Medical device makers critical of Japan’s pricing and regulatory regime

Industry spokesmen say the rules make it difficult to introduce new technology and may create a downward price spiral.

ByStephen B. Sherretta

WASHINGTON – Japan’s demanding medical device regulatory system may deny Japanese patients the latest medical technologies while forcing deep, unjustified price cuts on foreign companies, some industry representatives said at a trade conference here.

Out of five new orthopaedic-related technologies introduced worldwide by Stryker International over the last year, for example, only one is now available in Japan because of onerous regulatory processes, said Luciano Cattani, Stryker International group president. And of 22 products launched this year in the European region, none will become available in Japan before 2008, he said.

His comments came following a presentation by a leading Japanese government regulator at the Globalization of Medical Device Policies international conference hosted by AdvaMed, an industry trade group.

Had those products that were denied entry been introduced into Japan, they would make up 20% of the company’s business there today, Cattani said, illustrating the downward effect of Japanese regulations on Stryker.

“If we continue to see our prices and business going down, we will have to take our measures,” Cattani said.

At Boston Scientific, “We have seen as much as 50% price cuts in our product lines,” said Paul Barry, director for international health policy.

Guidelines for setting prices

Japanese price-setting rules have long been a sensitive issue for industry, which claims the existing approach squelches innovation and unfairly depresses prices for new technology. Under that system, all devices that meet a similar need, no matter how low-tech or high-tech, get lumped into a single “functional category.” Officials then calculate the average price of the whole group and apply that single price to every device within the group.

The Japanese regulations do not account for differing production costs or the medical benefit of these products, critics contend. One result: Older, less expensive, low-tech products can continually drag down prices for newer technologies within the same category, even where newer devices may provide a better overall medical value.

Barry and Cattani made their comments in a question-and-answer session following a presentation by Yukiko Nakatani, MD, deputy director of the economic affairs division in Japan’s Medical Policy Bureau.

Nakatani’s presentation outlined details of the Japanese medical device reimbursement and price-setting procedures. Those processes have been undergoing revisions in an attempt at streamlining and promoting innovative devices, said Nakatani, a pediatrician, during her presentation. Her group plans even more streamlining revisions, she said.

Medical devices: the best target?

But if the overriding purpose of the extensive Japanese medical device regulation regime is to reduce health care costs, then the government should look at cost-cutting targets that have far more savings potential than that of medical devices, Barry said.

“Why not take on something more dramatic — the cost of hospitalization, your true cost driver,” Barry said. Japan has more hospitals per capita than most leading industrialized countries and notoriously long lengths-of-stay, he said.

Nakatani responded, through an interpreter, by noting Japan plans to reduce the number of hospital beds – about 900,000 today — by about half over the next 4 to 5 years. She also noted that the government is considering changes to the price-setting system. “We would like to create a new system in which new technology can be properly evaluated.”

For more information:

Nakatani Y. The future direction of reimbursement in Japan: The view of MHLW (Ministry of Health, Labour and Welfare). Presented at the AdvaMed 2006 International Conference, “Globalization of Medical Device Policies – the Good, the Bad and the Ugly.” Oct. 30-31, 2006. Washington.

Stephen B. Sherretta is an OSN Correspondent who writes primarily for Orthopedics Today, a SLACK Incorporated publication.