EXCLUSIVE: Japan to Exempt Extra Charges on OTC-Like Drugs from Tax

Tokyo, Aug. 31 (Jiji Press)–Japan’s health ministry plans not to impose consumption tax on additional out-of-pocket costs for prescription drugs with ingredients and effects similar to those of over-the-counter medicines, Jiji Press learned Monday. The ministry asked that the additional charges be permanently exempted from consumption tax, in its tax system reform request for fiscal 2027. Japan plans to introduce the additional fees for OTC-equivalent prescription drugs in March next year. About 1,000 drugs containing 77 ingredients will be subject to additional charges. Under the new system, patients will be charged 25 pct of the drug fees in full as a special fee, while the remainder will be covered by public health insurance, with patients paying 10 pct to 30 pct out of pocket. Patients are not charged consumption taxes on treatment covered by public health insurance. Still, if they choose to receive services not covered by the insurance, such as private rooms during hospitalizations and prescriptions of brand-name drugs instead of lower-priced generic alternatives, they are charged a 10 pct consumption tax on the special fees. But the new system will automatically impose the additional charges on OTC-equivalent drugs although patients are not allowed to choose what drugs are prescribed. Patient associations have raised concerns about the additional burden caused by consumption tax. The health ministry believes that the additional fees will not be subject to consumption tax as long as tax authorities do not decide to levy the tax. “We will confirm with tax authorities that taxes will not apply, rather than launching the new system without clarifying the tax treatment of the system,” a senior health ministry official said. END [Copyright The Jiji Press, Ltd.]