With one of the highest life expectancies among countries and an increasingly aging population, Japan is at a juncture where there are more citizens requiring healthcare services than those contributing to the expenditure. The pressure to bring down healthcare spending is enormous and the need for a sustainable healthcare system is more crucial than ever. Following several discussions, careful contemplation, and a three-year Health Technology Assessment (HTA) pilot, the Japanese government launched its version of the HTA system, also known as cost-effectiveness assessment (CEA), in April 2019. CEA has been devised as a tool to supplement the current drug pricing system. Patient access as it fits in the Japanese healthcare system is the highest priority along with the aim to facilitate evidence-based decision making.
Under the CEA system, highly innovative and financially impactful drugs are subject to evaluation and consequently, price adjustments. The product selection criteria identify newly listed products with a peak sales forecast of over ¥10 billion (~US $92 million) or ¥5 billion to ¥10 billion annual sales and already listed products with ¥100 billion in peak sales or significantly high prices. CEA is heavily reliant on ICER (incremental cost-effectiveness ratio; costs per QALY gained) values with not enough scope for factors such as disease burden and severity and societal impact. The price adjustment rate is based on the ICER thresholds, as defined by the MHLW, and is applied to the launch premiums (if applicable) or the operating profit portion of the NHI prices. Cancer drugs and other specialty drugs are assessed against relaxed ICER thresholds. Therapies targeting state-designated intractable diseases, HIV, hemophilia, and some cancer indications could be excluded from CEA based on the small number of patients. However, products with high price tags and or high sale volumes (≥ ¥35 billion) could still be selected on a case-by-case basis by the Central Social Insurance Medical Council (Chuikyo).
In 2019, Pharma Japan reports, Ono Pharmaceutical’s Opdivo (nivolumab) faced downward price adjustment under the CEA program when it had already been subject to price tweaks in 2018. Alexion Pharmaceuticals’ Ultomiris (ravulizumab) was picked for CEA despite targeting a state-designated intractable disease, paroxysmal nocturnal hemoglobinuria, while Alnylam Pharmaceuticals’ Onpattro (patisiran) also indicated for a state-designated intractable disease, hereditary transthyretin-mediated (hATTR) amyloidosis with polyneuropathy, missed the cut.
Since the introduction of CEA early last year, the industry is skeptical of the overreliance on ICERs and the fact that innovation, therapeutic needs, societal and ethical factors are being overlooked. In response to the Ministry of Health, Labor and Welfare’s (MHLW) CEA proposal, the Pharmaceutical Research and Manufacturers of America (PhRMA) and the European Federation of Pharmaceutical Industries and Associations (EFPIA) also jointly proposed a point-based appraisal framework adding disease severity and unmet need, societal impact and other benefit factors to the ICER focused-methodology. Other benefits included factors such as a new administration that reduces pill burden or improves patient convenience, therapy areas with low innovation rate, and where existing therapies are outdated.
CEA sets the drug price reduction rate at 90% of the premium portion and 10-15% of the overall NHI price. The industry considers the rates excessive and believes that this disincentivizes innovation and hampers patient access. The probability of losing up to 90% of the effectiveness price premium undermines the prized innovation reward, which distinguishes Japan as an attractive market. The Federation of Pharmaceutical Manufacturer’s Association of Japan (FPMAJ) remarked that drugs with NHI prices set by the cost-based method and low disclosure ratios, including non-premium products, are being subjected to CEA. As a contrast, FPMAJ claims, drugs priced under the comparator-method are selected only when premiums are granted. The organization has since been advocating revising the product selection criteria to only include premium-granted products under CEA.
Japan boasts of one of the shortest times to market access, with products being reimbursed within 90 days of market authorization approval. Even though currently, CEA does not play a role in reimbursement decision making, such an application seems to be the goal of Japan’s Ministry of Finance. It is expected that eventually, CEA would take the shape of a tool to optimize drug costs and the product selection scope be expanded to include all medicines irrespective of their financial impact. Although nascent, the Japanese HTA system has the potential to incorporate reimbursement in a way it complements their healthcare system. The challenge with the move, the industry suggests, is the creation of inevitable delays in listing of products on the NHI reimbursement list and eventually market access.
Experts suggest that patient involvement is yet another area where the Japanese HTA system has room for improvement. Experts believe mature HTA markets such as the United Kingdom and Australia, which incorporate exhaustive stakeholder inputs, could serve as benchmarks for Japan’s future policy reviews. The Japanese authorities seem aware of the challenges associated with the roll-out and implementation of CEA. Putting transparency at the center, they continue to gain experience to effectively work with the industry and prioritize sustainable patient access above all. The authorities expect that with further research and learning as CEA comes of age, it will pave the way for expanded usage and implementation.
About Global Market Access Solution
DRG’s Global Market Access Solution (GMAS) allows global teams to monitor and assess the evolving market access environment—through a country, indication or therapeutic lens. Commercially focused data and insights support strategic activities with global revenue implications by helping businesses to scope global opportunities, shape relevant messaging, calibrate go-to-market planning assumptions, and achieve and maintain maximum access and reimbursement.
Reach out to the author anytime on LinkedIn.