Yoshio Mitsumori01.23.08
It’s cold outside, but Japan is heating up with litigation fallouts and changes ahead. In the fourth quarter of 2007, a major healthcare tragedy came to a head, resulting in a social outcry in Japan: the scandal resulting from drug contamination leading to hepatitis C infections in unwitting victims. While this event, as discussed below, is tied to pharmaceutical products, the impact surely will affect the medical device industry at some point, too.
In October 2002, a suit was filed against a drug manufacturer and government by patients who were infected with Hepatitis C after receiving a human-derived hemostatic drug, Fibrinogen. Approved by the Ministry of Health Labour and Welfare (MHLW) in 1964, the blood product had been in wide use mainly for hemostasis (the process of halting bleeding). However, in the late 1990s, it was found that this drug had been contaminated with Hepatitis C virus, and many patients—particularly women who had received this product during childbirth—were infected as a result.
The ensuing litigation filed in Tokyo, Osaka and Fukuoka, among other cities, targeted both the drug manufacturer and government that approved the drug. In 2002, after the MHLW ordered the pharmaceutical company to provide a list of infected victims, the manufacturer initially reported 418 cases. But these were just a tip of the iceberg. It soon became apparent that the number actually ranged in the thousands. Back then, however, the MHLW did not make the list public, stating instead that “no specific personal records” were available.
Fast forward another five years and, in 2007, due to heavy pressure from the patient group pursuing litigation—not to mention growing interest from the media—the new Minister of HLW, Yoichi Masuzoe, ordered a new investigation of the records. This time, a trove of records found in the MHLW’s warehouse clearly identified affected patients by name. It was clear from the cover-up that patients who had received this drug had not subsequently been informed of the Hepatitis C risk and missed the opportunity to benefit from an earlier diagnosis or treatment. As a result, many patients developed life-threatening hepatic cirrhosis or hepatoma, and some died.
The patient groups rallied for the government and pharmaceutical company to acknowledge and accept the entire responsibility for the fallout of this contamination and subsequent cover-up. At first, the government only would deem itself partially accountable for the situation, but Prime Minister Yasuo Fukuda later made a strategic political decision that led to him publicly noting that the government administration holds itself fully accountable for what occurred and announced that all victims would be equally compensated—including voiceless potential victims.
Given the tragedy resulting from a case such as this, the media’s harsh criticism of the MHLW is easier to understand. As a result of the public embarrassment this office has faced stemming from the scandal, don’t be surprised to see the MHLW proceed much more cautiously before approving new products—including devices—in the future, and expect that the MHLW will be working to strengthen its post-market surveillance. Unlike some practices in the United States and Europe, the Japanese government—including individual officials—is legally obligated to be held responsible for any problems that occur after a product has been approved for marketing and sale.
Moving forward, this legal responsibility will make reviewers even more cautious and careful when evaluating new products. However, it should be noted that reviewers will have to balance this ultra-conservative approach with the need to approve new, innovative medical technology in a timely fashion. In the past, this column has discussed the criticism the Japanese government has faced in recent years regarding its slow approval process for new technology. It will be interesting to see how the government balances the need to get new products to market quicker while exercising caution during the evaluation process.
In addition to above incident, one of the other top issues for the industry in the new year is the upcoming price revision for the remuneration of National Health Insurance (NHI), which will occur in April (it is renewed every two years). Since the growing elderly population and fewer births have become serious social security concerns, the National Treasury and Finance Council have recommend reducing the total healthcare expenditure as a measure of easing future burdens on the aging population. The Japan Medical Association (JMA), on the contrary, proposed a 5.7% increase in appreciation of unrewarded hard works and to ease the shortage of certain special services. In particular, there is a worrisome shortage of gynecologists and pediatricians in Japan—these specialties are among the most unpopular areas of study in medical schools right now, as the jobs are tougher than other practices and tend to offer a smaller income.
Some of the nation’s most powerful politicians adamantly believe that Japan should spend more for its healthcare expenditures. Japanese healthcare expenditure, at more than 30 trillion Yen, undoubtedly is sizable. However, in terms of GDP comparison, Japan spends only 8%, whereas the United States spends about 15% and other major European countries spend approximately 10%. (See Figure 1.) Many politicians have asked why Japan spends less.
On the other hand, a market survey by the MHLW revealed that there is a 3.6% difference between NHI reimbursement cost and actual market cost. In particular, medical devices showed an 8.9% difference (on average) between reimbursement price and actual purchasing price. This obviously will be a good reason to push down the reimbursement prices even further.
The government is planning to decrease the national budget by a maximum of 4.3 trillion Yen in the next five years. The healthcare segment is projected to deduct 22 billion Yen in the next five years alone. According to the Ministry of Finance, if 1% of healthcare expenditures were reduced, about 8 billion Yen would be saved.
After negotiations were held with the Minister of Finance and the Minister of Health on Dec. 18, it was announced that the framework of that upcoming revision will be a 0.82% reduction in total. Medical services will appreciate 0.38% in consideration of the aforementioned shortage of particular specialties. However, drugs and medical devices were devalued by 1.2% and 0.1%, respectively. (The medical device reduction is the same as it was during the last price revision, in 2006.)
Under this framework, the detailed price revisions (by category) will be determined toward the end of March. As a result, the winter will heat up for all healthcare stakeholders in the medical community as it gears up for whatever changes may be enacted in April.
Cover-up Leads to Tragedy
In October 2002, a suit was filed against a drug manufacturer and government by patients who were infected with Hepatitis C after receiving a human-derived hemostatic drug, Fibrinogen. Approved by the Ministry of Health Labour and Welfare (MHLW) in 1964, the blood product had been in wide use mainly for hemostasis (the process of halting bleeding). However, in the late 1990s, it was found that this drug had been contaminated with Hepatitis C virus, and many patients—particularly women who had received this product during childbirth—were infected as a result.
The ensuing litigation filed in Tokyo, Osaka and Fukuoka, among other cities, targeted both the drug manufacturer and government that approved the drug. In 2002, after the MHLW ordered the pharmaceutical company to provide a list of infected victims, the manufacturer initially reported 418 cases. But these were just a tip of the iceberg. It soon became apparent that the number actually ranged in the thousands. Back then, however, the MHLW did not make the list public, stating instead that “no specific personal records” were available.
Fast forward another five years and, in 2007, due to heavy pressure from the patient group pursuing litigation—not to mention growing interest from the media—the new Minister of HLW, Yoichi Masuzoe, ordered a new investigation of the records. This time, a trove of records found in the MHLW’s warehouse clearly identified affected patients by name. It was clear from the cover-up that patients who had received this drug had not subsequently been informed of the Hepatitis C risk and missed the opportunity to benefit from an earlier diagnosis or treatment. As a result, many patients developed life-threatening hepatic cirrhosis or hepatoma, and some died.
The patient groups rallied for the government and pharmaceutical company to acknowledge and accept the entire responsibility for the fallout of this contamination and subsequent cover-up. At first, the government only would deem itself partially accountable for the situation, but Prime Minister Yasuo Fukuda later made a strategic political decision that led to him publicly noting that the government administration holds itself fully accountable for what occurred and announced that all victims would be equally compensated—including voiceless potential victims.
Given the tragedy resulting from a case such as this, the media’s harsh criticism of the MHLW is easier to understand. As a result of the public embarrassment this office has faced stemming from the scandal, don’t be surprised to see the MHLW proceed much more cautiously before approving new products—including devices—in the future, and expect that the MHLW will be working to strengthen its post-market surveillance. Unlike some practices in the United States and Europe, the Japanese government—including individual officials—is legally obligated to be held responsible for any problems that occur after a product has been approved for marketing and sale.
Moving forward, this legal responsibility will make reviewers even more cautious and careful when evaluating new products. However, it should be noted that reviewers will have to balance this ultra-conservative approach with the need to approve new, innovative medical technology in a timely fashion. In the past, this column has discussed the criticism the Japanese government has faced in recent years regarding its slow approval process for new technology. It will be interesting to see how the government balances the need to get new products to market quicker while exercising caution during the evaluation process.
What’s in Store in 2008
In addition to above incident, one of the other top issues for the industry in the new year is the upcoming price revision for the remuneration of National Health Insurance (NHI), which will occur in April (it is renewed every two years). Since the growing elderly population and fewer births have become serious social security concerns, the National Treasury and Finance Council have recommend reducing the total healthcare expenditure as a measure of easing future burdens on the aging population. The Japan Medical Association (JMA), on the contrary, proposed a 5.7% increase in appreciation of unrewarded hard works and to ease the shortage of certain special services. In particular, there is a worrisome shortage of gynecologists and pediatricians in Japan—these specialties are among the most unpopular areas of study in medical schools right now, as the jobs are tougher than other practices and tend to offer a smaller income.
Some of the nation’s most powerful politicians adamantly believe that Japan should spend more for its healthcare expenditures. Japanese healthcare expenditure, at more than 30 trillion Yen, undoubtedly is sizable. However, in terms of GDP comparison, Japan spends only 8%, whereas the United States spends about 15% and other major European countries spend approximately 10%. (See Figure 1.) Many politicians have asked why Japan spends less.
On the other hand, a market survey by the MHLW revealed that there is a 3.6% difference between NHI reimbursement cost and actual market cost. In particular, medical devices showed an 8.9% difference (on average) between reimbursement price and actual purchasing price. This obviously will be a good reason to push down the reimbursement prices even further.
The government is planning to decrease the national budget by a maximum of 4.3 trillion Yen in the next five years. The healthcare segment is projected to deduct 22 billion Yen in the next five years alone. According to the Ministry of Finance, if 1% of healthcare expenditures were reduced, about 8 billion Yen would be saved.
After negotiations were held with the Minister of Finance and the Minister of Health on Dec. 18, it was announced that the framework of that upcoming revision will be a 0.82% reduction in total. Medical services will appreciate 0.38% in consideration of the aforementioned shortage of particular specialties. However, drugs and medical devices were devalued by 1.2% and 0.1%, respectively. (The medical device reduction is the same as it was during the last price revision, in 2006.)
Under this framework, the detailed price revisions (by category) will be determined toward the end of March. As a result, the winter will heat up for all healthcare stakeholders in the medical community as it gears up for whatever changes may be enacted in April.