Asia’s growing healthcare needs and aging populations offer a significant opportunity for medical device manufacturers from around the world. However, market access to the biggest economies in Asia – China, Korea, and Japan – usually entails navigating complicated and rapidly changing reimbursement frameworks. Knowledge about how these countries assess, value, and pay for medical technology is critical for business success.
China: Reimbursement Under Increasing Cost Control Pressure
China’s medical device reimbursement structure is influenced by a multi-layer but centralized model of governance at the national and provincial governments. The responsible entities are the National Healthcare Security Administration (NHSA), National Health Commission (NHC), National Development and Reform Commission (NDRC), and their provincial and municipal counterparts.
The central pillar of China’s payment system is the catalogue of medical services, which regulates the costs of treatment and diagnostic services. It is the foundation on which public medical institutions, the majority of which are owned by the state, are funded and how their service offerings are determined.
Reimbursement for an innovative medical device in China is notoriously slow. The process usually starts in a hospital, where a department needs to justify the use of the new device before its internal pricing committee. After getting approved internally, the hospital petitions for reimbursement with the local medical insurance bureau. If it gets approved, the product is tested in hospitals for one to two years without being reimbursed to assess its performance. Only by having demonstrated clinical and cost-effectiveness does a device stand the chance of provincial reimbursement.
To offset the rapid increase in medical expenditures, the Chinese government has adopted various measures to contain costs. These include the application of Diagnosis-Related Groups (DRGs) and Diagnostic Intervention Packets (DIPs), which categorize cases and assign fixed reimbursement levels. Volume-Based Procurement (VBP) has also been extensively applied, in which the government offers significantly lower prices for guaranteed quantities of purchases. The government has also started unbundling costly medical consumables from bundled procedure fees.
These policies have had a dramatic effect on China’s medical device industry. Coronary stent and joint implant costs, for instance, have decreased by as much as 90% in recent VBP cycles. For multinational companies, this means price erosion is a continuous threat, particularly for commodity products.
Although China is the world’s second-largest market for medical devices, constraints related to reimbursement restrict access even after regulatory approval has been obtained. In addition to price pressure, companies must also overcome challenges in securing hospital acceptance. Groundbreaking or demonstrably better products may get more favorable treatment since they can avoid VBP or receive temporary exemptions.
Korea: A Mixed System with a Strong Role for Cost-Effectiveness
South Korea has a single-payer, universal health insurance system overseen by National Health Insurance Service (NHIS). The scheme insures more than 97% of the population to date in 2019, with the rest being covered by medical subsidies. Reimbursement eligibility and new technologies are assessed by the Health Insurance Review and Assessment Service (HIRA).
Not all devices qualify for separate reimbursement. Implantable or disposable items like stents, pacemakers, sutures, and orthopedic implants are usually eligible. Other devices are either sold directly at market prices, often with no insurance coverage, or bundled into service fees.
Manufacturers must submit reimbursement requests to HIRA within 30 days of product approval. The reimbursement review process typically takes six months. Devices are compared to predicate products, and most are priced at the lowest price of comparable products, unless the product can show significant clinical advantages. It is very rare for a new price category to be established, and even if it is created, this will generally not be equivalent to U.S. or EU price levels. This has been a point of contention in the US-Korea trade relationship.
Korea’s focus on cost competitiveness can be a challenge to new products. Even with innovation, the price is determined relative to lower-cost products. In case of unreimbursed devices, hospitals determine the price independently. Yet this type of pricing discretion is only practical for devices with very high demand and/or limited competition.
However, there have been some positive developments recently. Korea is moving ahead of other countries to introduce digital therapeutics (DTx) into its domestic healthcare system, eyeing the increasing role software-based interventions will have in preventing and treating disease. The government issued guidelines last year for reviewing and approving DTx technologies, and HIRA has now initiated an assessment of how to set reimbursement levels for such innovation. This initiative aims to incorporate DTx into the national insurance framework.
Overall, success in the Korean market can be achieved through a balance between strict cost-containment expectations and showing strong clinical advantages over existing products.
Japan: Sophisticated, Regulated, and Strategically Important
The world’s third-largest medical device market, Japan has a universal health insurance system, and nearly all medical devices used in clinical practice must be reimbursed 100%. The use of non-reimbursed medical devices is basically prohibited, making reimbursement an essential component of Japanese medical device market entry.
Reimbursement policy is regulated by the Ministry of Health, Labour and Welfare (MHLW) and its advisory body, the Central Social Insurance Medical Council (Chuikyo). Manufacturers will also need to collaborate with the Pharmaceuticals and Medical Devices Agency (PMDA) on registration, which can be done in parallel with reimbursement strategy planning.
Reimbursement will follow approval by regulatory bodies within 3–6 months. Companies are, however, strongly recommended to consult with the MHLW or PMDA early since reimbursement arguments need to be incorporated in the registration dossier. Accurate selection of the Japan Medical Device Nomenclature (JMDN) code is important, as inappropriate selection can undermine reimbursement classification and pricing in the future.
For new or premium products, clinical benefits need to be demonstrated. This may mean demonstrating improved outcomes, new treatment function, or enhanced mechanisms of action. Using Japanese KOL clinical experts or getting the appropriate society to support your arguments for higher reimbursement or obtaining changes to clinical practice guidelines can help strengthen your pricing position.
Japan has two modes of reimbursement. The comparison method is used in the majority of instances. The device is compared to an equivalent device within a functional category, and prices are determined from a standard material fee. 10–15% premiums can be awarded for innovation or first-in-class products. Cost accounting can be employed where no equivalent products are available. Then, prices are determined by the cost of production or the imported price plus other expenses.
Although this dual system allows some room for negotiation, most products will fall under the comparison method, making category assignment and premium justification key to profitability.
Conclusion: Navigating Reimbursement Across Asia’s Top Markets
Despite geographic proximity, China, Korea, and Japan have substantially different reimbursement systems that reflect their unique healthcare philosophies and cost concerns.
China is the second largest market in the world, but it is aggressively cutting prices through mechanisms like VBP, DRGs, and DIPs. Even with product approval, reimbursement is not guaranteed, and usage without reimbursement for one to two years is common before final pricing decisions are made.
Korea emphasizes predicates-based pricing and cost-effectiveness, making it difficult for new or expensive products to obtain favorable reimbursement unless supported by strong comparative data.
In some ways, Japan has the strictest but most predictable reimbursement frameworks among these three countries. Full reimbursement of medical devices is mandatory for patient use, and strategic planning around JMDN codes, clinical data, and early engagement with health authorities is essential.
For foreign medical device manufacturers, reimbursement success in Asia can be achieved through early planning, solid evidence of clinical value, and adaptability to local cost-control mechanisms.
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.