JAPANESE DRUG COST FALL HERALDS PRESCRIPTION SECTOR SHAKEUP

According to Japan's health ministry, the country's drug spending as a percentage of medical fees fell slightly in 2004, despite a rise in the volume of prescription drugs consumed.

Japan has traditionally had one of the world's highest ratios of drug spending as a proportion of healthcare expenditure. This — along with the "bungyo" combined dispensing and prescribing system — has helped to make the country the world's second largest drug market, and a very attractive proposition for many manufacturers.

The official data claims that the drug cost ratio, in terms of medical fee points, declined by 0.6 points to 21.4%. Further, the share of prescription drugs as a percentage of overall drug spending also rose, indicating that although many more prescription drugs were being dispensed, such products are slowly becoming cheaper in general. Further, just two types of medicines accounted for 42% of drug demand among Japan's elderly, who benefit from special state treatment programmes.

Local observers will no doubt welcome the results as a sign that cost-cutting sector policy — including a new computerised hospital payments system introduced last year — is beginning to have the desired effect. However, others will see a fall in overall drug costs, despite intense demand from an ageing population, as a sign that Japanese healthcare providers are at last realising the cost-saving potential of less expensive generic drugs. The sector currently accounts for just 9% of Japan's drug sales.