Comparison of medical device reimbursement policy between Korea and Japan

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Comparison of medical device reimbursement policy between Korea and Japan, and future challenges for sustainable innovation, presented at the 4th AMCHAM Health Care Innovation Seminar, which is held in Seoul, Korea, on June 28, 2013.

Speaker: Bae, Sung Yoon (Professor, Inje University)

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Comparison of medical device reimbursement policy between Korea and Japan

  1. 1. Korea and Japan’s New Government Growth Strategy in the Medical Device Industry - Creating National Competitiveness and Sustainable Healthcare through Innovation Comparison of Medical Device Reimbursement Policy between Korea and Japan, and Future Challenges for Sustainable Innovation June 28, 2013 Bae, Sung Yoon PhD, MPH, MBA Assistant Professor of Healthcare Management
  2. 2.  Medical Device Reimbursement Policy in Korea  Medical Device Reimbursement Policy in Japan  Comparison of Korea and Japan  Future Challenges for Sustainable Innovation
  3. 3. Medical Device Reimbursement Policy in Korea
  4. 4. Inform the review result Working with NECA1) (Korea) for HTA Process Reimbursement application Notify Claim Premium Payment (Ceiling Price2)) Out-of-pocket payment Payment (Actual Transaction Price) Medical Device Company Medical service Product/service Provider Monetary flow Info/Service flow 1) 2) Patient National Evidence-based Healthcare Collaborating Agency Reimbursed at Actual Transaction Price (ATP) under published ceiling price.
  5. 5. Category Payment Example NHI-Covered • Co-payment •80% from Insurance and 20%(or 10%) patient’s out of pocket payment Implants, sutures, staplers, catheters, stents, etc. (Hip & Knee replacement devices, Spine fixation devices, etc.) NHI-Non-Covered • Listed, but prices are not controlled • 100% paid by patients Cosmetic and not essential lifesustaining products; Not costeffective items Bundled with Procedure Fee • Included in procedure fee • Cannot charge to patient Instruments, syringes, etc (Usually reusable) Separate Payment No Separate Payment
  6. 6.  18,043 medical products are listed as of 2012 • 15,927 items covered (88.3%), 1,731 not-covered (9.6%), 385 included in procedure fee (2.1%)  About 1,000 products are added to the list every year  35% of listed products are those without NHI claims history over the past two consecutive years Year Total Benefit Payment Medical Product Payment % of Medical Product Amount % Growth vs. Amount % Growth vs. (Billion KRW) Previous Year (Billion KRW) Previous Year 2006 28,558 15.2 1,218 45.8 4.27 2007 32,259 13.0 1,350 10.8 4.18 2008 35,036 8.6 1,523 12.8 4.34 2009 39,430 12.5 1,690 11.0 4.29 2010 43,657 10.7 1,972 16.7 4.52 2011 46,076 5.5 2,045 3.7 4.44 Source: HIRA, 2012
  7. 7. By KFDA Medical Device Regulatory Approval - Official lead time : 6~12 months Fast-Track Review Option Standard Lead Time : within 150 days By Company Reimbursement Request Submission - Within 30 days after KFDA approval Near-Parallel Review by KFDA and HIRA (for limited items only) Documents Review Under HIRA 2~3 months - Consult to experts & make preliminary decision Medical Device Expert Committee - Deliberation of reimbursement type & price (every month) Health Insurance Policy Deliberation Committee Under MOHW 1~2 months - Final deliberation (every month) Announcement by MOHW - Listing the items on the reimbursement schedule Independent Review - HIRA decision released upon the completion of HIRA review process (within 15 days). - Application made within 30 days after HIRA notice. - Independent review completed within 100 days, reported to HIRA within 7 days upon the completion of review.
  8. 8.  Applied to … Similar products as existing items on the reimbursement list upon company request.  Impact: Shortening 2~3months of HIRA staff review time  Limitation: Not applicable for New & Innovative products which usually take more than official lead time Reimbursement Review by HIRA Staff Regulatory Review by KFDA Official Regulatory Approval Submission of Regulatory Clearance Certificate by company Medical Device Expert Committee -Deliberation of reimbursement price and type Health Insurance Policy Deliberation Committee -Final deliberation Announcement by Minister of MOHW -Listing the items on the reimbursement schedule Lead Time : within 70 days  Effective date: June 15, 2009 Companies request Regulatory & Reimbursement process at the same time (Near-parallel review process)
  9. 9. Same or Similar in function, cost, or effect Innovative technology & New indication Value Appraisal 1 100% of the highest-priced product within the category Value Appraisal 2 Higher price than existing similar product possible (Up to 10-50% premium) Deteriorated in function, cost, or effect New Medical Products Moderately Improved in either (1) function, cost or effect, or (2) material, shape, or structure Substantially Improved in function, cost or effect only Same intended use as existing materials 90% or the lowest price within the category Less than 90% or below the lowest price within the category Unstructured Process • Hard to predict the expected reimbursement price • Historically based on the cost plus method (2) Improvements in material, shape or structure are also considered. Other Pricing & Reimbursement Policy •10% automatic price cut of existing products listed over 3 years when new product listed at 100% price (twice a year) • Introduction of triennial re-evaluation on listed products in 2010, resulting in price cut after ATP investigation • Implementation of HTA Process for new health technology, effective from July 25, 2008 (HIRA & NECA)
  10. 10. 1. Evaluation Criteria Evaluation Category Procedural Aspect Functional Aspect Cost Aspect Patient Aspect Other Considering Factors 1 None Degree of Improvement 2 3 4 Minor Moderate Significant 5 Full Minimal invasion Ease of procedure (deliverability) Reduced time of procedure Increased precision of procedure Improved functionality (adhesion) Biocompatibility Cost reduction compared to alternative treatment options Increased product life (durability) Reduction of pain and discomfort Patient safety  Mark the corresponding cell based on the degree of improvement which specific product under evaluation has achieved. 2. Scoring and Decision on the Product Improvement  Determined as “Improved” are products that obtained “moderate or higher (significant or full-fledged) degree” of improvement in more than one category.
  11. 11. 1. Evaluation Criteria Evaluation Category Considering Factors 1 None Degree of Improvement 2 3 4 Minor Moderate Significant  Improved clinical performance • Reduction in complication, infection and Clinical adverse events Efficacy • Reduction in disease recurrence and need for additional operations  Increased product life (durability)  Reduced consumption of medications and Cost other therapeutics Effectiveness  Reduction in length of hospital stay and duration of treatment  Reduced duration of operation  Reduction of patient pain and discomfort Quality of Life  Improved patient benefits Improvement  Improved patient independence in doing activities of daily life (ADL)  Fill the corresponding score in each relevant cell based on the degree of improvement which specific product under evaluation has achieved. 5 Full
  12. 12. 2. Scoring Method Evaluation Category (Weights) Clinical Efficacy (25) Cost Effectiveness (15) Quality of Life Improvement (10) Score Assignment based on the degree of improvement 1 2 3 4 None Minor Moderate Significant 0 6.25 12.50 18.75 0 3.75 7.50 11.25 0 2.50 5.00 7.50 5 Full 25 15 10 3. Decision on the Reimbursement Level  Multiplying factors to calculate additional premium for improved medical products are determined by the sum of individual scores as evaluated in each category.  Multiplying factors are price percentages added to the reference price (the highest price currently available in each category). Multiplying Factors by Sum of Score Group Sum of Individual Scores 10 – below 20 20 – below 30 30 – below 40 40 – below 50 50 Multiplying Factor (%) 10 20 30 40 50
  13. 13. Medical Device Reimbursement Policy in Japan
  14. 14. Employers/Companies Local Government Monthly Fee Shared Payment Employee/Workers Self-employed Monthly Fee Patients Health Insurance Unions (Payers) Patient Co-Payment 0% to 30% Provide Medical Service Healthcare Fun ding Payment Central Government Hospitals/ Clinics Reimbursement (Tech fee, Drug, Device, etc) $100B Pharmaceutical & Medical Device Companies *Numbers are rough estimates Device/ Drug $110B Payment $390B Government is filling the deficit of Insurance Unions Payment Device/Drug Dealers
  15. 15.  Overall Reimbursement Category • • • • • Hospital Fee (Hospitalization, First visit fee, etc.) Technical Fee (Diagnostics, Treatment, Procedures, etc.) Pharmaceuticals (New drugs, Generics) Medical Materials (Specially Treated Medical Materials) Dental Materials
  16. 16. Category Joints, Stents, Coils, etc. (High priced, single use device) Separate Reimbursement for device by Functional Category Price List of Functional Categories Device price is included in the technical fee Specially Treated Medical Materials (STM) Price Price List of Technical Fee Low Priced Devices Re-usable Devices Threads, Needles, Sutures, etc Medical Equipments CT, MRI, Generator, etc (Re-usable)
  17. 17. A1 : General Inclusive Equipment, Low priced MD, Reusable MD Devices included in the general procedures → No specific pricing for devices (Thread, Needle, etc.) A2 : Specific Inclusive Devicse included in the specific procedures → No specific pricing for devicse (Ultrasoundgraph, Endoscope, etc) B : Specific Pricing per Functional Category (STM) Devices are reimbursed separately → Specific reimbursement price is defined for each functional category STM C1 : Creation of New Functional Category Devices are reimbursed separately, and the creation of new functional category is needed. (Joint with new surface coating, etc.) C2 : Creation of New Functional Category & New Technical Fee Device are reimbursed separately, and the creation of new functional category and new technical fee is needed. (Capsule Endoscopy, etc.) (C2 products are subject to HTA) * In some occasions, C2 is used for specific medical equipment application (i.e. DaVinci)
  18. 18. Reimbursement Application A2 B Category not exists Regulatory Approval A1 Category exists Existing Tech Fee General Inclusive Specific Inclusive CEC Reusable Low priced C1 There are always some exceptions in the process ! STM Need to create new Tech Fee CEC Reusable Low Priced STM Physician oriented Device oriented Create new Tech Fee Create new category A2 C2 Create new tech fee C2 Create new category Create new tech fee
  19. 19. Company ⑥Report ①Application/Hearing ⑦Objection Iseikyoku-keizaika Chuikyo (Economic Affairs division) Pricing committee ②Report ⑤Report ③Original plan MHLW Hokenkyoku-iryouka ⑧Report (Medical Economic Division) ④Draft Assembly ④Acknowledgment Within 60 days as a rule, or 90 days at the longest ⑩Official gazette Hearing Academia
  20. 20. Japan Korea Reimbursement Scheme Fixed Fee for each functional category with Cap of 1.5x of Foreign average price Actual Transaction Price with Ceiling set for each functional category Functional Review Body Chuikyo (12 full-time MDs per Specialty & 50 non-residential reviewers) NHI Expert Review Committee (Sampling without replacement from a pool of 300 external experts) Hospitals’ Incentive to Purchase at Lower Price Yes (Margins Officially Allowed) No (ATP Should be Claimed) Foreign Price Reference Yes (US, UK, France, Germany, & Australia included in Apr.2012) Not Yet Time to NHI Coverage Decision Varied (In 2009, 8~21 months Within 150 days (Official Lead Time) depending on the degree of innovation) Value Premium 10-50% for Improved STMs Additional 5% for Innovative STMs (Two-year Conditional) 10-50% depending on the item’s value added Price Revision Measures •Biennial Price Revision to reflect actual market price •Sales Volume-adjusted Price Cut •Foreign Average Price Cut •Triennial Value Reappraisal •Irregular Investigation of Mftg Cost or Import Price •Foreign Exchange Rate-based Revision •Automatic Price Cut for old items
  21. 21.  Different principle should be employed for medical device regulations and its value appraisal • Devices are different from drugs in many ways  Limited or delayed access to innovative medical devices • Heavy workload of HIRA officials & MMBC for product review  Introduction of Independent review process  More staffing for product review in HIRA  “Parallel independent review” option for fast market launch • Rigid decision for NHI coverage  Conditional coverage for better monitoring & fast market launch (Examples in other countries) Coverage with Evidence Development (USA), 5-year conditional LPPR coverage with post-listing study requirement (France), NUB application for individual hospital (Germany)
  22. 22.  Arbitrary and/or biased appraisal of product value • Due to inadequate review staffing & inappropriate composition of MMBC members  More staffing & improved composition of MMBC member • Lack of objective & systematic appraisal formula  More specific, measurable & predictable checklist in value appraisal formula  Conditional coverage for innovative products • Reasonable decision process required for timely coverage and adequate pricing for innovative product, especially under the bundled payment  Partial payment or Balance billing (Taiwan) to allow timely coverage and ensure patient’s right to choose innovative products
  23. 23. THANK YOU Bae, Sung Yoon | PhD, MPH, MBA Assistant Professor of Healthcare Management, Inje University baesungyoon@gmail.com

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