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Pricing and Reimbursement in Japan

The government has relied on simple P&R tools to contain rising healthcare costs and provide a reasonable level of healthcare. However, factors such as a healthier elderly population are masking healthcare system inefficiencies, boosting healthcare costs and increasing the focus on cost containment. Although the rise in drug spending is slowing down, it remains a visible cost containment target.

Scope

Overview of the Japanese healthcare system, detailing trends shaping healthcare provision including how P&R fits in

In-depth analysis of the Japanese P&R infrastructure, examining how P&R tools are used to contain costs

Examination of macro trends shaping healthcare provision and the P&R environment

Identification of future trends shaping P&R tool use and healthcare evolution in Japan

Report Highlights
Over the last decade, biennial drug price cuts and increasing patient co-payment levels have been the key tools used to contain pharmaceutical expenditure.

In the future, a range of factors will impact the P&R environment, including greater generic uptake, the wider adoption of a prospective payment reimbursement system, and determining a solution to providing the elderly with adequate yet cost effective healthcare provision.

A range of macro trends are also impacting drug prescription and P&R, including: rising healthcare costs as a result of system inefficiencies, the fact that innovation is neither well-cultivated by Japanese drug developers nor well-rewarded by the Japanese government, and lastly the effects of an ageing population combined with a stagnant economy.

Reasons to Purchase

Gain a clear understanding of the healthcare market dynamics and factors influencing healthcare provision in Japan

Understand the role of different P&R tools in healthcare cost containment in Japan

Gain insight into how P&R and more global macro trends are set to shape healthcare provision in the future

Table of Contents

• CHAPTER 1 EXECUTIVE SUMMARY - page 4
  • Scope of the report - page 4
  • Key findings - page 4
• CHAPTER 2 OVERVIEW OF THE JAPANESE HEALTHCARE AND P&R SYSTEM - page 12
  • An introduction to the Japanese healthcare system - page 13
    • The government must improve efficiency and reduce costs in healthcare provision - page 13
    • High drug spending is a visible cost containment target in the Japanese healthcare system - page 14
  • An overview of the Japanese healthcare system - page 17
    • Public healthcare insurance schemes provide the majority of Japanese healthcare - page 17
    • Hospitals remain the first port-of-call for patients seeking healthcare in Japan - page 18
    • There are a number of key stakeholders that impact healthcare provision in Japan - page 19
      • Governmental stakeholders are unified under the Ministry for Health, Labor and Welfare - page 19
      • Healthcare worker and industry stakeholders - page 21
  • Gaining a price and reimbursement level in Japan: the process and the key stakeholders that affect it - page 23
    • The process of gaining a price and reimbursement level - page 23
    • Drugs qualify for fairly generous premiums if they are innovative enough - page 24
    • A wide range of premiums are available for innovative drugs, and it is slowly getting easier to meet these criteria - page 24
    • A number of healthcare stakeholders impact government P&R strategy and healthcare provision - page 26
      • The DPO and Chuikyo are the key governmental stakeholders shaping P&R - page 26
      • The influence of healthcare stakeholders in shaping healthcare reform and P&R implementation is varied - page 26
• CHAPTER 3 THE PRICING AND REIMBURSEMENT ENVIRONMENT IN JAPAN - page 28
  • Key reforms impacting the P&R environment - page 29
  • Biennial price cuts and patient co-payment have been the dominant P&R cost-containment tools in Japan - page 30
    • Biennial price cuts have historically had the greatest impact in restricting pharmaceutical expenditure - page 31
      • Over the past decade, the R zone has fallen, making price cuts more punitive - page 31
      • In addition to standard price cuts, extraordinary price cuts and long-listed drug price cuts also impact drugs - page 32
    • Patient co-payment is one of the most effective ways to control patient spending in Japan - page 33
    • PE analysis also plays a role in P&R in Japan, but on a more informal basis than in European markets like the UK - page 34
  • Increased DTC, the greater adoption of a prospective payment system, and increased generic uptake are all set to impact drug price following launch - page 35
    • Pharmaceutical companies exploit loopholes in advertising restrictions to capitalize on DTC and physician promotion - page 35
    • The adoption of the DRG-like diagnosis procedure combination (DPC) reimbursement system has met strong opposition but it may help to cut costs and reduce ALOS - page 36
    • There is a strong drive to increase generic uptake in Japan to help contain costs - page 37
      • Generic prescription in Japan is driven primarily on price - page 38
      • Despite cost savings available with generics, a range of factors have restricted generic uptake in Japan - page 39
      • Increased patient and physician awareness of generic drugs, greater patient participation in health management, and increased generic substitution are all helping to counteract the significant restrictors to generic uptake - page 40
      • The future is bright for generic uptake in Japan although there is still significant patient and physician resistance to overcome - page 41
    • Government use of an OTC switching category to transfer cost to patients is not effective in Japan because of the risk-averse nature of healthcare provision - page 42
    • Japanese drugs companies do not have to contend with parallel importation - page 43
• CHAPTER 4 KEY MACRO TRENDS INDIRECTLY IMPACTING P&R IN JAPAN - page 44
  • Healthcare costs are being driven up by a range of factors, even though drug prices appear to be falling - page 45
    • Long patient hospital stays are a significant problem in Japan and is becoming an increasingly visible focus for cost containment - page 46
    • The failure of healthcare providers to price services differentially together with financial incentives to provide outpatient care exacerbates patient selection of in-patient care as the first port of call - page 47
    • Patients have historically had little incentive to be cost-conscious - page 48
    • Physicians are under attack and have little incentive to prescribe cost-consciously - page 48
    • The wide variety of health insurance schemes has done little to help contain costs - page 49
    • Historically high drug prices have been falling in the Japanese market - page 51
  • Innovation is required for a high level of reimbursement, yet there are problems capturing and adequately rewarding innovation - page 52
    • The level of innovation required for premiums is difficult to attain - page 52
    • There has historically been relatively low R&D investment in Japan - page 52
    • Innovative drugs may bypass the lengthy approval and P&R processes which have historically slowed down access to the Japanese market - page 54
    • Restructuring R&D strategy and capitalizing on governmental financial incentives will boost innovation - page 54
      • R&D restructuring may help to capture greater innovation - page 54
      • The Japanese government needs to provide greater financial incentives for R&D and make clinical trial progression, approval and P&R assessment easier to encourage foreign investment - page 55
  • Characteristics of Japanese society impact the healthcare service - page 56
  • The stagnant Japanese economy impacts on Japanese healthcare provision - page 57
• CHAPTER 5 THE FUTURE OF P&R IN JAPAN - page 58
  • There are a range of factors that directly impact P&R tool use and effectiveness - page 58
    • The government should aim at making it easier for drugs companies to demonstrate innovation - page 58
    • The price cut system is set to evolve - page 58
    • Generic uptake is set to be strongly boosted - page 59
    • The number of drug types receiving high reimbursement levels is set to change - page 60
    • Reference pricing is set to become more restrictive - page 60
  • A range of factors that shape healthcare provision will also indirectly impact P&R - page 60
• CHAPTER 6 BIBLIOGRAPHY - page 62
  • Publications and online articles - page 62
  • Datamonitor resources - page 63
• CHAPTER 7 GLOSSARY - page 64
  • Glossary of terms - page 64


• List of Tables
• Table 1: There are a range of premiums for new drugs which help boost drug price and reward innovation - page 25


• List of Figures
• Figure 1: A range of factors will shape the Japanese healthcare system in the future - page 6
• Figure 2: Healthcare spending as a proportion of GDP is below the seven major market average in Japan - page 13
• Figure 3: Japan has historically spent a high percentage of healthcare spending on pharmaceuticals, 1980-2000 - page 15
• Figure 4: Japan's total healthcare expenditure as a percentage of GDP is not rising strongly, 1980-2003 - page 16
• Figure 5: A wide range of bodies and groups impact healthcare provision in Japan - page 19
• Figure 6: From a healthcare and P&R perspective, there are five key bureaus in the MHLW - page 20
• Figure 7: Reforms since 1997 have focused on a range of factors, most significantly drug prices, co-payment and medical fees - page 30
• Figure 8: Higher biennial price cuts and a reduced R Zone percentage are increasingly punitive for drugs companies, 1992-2006 - page 32
• Figure 9: There are more disincentives than incentives for generic prescription in Japan - page 38
• Figure 10: There are a number of factors increasing the cost of Japanese healthcare provision - page 46
• Figure 11: There are a range of different healthcare schemes, depending on the characteristics of the person being covered - page 50
• Figure 12: The top-13 Japanese pharma/biotech companies have had a lower R&D investment as a percentage of revenues compared to the top-38 Western pharma/biotech companies, 1999-2005 - page 53

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