TOKYO -- Takeda Pharmaceutical will adopt value-based pricing for expensive biopharmaceuticals starting in Europe, becoming the first Japanese drugmaker to test a method that charges only patients whose conditions have improved and possibly igniting a debate for introduction here.
Takeda is looking to adopt the pricing mechanism for a stem cell therapy called Alofisel for a complication of Crohn's disease. Because of the complex production method that involves cell cultivation, the drug is expected to carry a price tag of an estimated 60,000 euros ($67,000).
With a growing number of expensive treatments like biologics and gene therapy, more companies, particularly in Europe and the U.S., are pricing drugs based on performance to keep customers satisfied. This also helps governments keep medical expenditures down, since they need not subsidize ineffective treatments.
The company is now assessing Alofisel's profitability under the proposed pricing scheme, which will reimburse part or all of the payment to patients not seeing improvement. The drug is expected to go on sale by the end of fiscal 2019 in the U.K. and elsewhere in Europe.
The British public health system does not cover many extremely expensive treatments, since it puts much focus on drugs' cost-effectiveness. It allows value-based pricing for certain therapies not covered by public insurance.
While the European Union has approved Alofisel's sale in the bloc, members decide for themselves whether to cover the drug under their public insurance. Takeda will finalize plans for value-based pricing depending on what the countries decide.
The drugmaker will also consider adopting a similar scheme for other treatments that cost as much as or more than Alofisel in Europe and the U.S.
Other drugs priced on performance include Kymriah, a Novartis leukemia drug originally priced at $475,000; and Luxturna, a Spark Therapeutics treatment for a rare retinal disease that costs $850,000 for both eyes.
In Europe and the U.S., pharmaceutical companies in principle set drug prices and negotiate with public and private insurers to have their products covered by public insurance. If prices are set high based on development and manufacturing costs, drugmakers can negotiate for value-based payments.
In Japan, drug prices are set by the government, and the system is not designed to accommodate result-based payments. Pricey drugs can be covered under public insurance, but the government could set their prices under levels the developers anticipated.