OBJECTIVES: Japanese drug pricing system is experiencing a radical reform in 2018 to sustain universal healthcare coverage and promote medical innovation in order to improve health care and reduce disease burden. This study aimed to describe the reform, the trend, and the potential impact on the healthcare landscape in Japan.

METHODS: Governmental policy reports related to the reform published by Chuikyo (Japanese Central Social Insurance Medical Council) were reviewed. The review was completed with an analysis of literature review, policy reports, and grey literature. The policy trend and potential impact were analysed.

RESULTS: The main elements of the reform consist of: 1) closer drug price survey and price revision, 2) prompt price discount when high sale extension is observed, 3) restriction of price maintenance premium, 4) implementation of cost-effectiveness analysis (CEA), 5) enhanced price reduction of older products and generic uptake incentives, and 6) external reference pricing revision to contain costs. Because CEA was delayed, the reform is strongly focused on cost containment. CEA is high on the policy agenda but was delayed once again. It is unclear if the high cost containment measures are the outcome of a trade-off to delay CEA or if it is a first step towards a broader use of CEA. Unlike generics, which are the focus, not a single statement on biosimilars was identified in the reform. Given that the high price of biologic drugs are the faster growing segment of pharmaceuticals, policy to incentivise the use of biosimilars may reinforce the free important resources to fund the flow of expensive innovations such as cell and gene therapies.

CONCLUSIONS: The Japanese drug pricing system is experiencing a radical reform in 2018 toward enhancement of cost containment and full implementation of CEA after 2019. Biosimilar use incentive may provide room for more innovation adoption.