Newly developed drugs can increase the chances of helping patients overcome hard-to-cure illnesses such as cancer. Pharmacological breakthroughs are welcome, but new drugs that come out of them tend to be so expensive that their wide use can put a heavy strain on the nation’s medical expenses. In approving the use of such drugs, the government needs to take utmost care so that it doesn’t sow the seeds of bankruptcy in the nation’s public health insurance system.

Under the system, which in principle covers all residents, the Health, Labor and Welfare Ministry’s Central Social Insurance Medical Council decides on the prices of drugs that doctors prescribe to patients. For example, Nivolumab, an antibody sold under the trade name Opdivo, carries a price of about ¥730,000 per 100 mg. Ahead of other countries, the Japanese government approved the product in 2014 as a drug for treatment of malignant melanoma, a form of skin cancer.

When Opdivo was put on the Japanese market in 2014, it was estimated that some 470 patients of malignant melanoma will use it. But the potential number of users jumped to the tens of thousands when the government approved the drug for treatment of non-small cell lung cancer last December. This type of lung cancer accounts for about 85 percent of all cases of lung cancer. Last month, the government authorized the drug’s use against renal cell carcinoma, a type of kidney cancer, adding an estimated 4,500 patients of the disease to potential users of the drug.

Nivolumab was jointly developed by the U.S. biopharmaceutical firm Medarex Inc. and Japan’s Ono Pharmaceutical Co. It targets the immune system to help fight cancer. Cancer cells create a protein called PD-L1. When this binds with another protein called PD-1 — a cell surface receptor of immune system T cells, which attack cancer cells — a wrong signal is issued to T cells, telling them to stop attacking cancer cells. Nivolumab binds with the T cell’s PD-1, preventing the binding of PD-L1 and PD-1 so T cells can resume their attack.

A drug like Nivolumab is called an immune checkpoint inhibitor. Together with Ono, Bristol-Myers Squibb Co. of the United States, which acquired Medarex, marketed the drug as Opdivo. It is renowned worldwide as the first immune checkpoint inhibitor that has overcome problems of immunotherapy. It is used against advanced cancer that can’t be operated on. It is injected into a patient’s body through intravenous drips — once every two or three weeks depending on the patient’s conditions.

If an average patient uses Opdivo for one year, it costs about ¥35 million. Patients pay a maximum of some ¥2 million, with the rest covered by the public health insurance and taxpayer money. In April, an expert reported in a meeting of the Fiscal System Council, an advisory body for the finance minister, that if 50,000 out of some 100,000 lung cancer patients in this country use Opdivo, the expense will add up to ¥1.75 trillion a year and wreck the nation’s finances. (This may be an exaggeration since some patients are likely to stop using the drug midway for various reasons.) Ono Pharmaceutical estimates that Opdivo will bring sales of ¥126 billion in the business year ending in March 2017 — ¥122 billion from treatment of some 15,000 patients of non-small cell lung cancer and ¥4 billion from the treatment of some 450 melanoma patients.

Since more immune checkpoint inhibitors are likely to be developed, a way to hold down their prices should be seriously considered. The current system of reviewing the prices of drugs once every two years — with the next review scheduled in 2018 — is too rigid to flexibly lower drug prices. The government should introduce a system under which it can lower drug prices halfway through the regular review period in the event that the number of users of a particular drug sharply increases — thus putting financial strain on the health insurance system — following approval of its use in a broader range of illnesses. It also should fully utilize a system introduced in April to lower the price of a drug by up to 25 percent if its annual sales are between ¥100 billion to ¥150 billion and by up to 50 percent if its sales are higher. The government should also consider the cost-effectiveness of drugs when deciding on their prices as well as to make the process of setting drug prices more transparent — since it is consumers who pay the health insurance premiums and taxes.

When the Health, Labor and Welfare Ministry council sets the prices of drugs, a higher profit margin for the manufacturers is officially accepted as a markup for breakthrough products like Opdivo. A key factor behind Opdivo’s high price was its steep total manufacturing cost, including the development expenses, that the council took into account. The price of a drug also tends to be set higher when the number of estimated users is smaller. The problem is that the cost of a drug’s development is not made public. Disclosure of more details of the grounds for setting drug prices will be of vital importance in view of the anticipated development of more innovative — and more costly — drugs.

Cases have been reported in which patients’ cancer disappeared in two months after starting the use of Opdivo. On the other hand, the drug causes strong side effects and its effectiveness is confirmed only among 20 to 30 percent of the drug’s users. To restrict the use of drugs in the category of immune checkpoint inhibitors to patients for whom they actually work, the government needs to establish a system to accurately determine what kinds of drugs are effective for what types of patients and when to stop their use.

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