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 With respect to Japan, pharmaceutical and medical device issues are an integral part of the Administration's regulatory reform work. The United States has made steady progress in improving transparency in this sector, ensuring that foreign pharmaceutical and medical device manufacturers have meaningful opportunities to provide input into important regulatory matters, and facilitating the introduction of innovative new pharmaceuticals and medical devices into the Japanese market.

Separately, the Administration has had a longstanding dialogue with Korea on pharmaceutical issues and, as a result, has seen considerable improvement over the past decade in U.S. pharmaceutical companies' access to the Korean market. The Administration is continuing these consultations and has made recent progress, focusing on further improvements in market access and transparency, and ensuring competition in this sector of the Korean market. In January, Korea's Health Insurance Reimbursement Agency began providing written justifications for its decisions on pricing and listing of new drugs.

With respect to China, the Administration has pressed the Government of China to price innovative drugs fairly and to add new drugs to its national formulary, which controls access to medicines for China's nearly 1.3 billion people. The Administration also is pressing the Government of China to address the production and export of counterfeit pharmaceuticals that both endanger lives and disrupt markets.

The Administration is examining other countries' practices including, for example, those of Canada and Germany. Canada's Patented Medicine Prices Review Board (PMPRB) regulates patented pharmaceutical products, but not generic products. The PMPRB sets the launch price for drugs when they enter the market and then limits further increases. Under the PMPRB's pricing system, the price for a new innovative drug cannot exceed the median of prices in seven developed countries that Canada uses as a basis for comparison (the United States, the United Kingdom, France, Germany, Sweden, Switzerland, and Italy). In addition, Canada's pharmaceutical approval process is protracted and the procedures for provincial listing decisions can be lengthy and inconsistent.

Germany is in the process of implementing significant changes to its reference pricing system, which could impact the development and availability of innovative pharmaceuticals in that country. In 2004, the German Government required innovative drug makers to pay a 16 percent rebate on patent-protected pharmaceuticals (i.e., a mandatory price cut on patented-drug producers, but not generics). On January 1, 2005, Germany reduced the rebate to 6 percent, but put in place a reference pricing regime for patent-protected medicines. This new regime combines for the first time patent-protected and off-patent pharmaceuticals in "jumbo" reference pricing groups. This approach arbitrarily diminishes the value of innovative medicines by equating them with generic medicines for purposes of government reimbursement. Of the 12 new reference pricing groups established, four are jumbo groups, covering a wide range of innovative patented medicines. It has been estimated that reference price cuts for some of the most innovative drugs in the new jumbo groups are as much as 40 percent, which has the potential to affect the availability of such novel medicines and may lead to an increased burden on American patients in paying for the newest ground-breaking drugs. Although manufacturers