Pharmaceutical prices, quantities and innovation. Comparing Japan with the US

Per capita expenditure on pharmaceuticals is higher in Japan than in the US, despite a series of drug price reductions instigated by the Japanese Ministry of Health and Welfare that began in 1981. For some individual products, these price reductions cumulatively totalled more than 50%. This article argues that although the price of individual drugs is lower in Japan than in the US, aggregate expenditure is higher because of the greater use of newly-introduced original drugs and lower use of generics. Providers and consumers also tend to use drugs in larger quantities in Japan, because of polypharmacy and greater use of vitamins and nutrients, antihypertensives, cerebral metabolic activators (e.g. idebenone) and milder-acting drugs (i.e. drugs with low toxicity but unproven clinical efficacy). The level of expenditure is unlikely to decline, despite changes to pricing policy and ongoing efforts to improve the pharmaceutical distribution system and to discourage physician dispensing activities.