Pharmaceutical Price Control Policy, Pharmaceutical Innovation, and Health Durability

Abstract

Background: The increase in R&D and upward trend of R&D/pharmaceutical sales has occurred despite government controlled pharmaceutical price reduction in Japan. This paper identifies the effect of the government's price control policy on pharmaceutical innovation and evaluates the influence of new chemical entities (NCE) on health durability. Method: The study employed pharmaceutical price, government approval, and new pricing adaptation policies to evaluate their influences on NCE. Quantitative and qualitative expressions of pharmaceutical innovation were analyzed to measure health durability. Results: The results show that the government pharmaceutical price and new pricing adaptation policies may have been effective in increasing NCE in the pharmaceutical industry. In addition, our findings show that the optimum R&D adjustment rate for NCE (32%) would cause a downward influence of 0.4494 billion yen of NCE in the long run, while a full adjustment (i.e. 100%) of R&D would bring an increase of 0.709 billion yen in the long run. Finally, the aggregate effects of NCE reduce illness-caused death. The six leading illnesses share a 65.95% decrease in death caused by illness of those aged 65 years or older. Conclusion: Pharmaceutical price control is not intended to hamper the pharmaceutical industry. It is a price reduction of the government's approved-list of pharmaceutical drugs under the national healthcare system geared toward controlling rapid and excessive growth of pharmaceutical expenditures.