Simulation of the Economic Value of a Transferable Regulatory Privilege in Japan

Abstract

 Various regulatory incentives are established in many countries to encourage drug development for unprofitable diseases, such as rare diseases or neglected tropical diseases. One example is the Priority Review Voucher (PRV) program in the United States, which grants transferable priority review rights to companies that successfully develop drugs for pediatric rare diseases or neglected tropical diseases. Since 2007, at least 53 PRVs have been issued, with an average sale price of approximately 100 million USD. Because the policy research on PRV have not been conducted in Japan, this study newly defined “Transferable Regulatory Privilege” (TRP) as a transferable regulatory incentive optimized for the Japanese regulatory system and estimated its economic value. Considering the Japanese regulatory system, we hypothesized four transferable regulatory privileges : (1) priority review, (2) patent extension, (3) premium pricing, and (4) mitigation of price reduction. The economic value of each option was calculated as the incremental net present value (NPV) before and after applying TRP to blockbusters. The NPV of the base scenario was 77.6 billion yen. The economic values of the options were : (1) 6.6 billion yen per 6-month review acceleration, (2) 930 million yen per 6-month patent extension, (3) 3.7 billion yen per 5％ premium pricing, and (4) 5.6 billion yen per 1％ price reduction waiver. Considering the minimum value necessary to incentivize companies and balance between stakeholder benefits and costs, option (1) was suggested as the best choice. This study evaluated the economic value and feasibility of TRP optimized for Japan for the first time.