Japan's Drug Pricing Policies Hurt Patients and Biotech Innovation

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Japan's national health insurance system sets artificially low reimbursements for new medicines, repeatedly revising prices downward. This has partially hollowed out Japan's drug industry, with the global share of new medicines invented by Japanese companies plummeting from 29% in the 1980s to just 7% in the 2010s. A fairer, more market-based drug pricing system in Japan would breathe new life into the country's biotech industry and give Japanese patients faster access to cutting-edge treatments. Cooperation between the U.S. and Japan to reform drug pricing offers a rare diplomatic opportunity for a 'three-way win' - benefiting patients, boosting biotech innovation, and strengthening the U.S.-Japan alliance.

Why it matters

Japan's drug pricing policies have stifled biotech innovation and delayed patient access to new treatments, while also creating tensions with the U.S. over the perceived unfairness of other countries not paying their fair share for American medical breakthroughs. Reforming these policies could revive Japan's life sciences sector, strengthen America's lead in global drug development, and deepen the strategic U.S.-Japan alliance.

The details

For decades, Japan's national health insurance system has set artificially low reimbursements for new medicines, repeatedly revising those already controlled prices downward. The latest revisions will reduce reimbursements on numerous therapies beginning in April, with the government targeting a 4% cut in total drug spending. These price controls have partially hollowed out Japan's drug industry, with the global share of new medicines invented by Japanese companies plummeting from 29% in the 1980s to just 7% in the 2010s. By 2020, Japan's biotech sector was attracting just $1 of venture capital investment for every $67 in VC funding that flowed to U.S. biotech firms.

• In April 2026, the Japanese government will implement a 4% cut in total drug spending through further reductions in reimbursement rates.
• Between 2005 and 2022, about 44% of medicines approved in the U.S. were still unavailable in Japan.

What’s next

The U.S. and Japan could work together to implement drug pricing reforms in Japan that would help revive the country's stagnating life sciences sector, strengthen America's lead in global drug development, and deepen the strategic U.S.-Japan alliance.