Japan’s plan to cut EU pharmaceutical prices is harmful

Europeans will soon be swapping cabernets for Corollas. A nearly finalised free-trade pact between the European Union and Japan removes tariffs on European wines and cheeses and Japanese passenger cars. 

But Japanese officials aren’t following this spirit of free-trade when it comes to other traded goods. Specifically, they’re planning to re-evaluate – and likely reduce – the amount that they reimburse pharmaceutical companies for medicines distributed through the nation’s health insurance system. Policymakers also are considering dramatic changes to a programme that helps foster the development of breakthrough medicines. 

These measures would harm European drug companies and their workers. They also would deprive Japanese patients of lifesaving medicines.

Japan’s population is aging more rapidly than any other country’s. The island nation faces staggering health costs as a result. By 2030, it’s estimated that Japan could spend 32 trillion yen, about 250 billion euros ($298bn), on non-communicable diseases like arthritis or cancer.

Today, Japanese regulators review the prices of medicines once every two years. During those reviews, they decide to cut reimbursement levels if sales of a drug have been higher than anticipated.  For instance, Japanese officials recently announced a plan to reduce the reimbursement rate for Plavix, the blood thinner, by up to 25 percent after sales exceeded projections.

READ MORE: Concern grows over Japan’s ageing population

Under the new proposal, officials plan to review drug prices every quarter. So if a medicine proves unexpectedly popular, officials can quickly move to slash the amount it pays the manufacturer.

Trading Subaru BRZ's for Brie proves that Japanese officials want their people to have access to the world's best goods. Next, officials need to prove to their people that they want them to have access to lifesaving goods.

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Lowering payments so often, however, could restrict trade. European drug makers currently export a large number of pharmaceuticals to Japan. In 2016, the EU exported more than 8.7 billion euros ($10.4bn) worth of medicines to Japan, making Japan the EU’s third-largest trading partner for these products.  

This trade has helped to bolster Europe’s pharmaceutical industry, which supports more than 800,000 jobs.

Japanese policymakers are also considering changes to a “price maintenance scheme” that rewards drug makers for developing breakthrough medicines. This programme was created to help with the global research and development burden, as Japan has traditionally wanted to help shoulder these costs. 

If these changes go through, European companies might decide to avoid launching new products in Japan. After all, drug makers spend billions to develop each drug. If they can’t recoup their investment – whether because of quarterly price revisions or an inability to charge a premium – they’ll find it much harder to recoup the funds needed to invest in future research. And if European companies pull out of the Japanese market, then Japanese patients might miss out on valuable treatments.

There are better ways for Japan to reduce its healthcare costs. 

For instance, the government should try to speed up patients’ use of low-cost generic medicines. Back in 2013, generics constituted just under 47 percent of Japan’s “loss of exclusivity” market, or the market for drugs no longer on a patent. If Japan increases the share of generics in this market to 80 percent in 2020, then the country could save 1.3 trillion yen, or 10 billion euros ($11.9 billion), in 2020. 

Trading Subaru BRZ’s for Brie proves that Japanese officials want their people to have access to the world’s best goods. Next, officials need to prove to their people that they want them to have access to lifesaving goods. They can do that by promoting policies that reward biopharmaceutical innovation.

Jan Fischer is the former prime minister of the Czech Republic.

The views expressed in this article are the author’s own and do not necessarily reflect Al Jazeera’s editorial policy.