PHARMACEUTICAL PRICES, QUANTITIES AND INNOVATION - COMPARING JAPAN WITH THE UNITED-STATES

Per capita expenditure on pharmaceuticals is higher in Japan than in t he US, despite a series of drug price reductions instigated by the Jap anese Ministry of Health and Welfare that began in 1981. For some indi vidual products, these price reductions cumulatively totalled more tha n 50%. This article argues that although the price of individual drugs is lower in Japan than in the US, aggregate expenditure is higher bec ause of the greater use of newly-introduced original drugs and lower u se of generics. Providers and consumers also tend to use drugs in larg er quantities in Japan, because of polypharmacy and greater use of vit amins 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 physi cian dispensing activities.