Originally Published MX January/February
2003
INDUSTRY ASSOCIATIONS
Promoting True Healthcare Reform in Japan
AdvaMed offers medical technology as a palatable solution to Japan’s healthcare crisis.
Marjory E. Searing
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Marjory E. Searing is executive vice president of global strategy and analysis at AdvaMed (Washington, DC), an industry trade association.
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There is a Japanese expression to the effect that “good medicine is bitter in the mouth.” Certain medicines, however, are less difficult to swallow than others. Advanced medical technology, if afforded the right environment, is an example of a less-bitter solution to Japan’s healthcare problems.
As Japan moves forward with planned reforms of its regulatory and reimbursement systems for medical technologies, it will be crucial for Japanese authorities to consider the roles that high-technology medical devices and diagnostic products can play in their society. Such medical technologies have the potential not only to improve the quality and efficiency of healthcare in Japan, but also to improve Japan’s overall financial and economic situation.
At the moment, however, medical technology companies seeking to do business in Japan are likely to find themselves operating in an environment that is less than hospitable. The sections below suggest just a few of the challenges that medtech manufacturers are having to cope with.
Economic Context
Although Japan’s economy has recently shown signs of recovery, even the most optimistic accounts do not predict a dramatic turnaround for the nation’s economy in the near future. In 2002, Japan’s mounting debt (government debt currently amounts to 140% of the nation’s gross domestic product) prompted the Koizumi government to advance a number of initiatives for reforming the country’s fiscal structures.
Such fiscal tightening has had the effect of increasing pressures to curb rapidly rising healthcare costs. Overall, however, last year’s healthcare reform efforts focused more on immediate cost-cutting needs than on forward-looking systemic changes.
Demographic Trends
Driving some of the proposed changes in Japan’s healthcare policy is the rapid pace at which Japan’s population is aging. The number of Japanese between the ages of 15 and 65 actually began shrinking in 2000, and this demographic group will be increasingly burdened with the costs of caring for Japan’s growing elderly population. Japanese over age 65 already make up 17% of the population, and this figure is expected to rise to 25% by 2025. Expenditures for healthcare are expected to parallel this trend, and are becoming a source of great concern in a country faced with dwindling resources.
Health Policy Environment
Japan is currently the second-largest healthcare market in the world, expending more than $300 billion annually. Of this total, around 7.5%, or $24 billion, is devoted to medical devices and diagnostic equipment, making Japan also the world’s second-largest market for medical technologies, after the United States.
Japan’s government-run health insurance system provides universal healthcare coverage to all residents in Japan. However, the Japanese health insurance industry, which comprises a National Health Insurance (NHI) program and nearly 2000 health insurance societies managed by large corporations, is on the verge of collapse. To prevent such a collapse and ensure a sustainable system into the future, the government is making efforts to redirect expenditures so that money is spent more efficiently, while also aiming to improve the overall quality of healthcare.
Nevertheless, the healthcare reform initiatives recently proposed by Japan’s Ministry of Health, Labor, and Welfare (MHLW) have been shortsighted. They have erroneously identified medical technology as a problem for the Japanese healthcare system, rather than as a means of resolving Japan’s healthcare crisis.
Misguided Policies
In the area of product reimbursement, Japan’s payment policies and related practices act as disincentives to the market introduction of beneficial new medical technologies. Examples of such hindering policies and practices include the following.
• In April 2002, Japan adopted a pricing policy for medical technologies that adjusts reimbursement according to a product’s “foreign average price.” This policy artificially caps prices below current market levels.
• Reimbursement listing for advanced technologies is accomplished at a very slow pace, delaying the introduction of potentially beneficial products.
• Japan pursues an ongoing practice of arbitrarily consolidating reimbursement categories, effectively instituting backdoor price cuts.
• The Japanese reimbursement system does not provide for medical technologies used in clinical trials.
• Japanese authorities are now considering a proposed “diagnosis procedure combination” program that resembles the U.S. system of diagnosis-related groups (DRGs). If not structured correctly and based on adequate data, this proposed system may make it difficult to ensure adequate valuation of medical technologies.
Similarly, Japan’s regulatory policies present hurdles that, at times, unnecessarily restrict access to medical technologies for the nation’s patients and practitioners. Typical examples include the following areas of concern for the Japanese product-approval process.
• Overall, Japan’s regulatory processes for product approval are cumbersome and time consuming, impeding access to new products.
• Japan’s system imposes redundant clinical testing requirements that do not contribute to enhanced product safety.
• The product testing requirements imposed by Japanese authorities do not conform to international standards.
• Proposed changes in the requirements for product-submission dossiers still impose excessive obligations on applicants.
In sum, many of the newly adopted and proposed changes in Japan’s healthcare system run counter to the Japanese government’s stated aim of fostering industry growth. Such policies utterly fail to address the need for Japan to promote research and development for new medical technologies that can benefit the country’s patients.
AdvaMed’s Solutions
AdvaMed and its member companies have a keen interest in Japan—and not only because of the size of its market for medical technologies. Japan’s responses to the challenges of caring for an aging society amid shrinking financial resources are likely to be studied by many other countries in similar situations. Whether those responses turn out to be a model to be followed—or one to be avoided—may have a great deal to do with the ways that Japanese authorities handle the implementation of new medical technologies.
Recognizing the importance and growing needs of the Japanese market, the medical technology industry is committed to ensuring the highest quality of care for the Japanese people, participating in the nation’s healthcare reform process, and contributing to the solution of Japan’s healthcare crisis. If provided an environment conducive to rapid access, medical technology can contribute to solving Japan’s problems in a number of areas, such as the following.
• Disease Management. Medical technologies enhance the accuracy and efficiency of diagnosis and treatment.
• Lifestyle Issues. Medical technologies can help to reduce treatment and recovery times and improve quality-of-life matters for patients and their families.
• Social Problems. The application of medical technologies can help maintain the independence and productive capacity of Japan’s aging society, reducing the burden on individuals, their families, and society.
• Financial Concerns. Medical technologies make it possible to achieve earlier diagnosis and faster treatment, thereby increasing the productivity of Japan’s citizens and helping to reduce overall healthcare costs.
• The Economy. As in other countries, Japan’s healthcare sector can become an economic driver, promoting research and development and creating jobs, investment, new growth, and spin-off benefits.
As one example of the potential of medical technologies, a recent study by Bain and Co. (Boston) found that greater use of heart pacemakers, catheters, stents, and defibrillators has begun to reduce Japanese hospital stays from months and weeks to a matter of days.1 If patients continue to receive timely access to such technologies, Japan could experience a tremendous reduction in healthcare costs over the long term.
Another medical technology study—this one conducted in the United States—offers an important finding for countries that face the challenge of an aging population—including both the United States and Japan.2 The study found that the incidence of long-term disability among the elderly has declined dramatically in the past two decades, in part because of U.S. investment in medical technology. According to the study, this decline has enabled more than 2 million people to continue living active and independent lives and has saved the Medicare system
$19 billion.
AdvaMed’s Initiatives
Last year, AdvaMed launched two new groups devoted to developing and advancing policies that will result in better patient and practitioner access to beneficial medical products in Japan. AdvaMed’s Japan Reimbursement Team consists of U.S. payment experts and U.S. industry counterparts from the subcommittee on medical devices and diagnostics at the American Chamber of Commerce in Japan (ACCJ). Similarly, AdvaMed’s Japan Regulatory Team is made up of U.S. and other international regulatory affairs specialists and their counterparts at ACCJ.
These two groups have been working on proposals in their respective issue areas and they are engaged in ongoing dialogue with government officials, politicians, physician and patient groups, and other policy influencers. By expressing industry concerns about current Japanese policies, the groups hope to refocus Japan’s policy discussions in a more forward-looking direction, and to help Japanese authorities develop an understanding of medical technology as a solution to their nation’s healthcare needs.
Getting Involved
AdvaMed’s Japan teams have a full agenda for 2003. By advocating on behalf of certain healthcare system reforms, they hope to create an environment more conducive to the timely introduction and adoption of medical technologies and, in turn, to help Japan and its aging population adapt to the changing times. Planned areas of activity during the coming year include the following.
• Negotiations with MHLW officials to reform Japan’s pricing system for medical technologies.
• Development of proposals to streamline and accelerate Japan’s product approval and reimbursement listing processes.
• Holding educational seminars on the implementation of quality systems and other regulatory standards.
Broad industry support of these activities is both necessary and welcomed. By contributing their talent and expertise, medical technology companies help to bolster the credibility of the industry and its views. Such active industry participation offers a concrete example of how medical technology companies can revolutionize care—in this case by helping to develop sound policy alternatives and demonstrating to Japanese officials the importance of the issues at hand.
For information about how medical technology companies
can become involved in AdvaMed’s Japan initiatives, contact Raelyn Campbell, director of global strategy and analysis for Asia, via e-mail at
rcampbell@advamed.org.
References
1. A Turning Point of the Japanese Health Care System: The Increasing Role of Medical Technology Innovation (Boston: Bain and Co., 1999).
2. Kenneth Manton, “Changes in the Prevalence of Chronic Disability in the United States Black and Nonblack Population above Age 65 from 1982 to 1999,” Proceedings of the National Academy of Science 98, no. 11 (2001): 6354– 6359. n
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