut research spending in Japan due to new rules requiring them to slash prices on some blockbuster drugs, including Gilead Sciences Inc's highly effective but expensive hepatitis C drug, Sovaldi.

Drugmakers such as the Japanese arms of Pfizer Inc and Eli Lilly and Co said the change, which could as much as half the price of popular medication, risks penalising companies for developing revolutionary drugs like Sovaldi. "Without stability and predictability in drug prices, investments will go elsewhere," Patrick Johnson, chief executive of Eli Lilly in Japan, recently told reporters.

The comments come as the government works to attract research and development investment from pharmaceutical firms as a key part of a broader economic growth agenda.

But the government also needs to curb soaring medical and nursing costs in a rapidly aging society, to help balance its primary budget by the fiscal year through March 2021.

Policies focusing on medical costs rather than advanced development "raise the risk of less investment in Japan," Pfizer's Japan head Ichiro Umeda told Reuters. "A market that appreciates innovation allows for more investment and enables continuous development of revolutionary new drugs," he said.

Beginning April 1, the government will lower the prices drugmakers can charge for popular drugs. For instance, prices will be cut by as much as 50 per cent for drugs with annual Japan sales exceeding 150 billion yen (US$1.79 billion) and that are 30 per cent over estimates manufacturers file with the government.

For Gilead's Sovaldi, the price will fall about 30 per cent.

Sovaldi has been shown to cure more than 90 per cent of patients with the liver-destroying hepatitis C, without the side effects of older medicines. However, a price of US$84,000 for a course of treatment in the United States drew criticism from insurers, politicians and patient groups.

Gilead has since agreed to lower the price in over 90 mostly developing countries. But not in Japan, where about 1.5 million people are diagnosed with hepatitis C, and where Gilead said sales had helped push up global sales in the three months through December.

When asked about Japan's rule change, the drugmaker told Reuters it was committed to "delivering new treatments to as many patients as possible amid a changing market environment." Others were more critical. Akira Kawahara, senior managing director of the Japan Pharmaceutical Manufacturers Association, told Reuters the rules were "suddenly proposed and suddenly implemented."

Drugmakers had advised the government against the move when it came up for debate late last year. The Pharmaceutical Research and Manufacturers of America, which represents US biopharmaceutical firms and researchers, had said the change would penalise firms for successful drug development.

REUTERS