Drugs Targeted for Price Cutting in Japan: The Case of Price Revisions Based on the Divergence of Official Versus Delivery Prices

Background: Official drug prices have been set by the government and revised every other year in Japan. However, most drug prices are revised based on the price divergence rate of official and delivery prices every other year. This paper overviews how the drug price revision process works and reveals factors associated with price cutting, based on the price divergence rate. Methods: Drugs approved as new molecular entities from 2005 to 2014 were selected for price cutting analysis, based on the price divergence rate. Logistic regression assessed the determinants of whether drugs were targeted for price cutting in 2016. Additionally, generic drugs approved from 2009 to 2013 and their off-patent drugs were also analyzed by multiple linear regression analysis to reveal determinants related to price divergence rates. Results: From the targeted on-patent drugs, 90% were targeted for price revision based on the price divergence rate. Of these drugs, 23% were targeted for price cutting. Drugs whose characteristics are larger sales, lower cost/patient, being followers, and being longer in the market were more likely to be targeted for price cutting. The number of generic manufacturers is directly proportional to the price cutting of both generic and off-patent branded drugs. Conclusions: As drug price revision policy is under reconstruction in Japan, the characteristics of drugs targeted for price cutting shown in this study should be considered for establishing drug price revision policies that reflect market conditions adequately.