The Elderly Get a Confusing Healthcare System, While Device OEMs Enjoy Favorable Developments
In the United States, April Fools Day marks a day of gags and laughs, but ever since April 1, Japan’s political arena has been more confusing than amusing with the rollout of a new healthcare initiative. Indeed, one of the hottest political issues today pertains to Japan’s Late-Stage Elderly Healthcare Insurance System. Although this new system theoretically is supposed to make healthcare more affordable for elderly individuals who are older than 75, from the very beginning there has been confusion about the system, particularly as criticism escalates about administrative mistakes and clerical errors that have arisen since its introduction.
The Late-Stage Elderly Healthcare Insurance System originally was established in 2006—well before it was formally launched. The impetus that led to its development was that healthcare expenditures for elderly patients tend to be much greater than they are for younger generations and, as such, the rapid growth of Japan’s elderly population would lead to an even sharper increase of healthcare expenditures in the near future. To cope with these increases and provide a sort of financial balance to the National Healthcare Insurance system, the government devised the new system for elderly populations.
By the system’s design, the elderly population now contributes a certain amount of money to receive healthcare benefits. All individual beneficiaries are charged a premium through the local government, while a local insurance organization operates the plan. The beneficiary funds 10% of the plan from his or her own pocket, 50% is funded via taxes and the remaining 40% is contributed from health insurance unions organized by active (ie, younger) generations. The actual financial burden for beneficiaries varies by district, averaging about 6,200 yen (approximately $57) per month.
Although the system was designed to alleviate financial burdens, for now it has proven more problematic than helpful—and criticism about the system has become widespread. Just a few short months after the system’s introduction, administrative procedures already have been deemed as too confusing and serious mistakes have been cited. For example, some elderly citizens received an insurance certificate while others didn’t or, in some cases, the monthly premium was mischarged. Another area of particular contention has been that the beneficiary’s monthly premium is directly debited from his or her pension. Japan’s pension system has seen its own share of colossal administrative errors and, as such, has been a big political hotbed.
Given the problems arising from both the new healthcare system for the elderly and the pension system, the Ministry of Health, Labor and Welfare (MHLW) is faced with tackling two extremely challenging political issues at the same time. The opposing political party, Japan Democratic Party, already has called for cancellation of this Late-Stage Healthcare Insurance System, and its voice is gaining strength as some politicians from the MHLW’s supporting parties join the ranks in criticizing the system. With Japan’s next general election just around the corner (it will be held sometime late this year or early next year), the controversy is gaining steam as a huge political issue.
Favorable Movement to the Medical Device Industry
Although the elderly population and political figures may not be having an easy time lately, medical device manufacturers doing business in Japan have been enjoying a more favorable climate due to some new developments.
One movement is that the Cabinet Office's Expert Committee on Foreign Direct Investment Promotion recently made a formal recommendation to the MHLW for major deregulation to expedite the import of the advanced medical technologies into the Japanese market. This recommendation was made public by an interim report issued by this committee in March.
In this report, the committee also recommended a recommended a larger budget allocation for the Pharmaceuticals and Medical Devices Agency (PMDA), which is responsible for evaluating new products in Japan. Readers of this column will recall that this agency has been suffering a shortage of reviewers, and this problem, in part, has slowed the acceptance of new, innovative products in the market.
With this budgetary recommendation, the committee intends to rejuvenate the medical device industry, which has become rather stagnant due to continuous reimbursement cuts as well as a difficult regulatory pathway. (To learn more about these topics, read “News From Japan” in the May issue of MPO, available at www.mpo-mag.com.) In addition to this recommendation, the expert committee has concluded that the PMDA needs to reduce the number of categories of medical devices requiring strict and lengthy evaluations. In the past decade, devices that have been proven safe and effective in the United States and Europe have fallen victim to Japan’s lengthy regulatory pathway, and this has prevented the timely introduction of advanced medical technologies into the Japanese marketplace. However, the committee’s recommendation (and related conclusion) aims to entice more foreign medical device manufacturers to invest in Japan’s market and—just as important—enable them to enter the market more easily.
Meanwhile, the MHLW’s ruling party, Liberal Democratic Party, also established a working group whose mission is to advance the medical device industry. The group will seek to strengthen the international competitiveness of Japan’s medical device market and, ideally, make medical devices one of the country’s key industries in the future. To accomplish these objectives, the working group has requested that the government amend the “five-year strategy for the creation of innovative drugs and medical devices” drawn up last year so that the group’s request will be reflected within the document.
Another favorable movement was the establishment of the Advanced Medical Technology Evaluation System, put into action on April 1 by the Central Social Insurance Medical Council, an advisory board to the MHLW. This new system has enabled new drugs and medical devices to be used in conjunction with insured medical services (subject to fulfillment of certain conditions)—a privilege that is commonplace in other nations but still new to Japan. The movement is significant because it has allowed for the use of unapproved products (proven safe and effective in other global regions) in insured services.
As you may recall from previous columns, unapproved new drugs and medical devices generally have not been covered by Japan’s National Health Insurance program because they haven’t been authorized as safe and effective products, regardless of positive findings from other strictly regulated regions such as the United States and Europe. Physicians historically have had the right to import and use new, unregulated products within their practices if they assume responsibility for all risks involved—and, as we all know, patients always want access to the latest and most advanced medical technology.
Recognizing that patients and physicians were using new products with or without approval, the MHLW established the new system to help ease financial burdens and get these devices and drugs approved quicker by helping manufacturers prepare adequate submission data for their applications to help facilitate a swifter regulatory approval process. Under this new system, new drugs and medical devices now can be used at qualified medical institutions if clinical requirements for safety and efficacy are fulfilled. The Advanced Medical Technology Evaluation Council shall evaluate and determine the conditions and requirements for each subject drug or medical device to be used in this nature. Drugs and medical devices to be considered for this new system include: 1) self-developed products (including consignment of production to the third party) and/or 2) self-imported products by physicians (using his or her MD license).
By introducing this new system, the fast introduction of advanced new drugs and medical devices shall become a reality, and quick approval also shall be expected. This obviously is a favorable trend for the medical device industry, even though the system is limited to only the newest technologies at present. That said, the industry expects further deregulation to include conventional medical devices as well.