Application of cost-effectiveness evaluation in Japan

In Japan, discussions have been held at Chuikyo over introduction of cost-effectiveness evaluation for medicines and medical devices. The course of such discussions is reviewed below.

1. Beginning of discussion

In Japan, submission of data on cost-effectiveness for drug pricing was permitted from 1992 (whether or not to submit such data can be decided by manufactures). In Australia, “PBAC (Pharmaceutical Benefits Advisory Committee)” was established in 1993 to consider application of cost-effectiveness analysis to the decision making of listing. These suggest that discussions on the application of cost-effectiveness data were begun relatively early in Japan.

However, application of cost-effectiveness data did not advance smoothly in Japan. One reason is that the rule of utilization of cost-effectiveness data has not been positioned as a drug pricing system. This means that when manufactures prepared cost-effectiveness data, their purpose of submission and advantages remained unclear.

2. Advances in the discussions held at Chuikyo

However, application of cost-effectiveness data advanced on a global scale. In the UK., NICE was founded in 1999 and began to actively use information on cost-effectiveness for decision making. Such attempts were also actively made in other European countries; Asian countries, such as Korea, Taiwan and Thailand also began to utilize such data activity.

In Japan, with the aging of the society and advances in healthcare technologies, public healthcare expenditure has been increasing. This situation making it increasingly important to devise ways for more efficient utilization of the limited healthcare resources. In the field of healthcare, the necessity of cost-effectiveness data increased over time. In 2012, the Special Committee of Cost Effectiveness Evaluation was established under the Chuikyo. At this committee, discussions have been continually held over how to evaluate cost-effectiveness and how to apply the results to decision making.

Based on such discussions, cost-effectiveness evaluation was introduced on a trial basis in April 2016. This was intended to evaluate the cost-effectiveness of 13 products satisfying the criteria (7 medicines and 6 medical devices). The results was reflected into their prices (price reduction for not cost-effective products and price increase for cost-effective (dominant) products). Its implementation on a trial basis was completed after analysis by manufactures and re-analysis from academics in 2016 and 2017, and review in 2018. In practice, the prices of some drugs and medical devices were adjusted during this process. At last, cost-effectiveness evaluation was formally incorporated into the medicine and medical device pricing system in April 2019.

3. Discussion towards establishment of cost-effectiveness evaluation system

During discussions on establishment of a cost-effectiveness evaluation system, it was proposed that cost-effectiveness evaluation be applied to “price adjustment.” Some pointed out that cost-effectiveness evaluation should be also utilized for decision making of reimbursement, as done in the UK and some other countries. However, Chuikyo agreed to begin cost-effectiveness evaluation with utilizing price adjustment of medicines and medical devices.

Cost-effectiveness evaluation will be performed for medicines and medical devices selected by the criteria, and the results of such evaluation will be utilized for adjusting the part of price (premium and/or profit rate). The portion of “premium” is adjusted for products whose prices have been set based on similar efficacy (functional category) comparison method. That of “premium and profit rate” is pricipally adjusted for products whose prices have been set by the cost calculation method. Price will be reduced if the product is cost-effectiveness, on the other hand it will be increased if the product is cost-effective.

Such evaluation is applied to newly listed products whose expected annual sales at peak are estimated to be JPY 10 billion (USD 90 million) or more (and some of 5 billion (USD 45 million) or more). When ICER exceeds JPY 5 million (USD 45,000) per QALY (7.5 million [USD 68,000] in the case of special products, e.g. anticancer drugs), the price is stepwisely decreased. On the other hand, products evaluated as "dominant" or ICER of less than JPY 2 million (USD 18,000) per QALY has a possibility (not all the products) to increase the price.

Establishing such a cost-effectiveness evaluation is aimed at providing clearer rationale for the price setting for drugs and medical devices and then improving sustainability of public healthcare system.