Reining in prescription drug costs

The government is aiming to increase the share of generic drugs used in medical treatment from the current 50 percent to 80 percent. It hopes this move will help slow the growth of the nation’s total medical expenses. But in pursuing the policy, the government must ensure the safety and stable supply of generic drugs.

The merit of generic drugs is that they’re 30 to 50 percent cheaper than non-generic drugs because they’re based on expired patents of brand name drugs so expenditures on research and safety tests are not required.

In 2010, generics accounted for 91 percent of the prescription drugs used in the United States, 82 percent in Germany, 73 percent in Britain and 62 percent in France. To reduce medical costs here, the health and welfare ministry took a cue from the practices in these countries and decided to increase the rate to 60 percent by the end of fiscal 2017. Its measures include using generic drugs in principle when prescribing drugs to patients on welfare. As a result, the share of generic drugs reached 50 percent in the October-December period of 2014.

The Abe administration’s guideline for economic and fiscal management adopted at the end of June calls for increasing the share of generic drugs to more than 70 percent by the end of fiscal 2017 and to more than 80 percent at an early date between fiscal 2018 and fiscal 2020. This demonstrates the administration’s eagerness to expand the use of generic drugs as a means of reining in ballooning medical expenses. In fiscal 2012, the nation’s medical spending reached ¥39.6 trillion, with prescription drug expenses accounting for about 20 percent of the total. The government estimates that expanding the use of generic drugs can save ¥1.3 trillion over three years.

But to achieve this goal, the government must address doctors’ concerns over generic drugs. The health ministry and generic drug makers insist that since generic drugs are based on data used in making the original brand name drugs, their efficacy and safety are no different. But the absence of safety tests on generic drugs makes doctors uneasy. They point out that additives in generic drugs that are different from those used in the original brand name drugs and might either weaken the expected efficacy or produce effects that are too strong. The ministry and generic drug makers should make serious efforts to address these concerns.

Ensuring a stable supply of generic drugs is also important. The makers need to have sufficient production capacity and inventory so that doctors and patients feel they can rely on them. But most generic drug makers are small or medium-size firms that don’t have the necessary funds to increase production to required levels. The recent fall in the yen’s exchange rate is also hurting generic drug makers, which rely on imported raw materials. They need to explore ways to cooperate with each other in production to reduce costs.

To rein in medical costs, efforts should also be made to cut down on unused prescribed drugs, which cost the nation more than ¥40 billion annually. Doctors should avoid over prescribing drugs and patients must be diligent in taking their medicine as instructed to ensure optimal results.