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JAPAN "SPECIAL TREATMENT MATERIALS" BRAND-BASED REIMBURSEMENT LEVELS

This article was originally published in The Gray Sheet

Executive Summary

JAPAN "SPECIAL TREATMENT MATERIALS" BRAND-BASED REIMBURSEMENT LEVELS would be set for certain devices under a recent Japanese Ministry of Health and Welfare proposal. Representatives from the MHW stated at a July 26 meeting in Tokyo that the reimbursement system for special treatment materials would allow for different payment levels for different brands of a device where deemed appropriate, according to U.S. industry observers who attended the meeting. For most devices, the policy would set prices based on device function. Japan began developing a new STM reimbursement system in late 1992 and is expected to have payment levels established for some of the devices by April 1994. The "special treatment materials" category covers roughly 50 devices, including pacemakers, prosthetic heart valves, artificial joints, catheters and dialyzers. Pacemakers would not be affected by the new reimbursement scheme because they are covered under a separate 1992 U.S./Japan pact. The MHW position at least partially responds to U.S. concerns over a pricing scheme based on device function. The Health Industry Manufacturers Association, in a July 15 letter to the Japanese health agency, urged adherence to "the principles of a by-brand system which recognize that products with different features and/or levels of performance should be provided different levels of reimbursement." Such an approach, HIMA said, "encourages the development and provision of high-quality products for use by Japanese doctors and patients." In addition to HIMA, U.S. government officials raised concerns earlier this year over Japan's plans to create a special treatment materials reimbursement system based on device function rather than brand ("The Gray Sheet" May 10, I&W-9). Japan's Ministry of Health and Welfare is meeting with U.S. industry reps Aug. 9 to further define its plans for special treatment materials reimbursement. The meeting also will give U.S. industry a chance to respond to the MHW reimbursement proposal. In addition to by-function pricing, other U.S. industry concerns with Japan's development of a new special treatment materials reimbursement policy will likely be discussed at the Aug. 9 meeting, according to HIMA. The industry group, in recent comments on the reimbursement proposal, raises the concern that Japan will establish initial prices "on the basis of a weighted average, as opposed to the list price" of a device. Such a move would be "bad public policy to apply to highly differentiated health care products, because it is blind to [the] relative cost effectiveness of specific products, some of which also have higher initial prices," HIMA contends. HIMA also voices opposition to "the inclusion of relatively 'inexpensive' items in the integrated technical service charge." The practice "amounts to the practical equivalent of removing the product from the reimbursement system entirely," HIMA states. In its July 15 letter to MHW, HIMA points out that the U.S. and Japan recently concluded a "framework" agreement under which Japan will increase imports of medical technology and other "priority" products in 1994 ("The Gray Sheet" July 12, p. 5). "One of the key purposes of the agreement is to improve the environment for U.S. medical technology companies interested in doing business in Japan," HIMA remarks, adding that MHW "has an excellent opportunity to demonstrate Japan's sincerity regarding this new agreement...by establishing an [special treatment material] system which rewards companies that develop high quality products."

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