Recent Changes in Japan Medical Device Reimbursement

Almost all medical device purchasing in Japan is closely linked to the levels the national health insurance system will reimburse the devices at. In an effort to reduce healthcare spending, the government recently reduced the reimbursement prices of a majority of functional categories of devices. Most reductions were between 5% and 25%. The larger cuts (over 15%) will come into full implementation in April 2007.

The Japanese system has four classification types: A, B, C, and F. Class A devices are reimbursed only through technical fees; the government pays nothing for the device itself. Class B devices are reimbursed for the cost of the device as well, but fixed on the basis of the device’s functional category. Class C devices, on the other hand, have new functionality or added value compared to Class B devices, and can apply for new reimbursement levels based on costs of production and other factors. Finally, Class F devices are innovative and particularly risky, such that they must be reimbursed in a novel fashion.

Although the Class C process can reimburse devices at higher levels than existing related products, more documentation is needed to obtain this status. It also takes significantly longer to receive a decision, four to five months compared with about one month for Classes A and B. From April 2006, however, Class C reimbursement decisions were made more frequent, moving from an annual basis to a quarterly basis. This may make Class C a more attractive option for manufacturers of innovative devices.

The potential of Class C is limited somewhat by the Foreign Reference Price system, which has been in place for four years now despite foreign protests. Under this system, reimbursement prices cannot exceed 150% of average prices in the US, the UK, France, and Germany. Exceeding this limit may sometimes be allowed on the argument that use of the device can decrease overall spending on healthcare.