Pricing and Reimbursement in Japan: Costly healthcare system inefficiencies increase the focus on healthcare cost containment

CHAPTER 1 EXECUTIVE SUMMARY 4
Scope of the report 4
Key findings 4
CHAPTER 2 OVERVIEW OF THE JAPANESE HEALTHCARE AND P&R SYSTEM 12
An introduction to the Japanese healthcare system 13
The government must improve efficiency and reduce costs in healthcare provision 13
High drug spending is a visible cost containment target in the Japanese healthcare system 14
An overview of the Japanese healthcare system 17
Public healthcare insurance schemes provide the majority of Japanese healthcare 17
Hospitals remain the first port-of-call for patients seeking healthcare in Japan 18
There are a number of key stakeholders that impact healthcare provision in Japan 19
Governmental stakeholders are unified under the Ministry for Health, Labor and Welfare 19
Healthcare worker and industry stakeholders 21
Gaining a price and reimbursement level in Japan: the process and the key stakeholders that affect it 23
The process of gaining a price and reimbursement level 23
Drugs qualify for fairly generous premiums if they are innovative enough 24
A wide range of premiums are available for innovative drugs, and it is slowly getting easier to meet these criteria 24
A number of healthcare stakeholders impact government P&R strategy and healthcare provision 26
The DPO and Chuikyo are the key governmental stakeholders shaping P&R 26
The influence of healthcare stakeholders in shaping healthcare reform and P&R implementation is varied 26
CHAPTER 3 THE PRICING AND REIMBURSEMENT ENVIRONMENT IN JAPAN 28
Key reforms impacting the P&R environment 29
Biennial price cuts and patient co-payment have been the dominant P&R cost-containment tools in Japan 30
Biennial price cuts have historically had the greatest impact in restricting pharmaceutical expenditure 31
Over the past decade, the R zone has fallen, making price cuts more punitive 31
In addition to standard price cuts, extraordinary price cuts and long-listed drug price cuts also impact drugs 32
Patient co-payment is one of the most effective ways to control patient spending in Japan 33
PE analysis also plays a role in P&R in Japan, but on a more informal basis than in European markets like the UK 34
Increased DTC, the greater adoption of a prospective payment system, and increased generic uptake are all set to impact drug price following launch 35
Pharmaceutical companies exploit loopholes in advertising restrictions to capitalize on DTC and physician promotion 35
The adoption of the DRG-like diagnosis procedure combination (DPC) reimbursement system has met strong opposition but it may help to cut costs and reduce ALOS 36
There is a strong drive to increase generic uptake in Japan to help contain costs 37
Generic prescription in Japan is driven primarily on price 38
Despite cost savings available with generics, a range of factors have restricted generic uptake in Japan 39
Increased patient and physician awareness of generic drugs, greater patient participation in health management, and increased generic substitution are all helping to counteract the significant restrictors to generic uptake 40
The future is bright for generic uptake in Japan although there is still significant patient and physician resistance to overcome 41
Government use of an OTC switching category to transfer cost to patients is not effective in Japan because of the risk-averse nature of healthcare provision 42
Japanese drugs companies do not have to contend with parallel importation 43
CHAPTER 4 KEY MACRO TRENDS INDIRECTLY IMPACTING P&R IN JAPAN 44
Healthcare costs are being driven up by a range of factors, even though drug prices appear to be falling 45
Long patient hospital stays are a significant problem in Japan and is becoming an increasingly visible focus for cost containment 46
The failure of healthcare providers to price services differentially together with financial incentives to provide outpatient care exacerbates patient selection of in-patient care as the first port of call 47
Patients have historically had little incentive to be cost-conscious 48
Physicians are under attack and have little incentive to prescribe cost-consciously 48
The wide variety of health insurance schemes has done little to help contain costs 49
Historically high drug prices have been falling in the Japanese market 51
Innovation is required for a high level of reimbursement, yet there are problems capturing and adequately rewarding innovation 52
The level of innovation required for premiums is difficult to attain 52
There has historically been relatively low R&D investment in Japan 52
Innovative drugs may bypass the lengthy approval and P&R processes which have historically slowed down access to the Japanese market 54
Restructuring R&D strategy and capitalizing on governmental financial incentives will boost innovation 54
R&D restructuring may help to capture greater innovation 54
The Japanese government needs to provide greater financial incentives for R&D and make clinical trial progression, approval and P&R assessment easier to encourage foreign investment 55
Characteristics of Japanese society impact the healthcare service 56
The stagnant Japanese economy impacts on Japanese healthcare provision 57
CHAPTER 5 THE FUTURE OF P&R IN JAPAN 58
There are a range of factors that directly impact P&R tool use and effectiveness 58
The government should aim at making it easier for drugs companies to demonstrate innovation 58
The price cut system is set to evolve 58
Generic uptake is set to be strongly boosted 59
The number of drug types receiving high reimbursement levels is set to change 60
Reference pricing is set to become more restrictive 60
A range of factors that shape healthcare provision will also indirectly impact P&R 60
CHAPTER 6 BIBLIOGRAPHY 62
Publications and online articles 62
Datamonitor resources 63
CHAPTER 7 GLOSSARY 64
Glossary of terms 64
List of Tables
Table 1: There are a range of premiums for new drugs which help boost drug price and reward innovation 25
List of Figures
Figure 1: A range of factors will shape the Japanese healthcare system in the future 6
Figure 2: Healthcare spending as a proportion of GDP is below the seven major market average in Japan 13
Figure 3: Japan has historically spent a high percentage of healthcare spending on pharmaceuticals, 1980-2000 15
Figure 4: Japan’s total healthcare expenditure as a percentage of GDP is not rising strongly, 1980-2003 16
Figure 5: A wide range of bodies and groups impact healthcare provision in Japan 19
Figure 6: From a healthcare and P&R perspective, there are five key bureaus in the MHLW 20
Figure 7: Reforms since 1997 have focused on a range of factors, most significantly drug prices, co-payment and medical fees 30
Figure 8: Higher biennial price cuts and a reduced R Zone percentage are increasingly punitive for drugs companies, 1992-2006 32
Figure 9: There are more disincentives than incentives for generic prescription in Japan 38
Figure 10: There are a number of factors increasing the cost of Japanese healthcare provision 46
Figure 11: There are a range of different healthcare schemes, depending on the characteristics of the person being covered 50
Figure 12: The top-13 Japanese pharma/biotech companies have had a lower R&D investment as a percentage of revenues compared to the top-38 Western pharma/biotech companies, 1999-2005 53