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Japan's latest reimbursement changes challenge device manufacturers.

It's now official: As of April, the National Health Insurance (NHI), which provides coverage for all medical services, drugs and devices to Japan's citizens, has been revised. Medtech manufacturers should take note, as reimbursement prices for medical devices were impacted by the revision--and the bad news is that many prices were slashed by double-digit percentages.

In Japan, reimbursable medical devices are categorized according to function, and the amount of coverage determined for each device is based on this designation. When the latest remuneration of these prices was being determined for the NHI program, the Central Social Insurance Medical Council--an advisory board to the Minister of Health, Labor and Welfare (MHLW)--reviewed the prices for each functional category as part of its "Guidance of Special Insured Medical Material." In total, 27 functional categories underwent reimbursement price revisions. The highest reductions (as much as 25%) were applied to functional categories including intramedullary nails, angioplasty balloon catheters and synthetic artificial vessels.

The new pricing for all the categories impacted takes into account both domestic market price surveillance and justification with the foreign average price (FAP) of other leading countries, such as the United States, United Kingdom, France and Germany. For example, imported medical devices that previously were priced more than 1.5 times higher than the FAP and had a reduction rate of less than 15% during the NHI's last two price remunerations were reduced this time by as much as 25%.

The silver lining is that government officials recognized such drastic reductions are sure to affect device manufacturers and, as a result, put a plan into place to help ease the burden facing suppliers of medical products. Specifically, device categories that incurred a price reduction of more than 15% will undergo reimbursement changes in a stepwise manner. The first reduction began last month, and the next two reductions are scheduled to occur in January and April 2009.

Medical Service Fees Impacted

Medical service fees were targeted by the latest remuneration as well. The fundamental idea behind these price revisions is based on a good intention: to effectively provide high-quality medical services and sustain the universal coverage system as a basis of national security.

For example, a rising shortage of medical specialists such as obstetricians and pediatric physicians has led to growing concerns of citizens not being able to receive adequate medical care in the district. Therefore, the latest revision focused on improving existing medical services to help ensure that the number of these types of specialists will increase over time as they are drawn back to these types of practice. As such, medical service fees for both obstetric and pediatric practices have appreciated higher. In addition, some specialty services, such as those associated with managing high-risk pregnancies and births, as well as those for emergency infant care, were granted higher reimbursement. The idea is to help reduce the burdens that have been placed on hospital physicians.

The revisions also have taken into account the need to encourage more interactions between hospitals and clinics. Along these lines, nighttime services provided by clinics have received higher reimbursement (to help reduce the burdens placed on hospitals), and hospitals have been enticed to focus more on inpatient care instead of encouraging outpatient care.

Furthermore, in consideration of Japan's growing elderly population, higher reimbursement has been granted for cancer treatments and management of cerebral stroke.

Fast-Track Introduction of Prioritized Medical Technologies

Along with all these changes, one other development will be of great interest to medical device manufacturers. As part of the remuneration initiatives, officials are continuing to work on ensuring that the latest advanced medical technologies will be more easily accepted into the NHI program--the intent is to steadily replace comparatively less effective conventional products.

As of press time, the MHLW had actively sought recommendations (until the end of April) from the medical academy with regard to which highly demanded medical devices should be evaluated by the agency's "Working Group for Fast Introduction of Prioritized Medical Devices." Devices that would qualify for evaluation must fulfill certain conditions including a high recommendation by the medical academy, regulatory approval in other leading countries and a high expectation of effectiveness in managing or treating serious diseases.

The Working Group, which has been busy deliberating the fast introduction of unapproved new medical devices and invitro diagnostics since October, already has prioritized 13 new devices--such as an aortic thoracic stent graft, carotid stent, capsule endoscopy tool, etc.--among 59 recommended devices to date. The latest round of recommendations solicited was the second of its kind.

The MHLW also has decided to set forth technical guidelines aimed at enhancing the development of new technologies and speeding up the regulatory approval process. Areas of interest that have been recommended for this track include an implantable artificial heart and gene diagnosis by DNA chips, among other new technologies. The purpose of the guideline is to suggest the necessary technical data and information to be prepared for submission. Although the guideline has no legal basis, it presents a key milestone for the regulatory preparation in conjunction with technical development of the new generation of medical devices.

A Growing Role for Clinical Trials

One other movement worth noting is the enhancement of clinical trials in Japan. In the last decade, due to severe regulatory requirements, clinical trials for both drugs and medical devices typically have been outsourced to third-world countries. This practice could change in the near future.

The MHLW and Ministry of Education, Science and Technology recently collaborated to establish their "Five-Year Plan for Enhancement of Clinical Trials," which aims to bring clinical trials back to Japanese medical institutions. This undertaking will not be without challenges, however. It would require institutional preparation of core clinical investigators with full compliance of Good Clinical Practices; the fostering of a professional executor of clinical trials; diffusion of clinical trials in public and promotion of participation; effective study and smaller burden for the sponsor; and so on. Faster regulatory evaluation, improvement of evaluation quality and enhancement of international joint study also are recommended. Regardless, it's a promising step and should be viewed with optimism.

Clearly, the business environment surrounding the medical device industry still proves quite challenging in Japan, given the NHI's newest severe cutbacks on prices for medical technology and the regulatory difficulties that remain for most medical devices trying to gain entry into this market.

However, there are some positive developments: movements encouraging the faster introduction of prioritized new medical technologies; establishment of new regulatory guidelines; and enhancement of clinical trials. So, as we remain cognizant of the challenges facing the industry, let us focus more on the good efforts being made to strengthen Japan's medical system and continue to remain optimistic as we expect further promising movement in the future.

Yoshio Mitsumori is the president and CEO for Tokyo-based ADMIS, a consultant specializing in the medical device industry. He has more than 25 years of experience in the medical industry, including positions with the Itochu Corp., U.S. Surgical, National Medical Enterprises and Century Medical. A member of RAPS, he has spoken at many industry events and worked extensively in international trade of medical products and technologies. He can be reached at
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Title Annotation:News from Japan
Author:Mitsumori, Yoshio
Publication:Medical Product Outsourcing
Date:May 1, 2008
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