Japan to Roll Out Cost-Effectiveness Assessment Scheme in April

February 21, 2019
Chuikyo Approves Outline of CEA Scheme on Jan. 20
Chuikyo Approves Outline of CEA Scheme on Jan. 20

Japan will go ahead with the introduction of a cost-effectiveness assessment (CEA) scheme for drugs and medical devices in April as an all-important reimbursement policy panel approved the plan on February 20 despite the industry’s criticism over its precarious designs.

The Central Social Insurance Medical Council, better known as Chuikyo, adopted the final draft of the Ministry of Health, Labor and Welfare’s (MHLW) CEA proposal at the day’s general meeting, giving shape to what has been discussed over the past seven years since the panel set up a subcommittee dedicated to CEAs in May 2012.

The paper presented on the day added one section regarding future discussions to the MHLW’s initial draft unveiled on January 23, with the regulator now vowing to “accumulate examples so as to enhance (CEA) infrastructures.” In the new section, the ministry said: “In light of the purpose of CEAs to conduct reasonable pricing, the impact of health finances, and transparency in price setting - aiming for a more efficient and transparent system, and referring to overseas examples - discussions will be held on enhanced selection criteria, analysis processes, appraisals, price adjustment methods as well as the application (of CEA results) upon listing.” The ministry also said that it will further deliberate on additional consideration factors to be taken into account in the appraisal and price adjustment processes, as well as their scope and how to evaluate them, based on the results of analyses to be submitted by companies and how similar systems are being operated in other countries.

The pharma industry has been lashing out at the MHLW’s overreliance on the ICER (incremental cost-effectiveness ratio; costs per QALY gained), contending that this measure fails to capture various benefits brought by their products to patients, society, and the economy. The Pharmaceutical Research and Manufacturers of America (PhRMA) and the European Federation of Pharmaceutical Industries and Associations (EFPIA) have jointly proposed a point-based appraisal framework designed to comprehensively evaluate the ICER and non-ICER factors, showing their readiness for dialogue. With no changes made to the original draft with respect to the use of the ICER, the handling of these additional benefits are expected to be a subject of future discussion following the scheme’s official launch as Chuikyo members show more and more openness towards the idea of embracing non-ICER factors.

Look at Overseas Examples

At the day’s meeting, payer rep Toshikazu Yoshimori, director of the Japan Health Insurance Association (Kyokai Kenpo), pointed out, “The system is not yet complete. We are finally at the starting line. It’s important to hold constructive discussions to create a system that would earn respect from other countries by not only collecting examples in Japan but by keeping tabs on initiatives overseas, while also lending an ear to industry stakeholders.”

Kichiro Matsumoto, executive board member of the Japan Medical Association (JMA), also said that continued discussions should be held by referring to other countries’ efforts. Meanwhile, he supported the MHLW proposal on the use of the CEA scheme being limited to price adjustments, and its positioning as a complementary tool to existing pricing rules.

Price Reduction Limit Set at 10-15%

While the final proposal had almost no changes from the initial draft, the latest paper newly spelled out a plan to set the CEA-based price reduction limit at 10-15% of the pre-adjustment NHI price depending on the rate of premiums granted at launch.

More specifically, the reduction limit will be 10% of the pre-adjustment NHI price for products granted 25% or less premiums, and 15% of the pre-adjustment NHI price for those with premiums of 100% or more (the maximum launch premium rate is 120%). For products with premiums between 25% and 100%, the reduction limit will be set at between 10-15% of the pre-adjustment NHI price in proportion to their premium rates: {10 + (premium rate – 25) / 15}%. For products priced by the cost-based method, the “premium rate” in this formula represents premium rates before any reduction is made based on their manufacturing cost-disclosure ratios.

Under the MHLW’s pilot CEA program, the maximum reduction rate was set on the basis of the premium, at 90%, but there was no reduction limit based on the total NHI price. In the January 23 draft, the ministry therefore cited 1) 10%, 2) 15%, and 3) a combination of 10% and 15% as a possible reduction limit in terms of the total NHI price, calling for the panel’s decision on which should be adopted. At the latest meeting, no objection was made by panel members regarding the 10%-15% plan.

Another rule to set the reduction limit at the minimum ICER threshold of 5 million yen/QALY (7.5 million yen/QALY for cancer drugs and other products that need special consideration), which was already included in the initial draft, also went through with no changes.

The MHLW plans to issue necessary notifications by the end of March to prepare for the full CEA rollout in April, along with updated CEA analysis guidelines, a draft for which was also approved at the latest Chuikyo meeting.

CEA Scheme Harsh on Industry: JPMA

On the heels of the Chuikyo gathering, Joji Nakayama, president of the Japan Pharmaceutical Manufacturers Association (JPMA), issued a statement saying that the CEA scheme agreed upon is “harsh” on the industry in terms of continuing the R&D and stable supply of drugs.

On product selection criteria, Mr Nakayama cautioned against a plan to include even products that did not earn launch premiums if they were priced by the cost-based method and had a manufacturing cost disclosure ratio below 50%. “We will keep a close eye (on this) so that it would not stifle innovation,” he said. The JPMA, along with foreign peers, has been demanding that the application of the CEA scheme be confined to premium-granted products.

On price adjustments, Mr Nakayama said that the maximum premium reduction rate of 90% is “an excessive reduction given the (CEA) scheme’s consistency with drug pricing rules and its purpose of complementing the drug pricing system.” He then called for revisiting the current premium granting system upon initial pricing.

On appraisals, the JPMA chief reiterated that the system is overly reliant on the ICER, and it is not a sufficient yardstick to evaluate the true value of medicines. While noting that the ICER cannot capture benefits related to long-term care and productivity losses, among other values, he prodded regulators to continue assessing data submitted by companies and accumulate them to inform future deliberations on how to gauge additional factors.

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