Last-minute talks heat up over looming drug price cuts

Working-level consultative group expected to meet ahead of notice

Key issues include reference date for drug prices and price-cut method for combination drugs

With the notice on drug price reductions under the reassessment of already-listed drugs expected soon, the pharmaceutical industry and the government are set for final negotiations over key outstanding issues.

The working-level consultative group is expected to meet ahead of the notice, which is anticipated around the end of this month, to discuss several major issues.

According to relevant authorities and industry sources on the 13th, the final working-level discussions regarding the reassessment of already-listed drugs are expected to begin shortly. As the new pricing calculation rules have already been finalized through revisions to the relevant notice, the fifth meeting of the consultative group is expected to focus on the reassessment of already-listed drugs.

The scope of drugs subject to reassessment and exemptions, reference prices, and methods of applying price reductions were discussed at the third meeting, but differences remain over the details. Therefore, attention is now focused on whether several major outstanding issues can be resolved in the upcoming discussions.

Reference date for reassessment prices: 2012 or September this year?

The reference date used to calculate the price reduction is one of the industry's key issues. Because the current price as of the reference date is used to set the 53.55% price, and then recalculated at the new 45% rate, the resulting reimbursement price varies depending on which reference date is used.

The government has proposed using the reimbursement list set as of September this year as the reference point. The industry, however, argues that applying the 45% calculation rate to prices that have already been continuously reduced since the across-the-board price cuts in 2012 amounts to double regulation.

The industry is therefore asking the government to treat reimbursement prices at the time of the 2012 across-the-board price cuts as the 53.55% level and calculate the new 45% prices.

As the government previously cited September this year as the reference date during consultative meetings, the key question is whether it will accept the industry's proposal in consideration of the impact on the market.

Price cuts for combination drugs…sum of single-drug prices at 45%, or 45% of the combination drug price?

The method for reducing prices of already-listed combination drugs is another major issue. The industry is calling for the reduced price of a combination drug to be calculated by adding together the prices of its individual components after each has been recalculated at the 45% rate. The government, by contrast, is seeking to reduce combination drugs uniformly based on 45% of the current highest price of the combination drug itself, without linking the price to those of the individual components.

Under the industry's proposed method, the extent of the reduction would vary depending on the dosage strengths and combination of ingredients. Applying the 45% rate uniformly without linking prices to the individual components, on the other hand, would result in an approximately 16% price reduction across the board.

If a combination drug contains even one Phase 1 single-ingredient drug (one listed before 2013), its price reduction will begin this year. This classification method has substantially increased the number of combination drugs included in Phase 1.

Ahead of the reassessment notice, the industry is expected to continue pressing until the last minute for combination-drug prices to be reduced based on the sum of the individual components' prices calculated at the 45% rate.

Deferral for innovative companies’ products only for drugs meeting eligibility requirements?

Another issue that remains to be finalized is whether the three- to four-year reassessment deferral granted to products developed by innovative and quasi-innovative pharmaceutical companies will also apply to drugs that do not meet the eligibility requirements.

Because the preferential treatment for innovative and quasi-innovative pharmaceutical companies is essentially a company-level benefit, the industry has interpreted it as applying to all products marketed by eligible companies. At an earlier consultative meeting, however, the government raised the possibility of limiting the deferral to drugs that meet the eligibility requirements.

The industry argues that products should not be divided according to whether they meet those requirements and that the three- to four-year deferral should apply to all products of qualifying companies.

Under the new pricing calculation rules, price premiums for innovative and quasi-innovative pharmaceutical companies are also conditional on products meeting the eligibility requirements. The key question is whether the government will grant the same preferential reassessment deferral period regardless of whether individual products meet those requirements.