Challenge:   The world's second largest pharma market, Japan, has a universal care system. Companies are required to provide sales forecasts for new products where they seek reimbursement. For some products that exceed their sales forecasts the government has the ability to re-price the product, essentially penalizing the company for achieving an overly successful outcome. Price negotiation is very constrained as the Ministry of Health has long abided by an approach that grants launch price based either on comparative products in the market or on a cost markup basis if no domestic comparators exist. Prices in Japan traditionally decline each 2 years as the government claws back unrecorded discounts. The company in this case had exceeded sales expectations with its biotech product used to treat a pervasive chronic disease. A price cut would have had large implications not only for the Japanese affiliate's profit forecast, but also outside Japan as the price edged toward the low end of the global price band in the largest market outside the U.S.

Strategy :   By itself, the company had minimal leverage to change the law and eliminate the measure hanging over its largest product like a Sword of Damocles. To address that goal it partnered with its trade association and peer firms in its and other therapeutic sectors facing the same challenge. This enabled the company to strengthen its position on the big issue of eliminating the market expansion re-pricing law while focusing its stakeholder plan construction and negotiation strategy with the Health Ministry Economic Affairs Bureau on the reimbursement rate for a new presentation of the product the company intended to introduce at a premium price to the existing presentation. A key stakeholder strategy was to align with the professional doctor association that recently had changed its prescribing guidelines to allow more patients to have earlier access. Those new guidelines were stimulated in part by local and global studies the company shared with doctors. Patient associations, traditionally not strong public policy advocates in Japan, likewise proved pivotal in urging broader access. Based on the stakeholder plan and several exploratory discussions with the Health Ministry, the General Manager and his business unit head examined the options and assessed their best alternative to a negotiated agreement (BATNA): to freeze application of the rule in this case as there was no identical class competitor. The legitimacy of the doctor association guidelines change was an important contributing factor to achieving this outcome.

Outcome:   the company was not subjected to the reimbursement rule based on the arguments and data it prepared for the Health Ministry. Using the stakeholder plan and circle of value/7-elements negotiation preparation tools Monere offers enabled the affiliate management to anticipate the government's arguments, prepare for them as a team and offer options the government could endorse short of abolishing the rule. Product efficacy demonstrated in government required post launch surveillance studies, patient testimonials and health outcomes data (even though not required in Japan) all proved to be important legitimacy factors in reaching their BATNA. While the company achieved its sales target that year, it will continue to face potential application of the market expansion rule until such time that the law is repealed, a goal that continues through a broader trade association effort.