Repricing Toward April 2008

The speedier process for reimbursement certainly may be good news for the industry, but other more immediate concerns remain, particularly the upcoming price revision that is due in April. As this column reported in the last issue, medical device pricing shall be reduced 0.1% in the framework of national medical expenditure. For the new assessment, the MHLW made public its basic rules for the re-pricing as follows.

In the next revision of insured medical devices/materials, an appropriate evaluation to reward innovative medical technology shall be conducted by the MHLW continuously from the viewpoint of intensive and effective allocation of financial resources, while pre-authorized devices/materials shall be reviewed by conducting corrective measures to narrow the gap as “unreasonable domestic-overseas price disparity.”  The authorized reimbursement prices for existing devices/materials have been strongly criticized by the media, as these are much higher than US or European market prices. From the industry’s point of view, those higher prices have certain reasonable ground such as the multiple distribution system, associated services to attend surgery and so on. The MHLW admits such ground, but the question remains regarding how big or small such disparity should be. Under the current rule, if a new product is applied more than two times the foreign average market price (FAP), the reimbursement price should be forced down less than two times; however, the MHLW will change it to 1.7 times the FAP from the next price assessment. In addition, reimbursement prices for pre-authorized devices/materials shall be recalculated in such a manner that the reimbursement prices of the functional categories to which they belong are assessed more than 1.5 times than FAP, and the size of reduction was less than 15% by the last two revisions, reassessment shall be made and the prices shall be revalued. But the lower limit of the price down after revision is fixed at 75/100.

The objective of these changes is to narrow the price disparity with the FAP, but the problem centers around how to assess the FAP for fair comparison. Toward the end of March, negotiations between the MHLW and the industry undoubtedly will heat up, resulting in more back and forth between the two groups. Only time will tell.

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].