Japan to slash price of Bristol-Myers Squibb, Ono's Opdivo by 50 percent
A Japanese government panel on Wednesday approved plans to cut the official price of Bristol-Myers Squibb and Ono Pharmaceutical's Opdivo (nivolumab) by 50 percent from February given the increasing use of the PD-1 inhibitor. The drug is currently priced at around 730 000 Japanese yen ($6660) per 100 milligrams, with the cost of treatment per patient estimated at 35 million yen ($320 208) per year.
Opdivo was first approved in Japan in 2014 for the treatment of unresectable melanoma, with the pricing of the product set based on the limited number of patients. However, Opdivo was authorised in 2015 for the treatment of non-small-cell lung cancer, which represents a much larger patient population, with the drug also gaining clearance earlier this year for use in patients with unresectable or metastatic renal cell carcinoma. As such, the Japanese health ministry used a provision that allows it to cut the price of drugs, which are usually reviewed every two years, under special circumstances.
Specifically, the special clause allows the health ministry to cut the price of a drug by 50 percent if its annual sales exceed 150 billion yen ($1.4 billion). Although Ono estimated that sales of Opdivo will total 126 billion yen ($1.2 billion) for the year ending March 2017, the health ministry concluded that revenue for the therapy will surpass 150 billion yen after considering distribution costs. In response to the decision by the Central Social Insurance Medical Council, Ono said it will consider filing an objection on the grounds that a sudden rule change disrupts its business forecasts, adding that the price cut is likely to negatively affect projected earnings.
According to the health ministry, the move will lead to cuts in national medical expenses by at least 75 billion yen ($684 million) in fiscal 2017, which starts in April. Meanwhile, the price reduction is expected to reduce Japan's social security budget by almost 20 billion yen ($183 million) in the next fiscal year.
The health ministry initially proposed reducing the price of Opdivo by 25 percent. However, government officials called for larger price reductions after determining that the drug is sold in the US and EU at less than 50 percent of its Japanese price. In September, the Japanese Health, Labour and Welfare Ministry revealed that prescription drug costs in the country totalled 7.9 trillion yen ($72 billion) in fiscal 2015, up 9.4 percent from the year before.
Japan Chief Cabinet Secretary Yoshihide Suga defended the latest move, noting that an anticipated 30-fold increase in the number of people using Opdivo required "various measures" to moderate the financial impact. "[With] the health insurance system being financed by the public’s insurance premiums and taxes, it is crucial that [the government] deals with this in a way that the public can agree with," Suga stated.
Commenting on the news, NLI Research Institute analyst Takuya Shinohara suggested that the current system of reviewing drug prices biennially has failed to keep pace with real-time price fluctuations. "With the Opdivo case in mind, the price review should be carried out more often, like once a year,” Shinohara argued, adding "while some people oppose increasing the frequency of such reviews, saying the manpower for investigating market prices would be enormous, I think there are ways to implement more swift reviews."