Regulatory Developments Medical diagnostic reagents and equipment are used to perform diagnostic tests in hospitals, commercial laboratories, physicians' offices and blood banks. Reagents are an essential component of any healthcare regime, indispensable in preventing sickness, detecting and diagnosing diseases, ascertaining the side effects of drug therapy, monitoring treatment, improving patient quality of life and decreasing total healthcare costs. Repeated cuts to reimbursement prices have reduced pricing levels below that of comparable overseas markets. This has reduced the incentive to invest in the development of new products for the benefit of Japanese patients. Reimbursement prices for medical diagnostic procedures and facilities were cut by 10% in the latest round of price revisions in April 2006. Reimbursement prices have now been cut by about 50% on a cumulative basis since 1998, with double-digit reductions in 2002, 2004 and 2006. Furthermore, the fact that reimbursement prices are the same for the same type of assay, even when the respective speed, quality, and contribution to patient care are totally different, acts as a disincentive for conducting better IVD tests. The past years have witnessed a number of improvements in the regulatory environment for medical diagnostics. Efforts to reduce bureaucratic delays in approving new products were boosted by the revision of the Pharmaceutical Affairs Law, implemented in 2005, introducing a third party/self-certification process based on risk classifications. More substantial progress was, however, impeded by the absence of practical guidelines for companies wishing to initiate applications under the new regime, as well as by the retention of risk classification methodologies and data requirements, which are unique to Japan. Meanwhile, biennial revisions of reimbursement prices have led to continuous erosion in prices for medical diagnostics, with little information made public about the decision process and little heed taken of the relative economic or clinical benefits or the innovative nature of individual products. All together, these factors raise significant concerns not only for European manufacturers, who find Japan an increasingly unattractive market for their products, but also for the country's healthcare system, which, in a mistaken short-term attempt to save money, may miss out on the longer-term economic benefits of deploying modern medical diagnostics. The current approach of treating medical diagnostics only as another expense, with a re-imbursement price that does not respect the added-value of each product, leads to incorrect diagnosis and unnecessary or wrong treatment and, in the end, excessive healthcare. The EBC is encouraged to see that IVD has now been introduced as a topic under the new Medical Industrial Vision study in which not only MHLW, but also METI and MOF are participating. The EBC is actively joining in the dialogue and sincerely hopes that the new tone of the debate will also bring a shift in focus areas, such as product approval and reimbursement. Prospects for EU-Japan Economic Integration Japan must change its medical diagnostic regime drastically if it is to create a competitive market for medical diagnostics that are of interest to European and Japanese manufacturers alike. The EBC can see no reason for why products that have undergone thorough tests in Europe and are certified with CE marking for the European market have to go through additional tests for Japan. Mutual acceptance of standards and certification between the EU and Japan would not only deliver products to Japanese consumers, but also provide a great business opportunity for Japanese manufacturers. Priorities
Key Issues and Recommendations ■ Product approval and smooth introduction Yearly status report: some progress. The new product approval systems have been implemented in accordance with the revised Japan Pharmaceutical Affairs Law. The introduction of a Ministry approved system, third-party certification and self-certification system based on risk classifications and strengthened safety measures, is an important step in the right direction, but still falls short of what is needed. In addition to these regulatory aspects, risk classification methodologies and data requirements, which are unique to Japan, technically make the application and review process discouragingly slow and/or redundant. This makes it impossible to initiate application procedures for many products - a situation that should be remedied immediately. At the same time, in Europe, an in-vitro diagnostic Directive (IVDD) came into effect on June 2000, from which time products bearing the CE marking have been granted free movement within the European Economic Area. IVDD should be considered as a positive example of an integrated cross-border standard. Recommendation:
■ Reimbursement Yearly status report: no progress. No information has been made public regarding the decision-making process for biennial revisions to reimbursement prices, on either how decisions are made or what the basis is for price cuts. It is said that the IVD reimbursement points are benchmarked against the price for hospitals to send work out to commercial laboratories. If true, this is an unfair comparison, since outsourcing prices do not include such costs as pre-treatment of patient samples (i.e. blood) and management of the patient test result history. Medical diagnostics expenses are thus seen as just another medical materials cost that can be cut, without due consideration to the unique role of properly conducted diagnostic testing in lowering total medical costs. Recommendation:
■ Diagnosis Procedure Combination (DPC) Yearly status report: no progress. DPC was introduced in selected Special Function Hospitals in 2003. The introduction of this system has led to a reduction in the number of diagnostic tests performed, as hospitals focus on reducing costs and outsourcing procedures. The underlying infrastructure for diagnostic testing is likely to erode if this situation persists. Recommendation:
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