Paul Barry Director, International Trade & Health Policy Boston Scientific Corp.
Presentation Outline
Funding and Healthcare Environment in Japan Responsible Agencies Reimbursement Classifications STMs, Functional Categories Reimbursement Pathway Price Adjustment by Market Method: R-zone Price Adjustment by Cost Control Method: FAP Policy Challenges, A Look Ahead
employer contribution, payroll deductions, taxes, patient copayments (30% for core population)
Achieved universal health coverage/access in 1961 Demographics: rapidly aging (82 yr life expectancy), but
8.2% of GDP spending on healthcare (05) 2nd largest market for med tech at >$26 bil; growth has flattened
in recent years.
Lengthy average hospital stays (30+ days) Serious over-capacity in hospitals and clinics, diffuse services and
Pressure to increase medical fees (physicians) Government is resorting to cost-containment and price-cutting
Pharmaceutical and Medical Devices Agency (PMDA) is a third-party regulatory review agency under MHLW Health Insurance Bureau (HIB) sets rates and approves reimbursement coverage Central Social Insurance Medical Council (Chuikyo) is an outside advisory body to HIB on reimbursement/coverage decisions
Special Treatment Materials (STMs): also called designated insured medical materials - product reimbursement price fixed according to a fee schedule and is separate from other medical service fees
STMs represent about 1/3 of overall device budget, or about 3% of national healthcare expenditures
2.
The remaining 2/3, including capital equipment, IVDs, commodities, etc, are either purchased by-brand or paid for out of the technical fee associated with a medical procedure
Non-STM product prices are determined through direct negotiation between buyer and seller, not according to a fee schedule
Applies only to Special Treatment Materials (STMs) Announced by MHLW in 1992, adopted in 1994 Products previously reimbursed by-brand Functional Categories established with the aim of
(1) Standard type (2) Emergency treatment type (3) Re-narrowing prevention type -----
246,000 Y
Applicant Dossier
1. Application for reimbursement
MHLW
Eco Affairs Div Health Policy Bureau
Expert Committee
3. Expert opinion
4. Listing decision
Chuikyo
A1 A2 B C1
Covered under technical fee. Product reimbursement is included in technical fee. Commodity-type products, e.g., sutures, gauze. Covered under technical fee. Product itself gives technical fee. High-end products such as MRI, CT, etc. Me-too product reimbursement category. Existing technical fee and separate device fee, with predicates in the market. New products that are based on existing products/ therapies. Technical fee exists for procedure, but new functional category needed to account for incremental improvement in technology. New products/therapy. New technical fee and device reimbursement category must be created.
C2
Timing of Reimbursement
A1 A2 B C1 C2
Automatically after 20 days of filing 1st day of every month, when filed before 10th day of previous month 1st day of every month, when filed before 10th day of previous month 4X / yr Jan 1, Apr 1, July 1, Oct 1 (submitted at least 4 months prior); Provisional coverage prior to final listing 4X / yr Jan 1, Apr 1, July 1, Oct 1 (submitted at least 4 months prior); Provisional coverage prior to final listing
Epochal Function Premium: 40-100% A) Novel function of clinical utility and B) Higher utility or safety than similar products and C) Improves the method of treatment
Orphan Drug Premium (I): 10% A new listed product of a new function class designated orphan drug in accordance with Par. 2 of Article 77 of PAL
Utility Premium (II): 5-10% a) Higher utility or safety and b) Increased safety for healthcare professionals and c) Improves the method of treatment and d) Environmental (disposal) advantage
Orphan Drug Premium (II): 3% A newly listed product of a new function class that has less target patients than do listed products of a similar function class
Cost of production/import + Promotion expense + General administrative expenses + Distribution expenses + Operative profit + Consumption tax = Price of a material of a new function class
Hindrance to securing new categories Allows for price management by government without consideration of value
B product applications
Supporting economic and clinical data helpful for C1/C2
Distribution Flow
Overseas Company
Primary Dealer
Secondary Dealer
Customers
Sell $200
Method or R-zone
official reimbursement price from government and actual price paid by hospital to supplier means to help cover other operating costs
Allows for small margin to be kept by hospitals as a The current allowable R-zone value is 4% for STMs
Sample R-zone revision: official reimbursement price product A = 1000 yen if average selling price per survey = 900 yen add 5% consumption tax to ave = 945 yen add 4% R-zone value (of official price) = 40 yen new official reimbursement price = 985 yen
10 9 8 7 5 4 3 2 1 0 1990 1994 1997 2000 2004 2008 Drugs Med Dev Docs
greater than the average overseas price, adjustment occurs overseas price AND the rate of decrease from the standard material price since the last revision is less than 15%, then the price is reduced by formula (up to a max of 25%)
A: weighted average of current market prices in a particular functional class B: overseas average price of the subject product
Standard Material Price Before the Revision X B x 1.5 A
Price data is protected not shared with any third parties Preliminary R-zone and FAP cuts announced to industry in Dec/Jan,
begins a 2-3 month comment period March, new prices effective April 1
price spiral, with political and economic pressure for expanded application therapies; product generation gaps are growing viewed very differently than in the past
Creating disincentives for introduction of new products and Uncertainty regarding return-on-investment, Japan is being
access to cutting-edge technology, and to grow Japans own med tech industry
solution
Future Developments
An age when greater weight is placed on value and price
Intensified price scrutiny; annual price surveys and revisions FAP & R-zone revisions to continue; rules changes to
Future Developments
Two potentially major systemic changes looming:
1.
DPCs: Diagnosis Procedure Combinations Japanese-style DRGs, per-diem rate which decreases over time. DPC pilot has expanded to ~534 hospitals, and shown modest results Will STMs be folded in to DPCs? Usual problems associated with DRG systems expected HTA: healthcare technology assessment requirements METI studying development of HTA guidelines; ISPOR chapter established in Japan to develop same First-ever economic/outcome data requirements for med tech coverage and reimbursement in Japan? Potential market barrier?
2.