MHW Urges Improvement in University Hospitals’ Financial Standing
Information for this article provided by Asia Pulse, May 18, 1999.
Japan’s Management and Coordination Agency recently called on the Ministry of Education to take measures to improve the financial standing of hospitals associated with national universities. Most of the hospitals, which are supervised by the university, operate at a deficit and are increasingly resorting to government loans to make up for revenue shortfalls. An agency survey of 27 of the 60 hospitals tied to 42 state universities between December 1997 and May 1999 showed revenues for these hospitals accounted for only 84.7% of expenditures on average in fiscal 1998, down 2.8 points from a year earlier.
One area the Management and Coordination Agency has decided to target is in the hospitals’ accounting procedures. University hospitals in Japan do not prepare financial statements, such as profit and loss statements and balance sheets, which are required of national hospitals and those affiliated with private universities. The Agency has therefore called on university hospitals to adopt such accounting procedures as a first step towards restoring their financial health.
Japan Agrees to Remove Barriers to Foreign Drug, Device Makers
Information for this article provided by Dow Jones Online News, May 3, 1999.
Japan has agreed to further open its medical device and pharmaceutical markets, perhaps in response to the suit filed by the U.S.-based Health Industry Manufacturers Association in April (see following article). As part of this new effort, Japan is creating a new product approval process and is giving foreign companies “meaningful input” into regulatory reforms.
Foreign manufacturers of drugs and medical equipment have long been restricted in Japan by a lengthy approval process that delays the introduction of new products. Foreign companies have also complained that the Japanese government attempts to regulate some product prices, and as government price controls have become stronger, many foreign companies have also set up their own direct distribution channels in Japan as a way to increase their profits — direct sales by foreign manufacturers, for example, now account for more than 25% of the pharmaceutical market in Japan, the second-largest share in the world. As the market opens, analysts predict between 35-50% growth in the pharmaceutical industry alone for the next several years. This forecast is bad news for Japanese drug makers, who have already been hurt by the government’s ongoing efforts to cut medical expenditures and drug prices.
U.S. Medical Equipment Makers Seek Trade Action Against Japan
Information for this article was provided by Dow Jones Online News, April 20, 1999.
Citing Japan’s failure to honor a deregulation agreement filed in 1998, a group of U.S. medical device manufacturers recently filed suit against the country under the Super 301 clause of U.S. trade law. According to the manufacturers, who are represented by the U.S.-based Health Industry Manufacturers Association (HIMA), the Japanese government has unfairly controlled the product pricing of U.S. companies in Japan. For example, HIMA cites that the Japanese government has pressed U.S. manufacturers to separate service and product pricing for products in which the U.S. has a technical edge over domestic producers (such as pacemakers). HIMA has also complained about the lengthy approval process for medical devices in Japan, which currently lasts about 18 months. Overall, compared to their worldwide average of 50%, U.S. medical equipment manufacturers currently maintain only 30% of the $20 billion Japanese medical device market.
New Public Nursing Insurance System
Information for this article was provided by AP Worldstream, April 15, 1999.
Due to the unprecedented speed at which Japan’s population is aging, the Japanese government will introduce a new nursing care insurance system by April 2000. To date, insufficient nursing care services have created an immense financial burden for Japan’s National Health Insurance (NHI) system, as the elderly (which will reach 21% of Japan’s population by the year 2010) have resorted to long-term, medically unnecessary hospitalization. The new nursing care system, which is expected to save NHI about $10.4 billion, separates nursing services from medical care and introduces a separate social insurance scheme for the former. Instead of allowing the elderly to be hospitalized, most will either be brought home or placed in nursing homes. According to the MHW’s program model, those needing the least care will receive visits from nurses, home help, and day-care service once or twice a week; those in most need of nursing care will be looked after every day. Hospitals and wards, however, will be able to choose in April 2000 whether to accept patients under existing medical insurance programs or the new nursing insurance system.
There are some problems with the new system. The MHW is relying on local governments to boost their staff levels and facilities to provide the additional nursing services, and many elderly are therefore at risk of receiving inadequate care if their prefecture cannot afford to meet the new system’s standards. Many families are also reluctant to take back relatives that were hospitalized under the previous system, particularly since only special homes, not regular homes, will be covered by the new insurance. And even in nursing care facilities, insurance given is proportionate to the seriousness of the patients’ conditions, and thus the milder a resident’s condition is, the less money a special home receives from nursing insurance. As a result, such residents are encouraged by these homes to move out.
The new system will collect obligatory insurance contributions from a broad sector of the population (all persons aged 40 and older) and will be 100% reliant on social insurance contributions.
Controls Called to Halt DNA Test Abuse
Information for this article was provided by Asahi Shimbun, April 15, 1999.
The Medico-Legal Society of Japan, a leading Japanese medical ethics group, recently issued a set of draft guidelines to regulate the fast-growing private sector business of using DNA tests to establish blood relationships between parents and children. The Society issued the guidelines based on concerns that the confidentiality of participants under current testing procedures is at risk.
Currently, private research companies conduct DNA tests on samples of hair, nails, or saliva that are sent by mail, not only compromising test accuracy but also allowing a third party to find out a person’s (and his or her relatives’) hereditary information. To prevent such information from being intercepted, the Society has proposed that approval be obtained from the sample providers for the tests, and that experts be present and photographs taken as evidence when such samples are taken from individuals. A detailed, step-by-step procedure for private companies conducting DNA tests will be issued by the Society sometime in June.
Since 1997, at least 11 companies conducting DNA tests have been established in Japan, 10 of which accept samples by mail.
Hospitals Still Retain Important Role in Billing, Reimbursing, and Controlling Medical Equipment
Information for this article provided by Pacific Bridge, Inc., April 15, 1999.
While the developing Japanese home care market has taken the outward appearance of the U.S. home health care model, there is a key difference relating to health insurance coverage and reimbursement. The current National Health Insurance (NHI) scheme, along with the anticipated home care insurance (to be implemented in 2000), will account for the majority of coverage for services and therapy equipment used in the home environment. Central to this is that all billing and reimbursement will be executed through the hospital and all equipment used for home health care will be controlled from the hospital.
Currently, for example, a patient who will use an oxygen concentrator at home (known as home oxygen therapy) must first be examined and “qualified” at a hospital by a physician. Upon the physician’s instructions, an order is sent to a medical equipment supplier who will then deliver the oxygen concentrator to the patient’s home. Once a month, the patient must be reexamined at the hospital to re-qualify for coverage, and will pay a deductible self-pay portion at that time. Every month, the equipment supplier will bill the hospital for the rental of the oxygen concentrator being used at the patient’s home. And finally, every month, the hospital will file a claim with the Health Insurance Agency for the oxygen concentrator and the doctor’s examination fee (a.k.a guidance fee).
Thus, when the equipment is used in the “home health care” environment, the control, billing and administration is accomplished through the hospital. The implication for an equipment vendor/supplier is that the patient has little choice of the therapy equipment brand or model. The “selling” effort must be targeted at the hospital to the key decision-maker, which will either be the physician or head nurse who will select the equipment to be rented from the supplier.
In case no health insurance coverage is available for the medical equipment, the decision-making process will usually start at the hospital through the nursing department or the doctor during the patient’s hospital stay. Due to the lack of discharge planning department in most Japanese hospitals, the “discharge consultation” will occur at the bedside or directly with the patient’s family. Should there be any need for equipment, the nurse will make recommendations and the patient can then be directed to either a Social Welfare showroom or one operated by a city or prefecture government. At such location, information on various the brands and models, as well as a supplier, will be provided. The patient or her/his family would then contact the supplier directly and have the product delivered to the home or would be advised as to where it can be purchased.
Japanese Medical Equipment Probed for Y2K Bug
Information for this article was provided by Asahi Shimbun, April 3, 1999.
According to the MHW, the millenium computer bug could put millions of lives at risk by shutting down medical equipment and tripping radiation equipment into emitting harmful rays. So far, the Ministry has targeted 934 types of medical machinery that could be affected and potentially damaged by the bug, and adjustments to medical equipment are already underway. In late December 1998, the ministry surveyed 3,310 manufacturers and importers of medical equipment to investigate how well they were dealing with the Y2K issue. The survey found that almost all of the 2,978 firms who responded to the survey had begun to tackle the problem, but 31 of the 306 firms dealing in respirators said that they had no plans to deal with the Y2K issue. While the MHW does not expect the Y2K bug to cause major difficulties in the industry, it is still trying to make sure that every company takes appropriate measures to prevent any potential accidents.
Oral Contraceptive for Women Rejected Again by MHW
Information for this article was provided by Houston Chronicle, March 7, 1999.
Despite protests from various women’s groups and the Japanese Family Planning Association, the MHW once again rejected an appeal to approve the birth control pill in Japan — although the MHW did state that it had “concluded its evaluation” of the pill’s safety and suggested that approval could come later this year. Pharmaceutical companies have been waiting nine years to sell oral contraceptives for birth control purposes in Japan. Currently, low-dose contraceptives are banned, while high- and medium-dose pills may only be prescribed for menstrual disorders. Along with concerns that the pill could depress Japan’s already-low birthrate, many in the health industry suspect that doctors don’t want oral contraceptives to be approved for women because it would cut into their highly profitable business of performing abortions.
The government has faced increased pressure from domestic and international health organizations in recent years to lift its ban on oral contraceptives, particularly after its speedy approval of Viagra in January 1999.
PhRMA Calls for Japanese Action Plan on Pharmaceutical Deregulation
Information for this article was provided by Comline/Japan Chemical Week, March 4, 1999.
In response to Japan’s sluggish implementation of its 1998 initiative to deregulate the medical industry, Ulrich Taglieber (Vice President of Merck) recently proposed that the MHW map out an “action plan” in more concrete terms in order to achieve some of the industry’s deregulation goals. Pointing specifically to the drug industry’s promise to cut approval times from 18 months to 12 months by April 2000, Taglieber suggested that the action plan should include specific provisions to increase personnel for drug evaluation and widen acceptance of foreign clinical test data. Many U.S. and European pharmaceutical companies have recently become frustrated with Japan’s slow implementation of promised medical industry reforms, which is still preventing over 70% of breakthrough drugs approved in the U.S. and Europe between 1990 and 1997 from being available in Japan today.
Reclassified “Quasi-Drugs” Now Available in Non-Pharmacy Outlets
Information for this article was provided by Marketletter, March 1, 1999.
Due to a recent decision by the MHW, over 700 over-the-counter (OTC) drugs were reclassified as “quasi-drugs” to make them available for sale in supermarkets, convenience stores and other non-pharmacy outlets. The reclassified drugs came from 150 categories, the largest being tonics (from which 200 products, excluding those with stimulants, were reclassified). Digestive drugs, vitamins, sterilizing treatments, medicated drops and ointments were among the other reclassified products, although most had to first be reformulated at lower dosages and supplied with modified instructions for use. Also, despite demands to deregulate from retailers and consumers, the MHW did not reclassify cold medicines and painkillers as “quasi-drugs” since they work on the central nervous system and have strong side effects.
Ministry to Ease Drug-Testing Rule
Information for this article provided by Asahi Shimbun, February 24, 1999.
In an attempt to lighten the regulatory burden of pharmaceutical companies, the MHW recently decided to eliminate clinical testing for additional treatments of certain drugs that have already been approved in Japan. The financial load of clinical testing has long discouraged the development of drugs in Japan, especially for drugs used to treat extremely rare diseases.
As a result of this automatic approval for additional treatments, the MHW also removed its restrictions on allowing patients who use these treatments to be covered under medical insurance and claim compensation for damages from the drugs’ aftereffects.
To date, there have been 408 requests for approval of additional drug treatments according to a ministry research team.
Japan Implements Liberalized Procurement Policy for Medical Products
Information for this article was provided by the U.S. Department of Commerce, February 23, 1999.
As of February 17, 1999, local governments are authorized to use overall greatest value methodology (OGVM) when procuring medical products. OGVM allows the purchaser to procure products based on the best overall value for their performance and specification requirements, not simply on the initial cost of the products. Before this decision was made, OGVM was widely used by procuring agencies at the national level, but local governments were still obligated to use the lowest-bid methodology — thereby impeding the ability of more sophisticated, higher-priced foreign equipment to sell in this significant portion of the Japanese medical market. Since OGVM tends to be applied for advanced technology products, however, the new legislation will greatly benefit foreign companies offering advanced medical equipment such as MRIs, computed topography scanners (CTs), advanced diagnostic equipment, angiograph equipment and other innovative products with a high initial price.
The U.S. first raised the issue of authorizing OGVM at local levels in the U.S.-Japan MOSS Medical Device and Pharmaceutical meeting in September 1997. As a result of the Japanese government’s decision, U.S. manufacturers expect procurement of their medical products in Japan to increase over $100 million annually for the next few years.
Cost-Cutting Changes Health Delivery Setting in Japan
Information for this article is provided by Pacific Bridge, Inc., February 16, 1999.
The Japanese healthcare market has been undergoing major changes in the past three years regarding where and how patient care is being delivered. The impetus for these changes has been the country’s burgeoning healthcare costs — Japan’s per capita medical expenditure ranks seventh in the world, and national medical expenditures are expected to exceed $240 billion in 1999. Furthermore, private health insurance organizations will incur a deficit of at least $3.06 billion in 1999, mostly due to the increasing health expenditures incurred by Japan’s rapidly aging population.
The MHW’s cost cutting efforts include reducing Japan’s the length of patients’ annual hospital stays (one of the highest in the world at 44.2 days per person). For example, it is gradually reducing reimbursement rates under its National Health Insurance (NHI) system for hospital stays up to and in excess of 30 days, and is also emphasizing preventative treatments.
The MHW has also been emphasizing home health care for bedridden or elderly patients that do not necessarily need to be treated in a hospital. Under this system, the care providers are nurses who are assigned to home care nurse stations. These stations are physically still part of the hospital, but hospital beds and other treatment facilities are kept in patients’ homes. Although care services and medical supplies may be delivered in the patient’s home, the NHI billing, under which 80% of the population is covered must be billed through the hospital via the home care nursing station as well as Home Health Care Support Stations. The latter are managed by city governments and are essentially clinic-type environments.
PhRMA Criticizes Japan’s Reference Drug Price Policy
Information for this article was provided by Marketletter, January 25, 1999.
Recent recommendations by a Japanese government panel that Japan’s pharmaceutical industry adopt a fixed drug price/benefit standard have created concern among many U.S. manufacturers. In its proposal to the MHW, the subcommittee on Institutional Planning of Japan’s Medical and Insurance Welfare Council recommended that: 1) all drugs with comparable clinical efficacy be put in the same groups (based on pharmacological effects as a general rule); 2) each of these groups receive a benefit standard price based on the weighted average market price of all drugs in that group; 3) drug companies be allowed to set a fixed price (applicable nationwide) for each of their products at their own discretion; 4) drugs be supplied at the benefit standard price or fixed drug price, whichever is lower, under health insurance programs; and 5) patients be required to pay all costs above the benefit standard prices and certain percentages of the drug benefit prices or fixed drug prices, whichever is lower.
Many U.S. manufacturers have criticized this new proposal, pointing out that reference pricing often ends up penalizing innovative drugs while subsidizing older and sometimes less effective medicine. As a result, the Pharmaceutical Research and Manufacturers of America (PhRMA), a U.S.-based organization representing many American pharmaceutical manufacturers, recently submitted a proposal to the MHW recommending that a drug market price system be implemented instead of the Japanese-style reference price system described above. Recommendations in PhRMA’s proposal include that: 1) medical institutions be reimbursed at the price at which a drug is actually purchased in order to fill the gap between the market price and NHI (National Health Insurance) price for a drug; 2) patients’ recognition of the value of a drug be increased, patients pay an equivalent of a certain ratio of the market price, and the government begin structural reforms of other healthcare services; and 3) more information should be offered to the public regarding the effects and healthcare expenses of drugs that can be selected by a patient.
Debate on this issue is currently underway in the Diet, many members of which do recognize the drawbacks of a reference-based drug pricing system.
New Organization for Medical Instrument Dealers
Information for this article was provided by Comline/Japan Chemical Week, December 21, 1998.
In December 1998, the Japanese Association of Health Industry Distributors (JAHID) was established through support from the Japan Federation of Medical Devices Association. JAHID, the first nationwide Japanese organization for medical instrument dealers, comprises forty-four industry-related bodies and 294 medical instrument companies in Japan. The organization will deal with common problems facing the industry, such as the planned reform of the Japanese health insurance system, modernization of the country’s distribution system and international harmonization of medical device regulations.
Specifically, many of JAHID’s efforts in these areas will be achieved through reforming administrative processes between distributors and medical product manufacturers. For example, it will promote extensive use of a model written contract that the organization drafted last year, put in a common code commodities that distributors are handling in cooperation with producers in order to improve distributor efficiency, make proposals from the distributor’s viewpoint to set medical instrument prices covered by the Japanese health insurance system, and survey and collect managerial materials as well as build up a system to offer useful information to its member companies.
MHW Removes Ban on Discount Ads for Drugs
Information for this article was provided by Comline Biotechnology & Pharmaceuticals, December 9, 1998.
The Japanese government recently revoked a ban on discount drug advertisements (those advertising special prices for pharmaceuticals) that it had implemented as part of its new “fair advertising standard” for pharmaceuticals. The ban, which was the result of fears that discount ads undermine the position of drugs and harm public trust in the medication and manufacturer, was revoked after a new investigation by the Fair Trade Commission of Japan’s pharmacies and drugstores found that discount advertising was not a reflection of lower quality. Pharmacies and drugstores will be able to post both the original price and the discount as well as the percentage consumers will save, which could also generate more price competition if shoppers are looking for bargains.