From Paper to Reality: Reimbursement Cuts Reverberate in Japan

Yoshio Mitsumori

The dreaded 2006 medical remuneration cuts were finally enacted on April 1. These reductions are now impacting the entire medical industry at full force and forcing medical device companies to reconstruct their management structure to cope with smaller revenues.

After heated negotiations between the Ministry of Health, Labor and Welfare (MHLW) and the stakeholders such as the Japan Medical Association (JMA), health insurance organizations and industry representatives (including US-based AdvaMed), the medical remuneration was downsized by a 3.16% cut for gross medical expenditures—the biggest cut ever made in Japan. Overall, the reduction adds up to about one trillion Yen (US $8.7 billion).

The JMA, one of the country’s most powerful lobbying groups, had almost nothing to do with these reductions. Instead, the strong will of Prime Minister Junichoro Koizumi made this drastic reduction real, and no one could resist this very political decision.

The revised remuneration focuses on improving patient quality of life and reprioritizing healthcare expenses in light of Japan’s changing social structure. As a result, pediatric care, OB-GYN, anesthesia/pathology, ambulance service, acute inpatient care, medical IT and home healthcare service actually received higher remuneration, with an estimated increase of approximately 150 billion Yen (US $1.3 billion). Other segments, however, depreciated with a 1.8% cut—a reduction of about 600 billion Yen (US $5.2 billion). These measures were an attempt to balance the increase with the decrease, though the decrease obviously far exceeded the increase.

In particular, the medical service fee was cut by 1.36%, an approximately 450 billion Yen (US $4 billion) reduction. The medical service fee reduction was the second cut in the history of Japanese health insurance system. Pharmaceuticals received a 1.6% cut—a 500 billion Yen (US $4.3 billion) reduction—and medical devices and equipment were cut by 0.2%, a 60 billion Yen (US $520 million) reduction.

 

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 [email protected].