Medical device trade association AdvaMed is pushing for changes to medical device reimbursement in Japan, the world's second-largest med tech market, worth more than $30 billion annually. In a recent interview, AdvaMed Vice President Philip Agress described the current government payment system as "flawed and inappropriate."
Under the foreign average pricing system, the government adjusts the price it will pay for devices based on a survey of charges in the U.S., U.K., France, Germany and Australia. The payment method does not apply to imaging devices or in vitro diagnostics.
"We consider it a highly flawed and inappropriate system because in Japan the cost of business is much higher. There are a number of factors that make it the most expensive market in which to do business," Agress said, citing the country's complex distribution system and high overhead costs.
AdvaMed has been requesting that Japan eliminate the foreign average pricing system for years, Agress said, but has been told by Japanese officials that political pressure makes the system "difficult, which is the Japanese world for impossible," to eliminate.
Like other developed countries with aging populations, Japan is under pressure to contain rising healthcare costs. It recently implemented an increase in the national sales tax to help finance the government's high debt burden.
"What Japan wants to do, and is doing, is basing its decisions not on the costs of doing business in Japan, but on the costs of other markets that are cheaper than Japan," Agress said.
He's also concerned about plans to readjust reimbursement rates every year instead of every two years, as is currently the case. And in 2013, the Millennium Research Group said market research group said the rates for cardiology devices are only going down "in an effort to align Japanese med tech prices with the global market."
But the federal Japan External Trade Organization says that it recognizes the higher costs of doing business in Japan, and adjustments only occur if the price being charged in the county exceeds the average price in the 5 reference countries by a factor of 1.5.
"Although there are some products for which the combination of a smaller market size and high regulatory costs makes entry into Japan economically infeasible, in most cases, the reimbursement rate offered in Japan is attractive and allows manufacturers to operate with attractive margins," the trade organization says on its website.
Japan has long been considered to have one of the toughest regulatory regimes in the world, rivaling that of the U.S., but it now implementing an overhaul to the way it oversees the device sector--to the delight of AdvaMed and other industry players.
"They're trying to attract more innovative products because some of them are not on the market in Japan. Streamlining the regulatory system is a positive step in that direction," Agress said, "but companies will not take advantage of that positive step unless Japan also addresses the reimbursement issues."