In the past, medical device reimbursement in Japan has been a function of – 1. Functional Categories, 2. Foreign Reference Pricing (FRP) and 3. Cost accounting. While functional category and cost accounting are still very important for reimbursement, foreign reference pricing has taken a back seat. Up until the last few years, FRP was a function of the weighted average of the 5 reference countries, including the US, UK, France, Germany, and Australia. Several years ago, however, the MHLW initiated a number of new FRP formulas. For example, if the product price in one of the 5 comparison countries is more than 2.5 times the product price in the lowest FRP countries, the highest price will be discarded, and the FRP price will be determined based on the 4 remaining countries. Today, foreign reference pricing normally closely follows EU pricing and not the high pricing often found in the US and Australia. Recently, we have found that Chuikyo (Japan’s reimbursement agency) often now looks at FRP as less important than before, and FRP may be used to further reduce pricing in Japan.
The key for new or unique device products to get a higher reimbursement in Japan comes down to the clinical efficacy/superiority of the device. There are two methods used for increased reimbursement in Japan – 1. The similar functional comparison method, and 2. the cost accounting method. For the similar functional comparison method, there is a “correction surcharge” including a usefulness surcharge, improvement surcharge, marketability surcharge, etc. For the cost accounting method, there are 2 ways to look at this. First, all the costs to make the device can be added together, or alternatively, second, start with the import price and add selling expenses, general and administrative expenses, operating profit, distribution expenses, and any taxes. Successful launch of innovative device products in Japan requires a careful look at likely reimbursement.
Written by: Ames Gross – President and Founder, Pacific Bridge Medical (PBM)
Mr. Gross founded PBM in 1988 and has helped hundreds of medical companies with regulatory and business development issues in Asia. He is recognized nationally and internationally as a leader in the Asian medical markets. Mr. Gross has a BA degree, Phi Beta Kappa, from the University of Pennsylvania and an MBA from Columbia University.