On July 6, 2009, a report of the the U.S.-Japan Regulatory Reform and Competition Policy Initiative was presented to President Obama and Prime Minister Aso of Japan. The report provides an insight into the degree that the U.S. government tries to influence prices for medicines and medical devices in foreign markets. Here, as in other foreign markets, the U.S. government seeks to raise prices, and to give industry an even greater role in setting the prices for their products.
On July 8, 2009, PhRMA issued a press release, which said in part:
“PhRMA members appreciate the special focus the report places on regulatory and market access issues related to pharmaceuticals. In particular, we welcome steps taken by the Japanese Government to ensure it establishes drug prices in a manner that recognizes the value of innovation and the need for timely access to pharmaceuticals by the people of Japan.
“We also applaud the U.S. Government for its strong statement in opposition to a market-expansion repricing rule. The market-expansion repricing mechanism has been inconsistent with Japan’s assurances to consider the value of innovation and ensure timely access to life-saving medicines for Japanese patients. The U.S. Government should also be commended for its strong statement urging the Japanese Government to avoid implementing its annual price revisions.
“The report specifically notes that Japan will provide meaningful opportunities for America’s pharmaceutical research and biotechnology companies to consult with the government on the government’s pricing rules, including frequency of reimbursement price revisions, and regulatory procedures and will allow for more transparency in the government price-setting process.
The U.S.-Japan Regulatory Reform and Competition Policy Initiative is one of several bilateral forums managed by the U.S. government which promote the interests of various industry lobby groups. This one was apparently formally created in the fall of 2008, after an exchange of recommendations by both governments in October. It was started by the Bush Administration, but has been largely implemented by the Obama Administration.
It includes four working groups: Cross-sectoral, Medical Devices and Pharmaceuticals, Telecommunications, and Information Technologies. These working groups meet to address areas such as regulatory policy, intellectual property, distribution and customs procedures, competition policy, trade and investment-related measures, government procurement, consular affairs, and privatization of public entities.
Just a few of the highlights on drug pricing and intellectual property rights follow:
Regarding “appropriate assessment of innovative products in relation to the pricing system. MHLW will continue to fully consider ideas that industry, including U.S. industry, presents at Kanmin Taiwa.”
c. Pricing Reform Proposals: In the drug pricing system revision of 2008, MHLW has further enhanced the evaluation of innovativeness of new drugs by taking measures such as 1) increasing the range of premium rates in the similar efficacy comparison method; and 2) revising the cost accounting method to reflect the level of innovativeness as well as efficacy and safety. The system proposed by industry, including U.S. industry, includes measures to: 1) provide initial prices reflecting levels of innovation; 2) maintain drug prices for reimbursement during patent or reexamination periods; and 3) promote generics. These three points are important parts of the current pricing reform discussion. Industry’s proposals were discussed four times between July 2008 and March 2009 in the Drug Pricing Expert Subcommittee of Chuikyo and will continue to be discussed, considering the views of those involved.
d. Annual Price Revisions: MHLW notes that the Government of the United States urges the Government of Japan to avoid implementing a system by which prices of pharmaceuticals and medical devices can be reduced annually under Japan’s medical care insurance system. MHLW will continue to provide industry with opportunities to discuss annual price revisions.
e. Repricing Based on Market Expansion: MHLW notes that the government of the United States continues to urge the Government of Japan to abolish or avoid further expansion of Japan’s market-expansion repricing rule. MHLW will continue to discuss with industry, including U.S. industry, the issue of repricing based on market expansion.
f. Foreign Price Adjustment (FPA) Rule: MHLW will continue to discuss with industry, including U.S. industry, the issue of the FPA.
g. Drug Price Premiums: Drug price premiums are intended to recognize the level of clinical innovation. MHLW will flexibly apply the range of premium rates based on the applicability of new drugs to the premiums.
XVII. MEDICAL DEVICES AND PHARMACEUTICALS
The Government of the United States and the Government of Japan have discussed the Government of Japan’s recommendation regarding the protection of undisclosed test or other data generated to obtain marketing approval for pharmaceutical products.
Below are more complete excerpts from the sections of the report on medical devices and pharmaceuticals:
III. MEDICAL DEVICES AND PHARMACEUTICALS
A. Input in Healthcare System Changes: When the Ministry of Health, Labour and Welfare (MHLW) and its advisory bodies such as Chuikyo consider and implement changes in Japan’s health care system, members of industry, including U.S. industry may express their views to MHLW, which MHLW will take into consideration. MHLW has been taking measures to enhance the global competitiveness of its healthcare industry as the country positions the pharmaceutical and medical device industries to be key drivers of Japan’s future industrial growth. The New Pharmaceutical Industry Vision is aimed at eliminating the drug lag, developing an internationally competitive drug industry, and making Japan an attractive investment destination. In addition, the Five-Year Strategy for Development of Innovative Pharmaceuticals and Medical Devices proposed measures such as properly evaluating innovative products.
B. Medical Device and Pharmaceutical Pricing Reform and Related Issues
1. Pharmaceuticals:
a. Kanmin Taiwa: In the Government-Private Sector Dialogue for Discovery of Innovative Drugs and Medical Devices (Kanmin Taiwa) the “5 Year-Strategy on Innovative Drugs and Medical Devices” includes efforts for the appropriate assessment of innovative products in relation to the pricing system. MHLW will continue to fully consider ideas that industry, including U.S. industry, presents at Kanmin Taiwa.
b. Chuikyo Expert Member: MHLW will continue to select suitable candidates, irrespective of nationality, to serve as expert members of the Drug Pricing Expert Subcommittee of Chuikyo.
c. Pricing Reform Proposals: In the drug pricing system revision of 2008, MHLW has further enhanced the evaluation of innovativeness of new drugs by taking measures such as 1) increasing the range of premium rates in the similar efficacy comparison method; and 2) revising the cost accounting method to reflect the level of innovativeness as well as efficacy and safety. The system proposed by industry, including U.S. industry, includes measures to: 1) provide initial prices reflecting levels of innovation; 2) maintain drug prices for reimbursement during patent or reexamination periods; and 3) promote generics. These three points are important parts of the current pricing reform discussion. Industry’s proposals were discussed four times between July 2008 and March 2009 in the Drug Pricing Expert Subcommittee of Chuikyo and will continue to be discussed, considering the views of those involved.
d. Annual Price Revisions: MHLW notes that the Government of the United States urges the Government of Japan to avoid implementing a system by which prices of pharmaceuticals and medical devices can be reduced annually under Japan’s medical care insurance system. MHLW will continue to provide industry with opportunities to discuss annual price revisions.
e. Repricing Based on Market Expansion: MHLW notes that the government of the United States continues to urge the Government of Japan to abolish or avoid further expansion of Japan’s market-expansion repricing rule. MHLW will continue to discuss with industry, including U.S. industry, the issue of repricing based on market expansion.
f. Foreign Price Adjustment (FPA) Rule: MHLW will continue to discuss with industry, including U.S. industry, the issue of the FPA.
g. Drug Price Premiums: Drug price premiums are intended to recognize the
level of clinical innovation. MHLW will flexibly apply the range of
premium rates based on the applicability of new drugs to the premiums.
h. Prescription Period for New Drugs: MHLW notes industry’s proposals regarding the prescription period for new drugs and is open to discuss those proposals.
i. Vaccines: MHLW will continue to discuss with industry, including U.S. industry, the issue of vaccines in the medical care insurance system.
2. Medical Devices:
a. Foreign Average Price (FAP) Rule for Medical Devices: The FAP rule has reduced price differences of 126 functional categories since it was implemented in 2002. In the medical device pricing revision of 2008, MHLW reduced the functional categories affected, used only industry-supplied data on the four comparator countries, maintained a maximum price cut of 25 percent, and decided to phase in the cuts. Considering public interest in foreign price differences, MHLW will continue to provide industry, including U.S. industry, with opportunities to express its view on the FAP rule, including the impact of foreign exchange fluctuation, and will consider those views as necessary.
b. R-zone: MHLW recognizes the unique nature of medical devices and the importance of innovation in the medical technology sector. Issues related to the R-Zone will be discussed at Chuikyo (Subcommittee) with opportunity for industry, including U.S. industry, to express its views.
c. Evaluation of Innovation: In the medical device pricing revision of 2008, MHLW made several revisions, such as raising the reimbursement price adjustment premiums of new and revised medical materials, and establishing a new improvement premium by integrating the effective premiums in order to strengthen the incentives for their development and practical application. In furtherance of this progress, MHLW will also provide U.S. industry opportunities to express its view on the cost of doing business in Japan. Considering the differences in the basic function between drugs and medical materials, MHLW will continue discussions on premiums towards the next medical device pricing revision.
d. Speedier Introduction of C1/C2 Products: As for the prompt introduction of reimbursement for medical devices, the listing of products in the C2 category has been made quarterly since the medical device pricing revision of 2006. In 2008, with regard to medical devices classified in the C1 category, MHLW substantially shortened the waiting time for the listing of products. MHLW will continue to discuss proposals from industry, including U.S. industry, on the prompt introduction of reimbursement for medical devices, which will help to reduce the device lag.
e. Reimbursement Pricing Process: MHLW has held hearings with industry, including U.S. industry, regarding pricing new devices after the medical device pricing revision of 2008. In March 2009, MHLW held a hearing where medical device companies could make a case for why their Special Treatment Materials or capital equipment should receive a higher reimbursement price. In addition, in the medical device pricing revision of 2008, MHLW revised the rule so that reimbursement prices can be increased for medical devices determined to be in extremely short supply. MHLW will continue to consult with industry on the reimbursement pricing process, including that for C2 applications.
f. Functional Categories: In the medical device pricing revision of 2008, MHLW revised the functional categories, such as subdividing the functional categories of clips used for operation of malformed brain vessels and medical materials for home medical care. In addition, between April 2006 and April 2008, MHLW established 15 new functional categories for new devices. MHLW will continue to consider the addition and revision of functional categories for new devices that have certain improved functions over existing products, as necessary.
g. Diagnostic Imaging Techniques: In the medical device pricing revision of 2008, MHLW conducted hearings with industry, including U.S. industry. In the revision, based on the evaluation of the Technical Evaluation Subcommittee of Chuikyo, MHLW established new premiums for coronary artery CT and for heart MRI, which academic associations had requested. MHLW will continue to hear industries’ views regarding pricing reforms, including those of diagnostic imaging, at Chuikyo’s Special Treatment Materials Subcommittee.
h. In-Vitro Diagnostics (IVDs): In March 2009, MHLW held the second IVD study meeting (benkyokai) of the year. The meetings have provided industry with valuable opportunities to explain their IVD reimbursement issues to MHLW. MHLW will continue to take part in such meetings. In the 2008 reimbursement revision, MHLW raised the reimbursement fee for “quick testing” in hospitals and other testing fees by considering valuation of such testing. MHLW will continue to provide industry, including U.S. industry, with opportunities to express its views on the IVD issue.
3. Blood Products: MHLW will continue to be open for discussions with industry, including U.S. industry, about pricing issues related to blood products.
C. Medical Device and Pharmaceutical Regulatory Reform and Related Issues: The Government of Japan is continuing to strive to eliminate the lag in the introduction in Japan of innovative medical devices and pharmaceuticals. The Government of Japan will improve its regulatory system by taking the following actions in FY2009.
1. Pharmaceuticals:
a. Development of Pharmaceuticals Including Simultaneous Global Development (SGD): In considering development plans and data requirements, MHLW and the Pharmaceuticals and Medical Devices Agency (PMDA) will continue to make science-based decisions based on the characteristics of individual products.
The Government of Japan supports simultaneous global development of pharmaceuticals as a means to promote the efficient development of pharmaceuticals in Japan. The Government of Japan has been implementing the “New 5-Year Clinical Trial Activation Plan” since 2007, promoting global clinical trials by taking measures such as: 1) improving the environment in hospitals for clinical trials, including global clinical trials; 2) supporting the efficient implementation of clinical trials to reduce the burden on companies; and 3) publishing guidelines called the “Basic Principles on Global Clinical Trials.” It is anticipated that SGD trials will help to reduce the drug lag. Through various dialogues such as the “Dialogue between the Public and Private Sectors for Innovative Pharmaceuticals and Medical Devices,” MHLW and PMDA will continue to exchange opinions with relevant parties, including U.S. industry.
b. Waiting Times for Drug Clinical Trial Consultations: MHLW and PMDA have made substantial progress in reducing waiting times for drug clinical trial consultations. PMDA abolished the system of arranging appointments on the basis of points, and rearranged the system to respond to all consultations in a timely manner in FY2008. MHLW will continue to support PMDA to meet the demand for clinical trial consultations in a
timely manner.
c. Drug Review Times: MHLW will ensure that PMDA implements its plan to increase by 236 the number of drug reviewers by the end of FY2009, and that PMDA redoubles efforts to improve systems for evaluating pharmaceuticals and conducting clinical trial consultations. There were 346 reviewers in PMDA as of April 2009. PMDA is also making efforts in facilitating reviews by conducting organizational reforms, such as the establishment of a new division specializing in anti-cancer drugs. In terms of improving the quality of reviews, PMDA is making efforts to ensure consistency by taking various measures, such as: 1) developing and circulating to new drug reviewers in April 2008 a document that summarizes points to be considered during the actual evaluation process of drugs; and 2) deploying experienced reviewers among each review team. MHLW and PMDA will continue to exchange views with industry, including U.S. industry, to look at process improvements for both consultations and reviews such as introducing a two-track system and improving the efficiency of the question-and-answer component of the review process.
d. Acceptance of Foreign Clinical Data: PMDA will continue to accept foreign clinical data in accordance with the ICH E5 guideline.
e. New Drug Application Approval Processing Times: MHLW will continue to exchange views with industry, including U.S. industry, on reducing the processing time for new drug applications before issuing final approvals.
f. Post-Approval Partial Changes: MHLW issued a notification on review time of post-approval partial change applications and expressed their intention to make efforts to reduce review times, including setting targets such as six month and twelve month total approval times (in median) depending on characteristics of partial change applications by the end of CY2009 and FY2009, respectively.
g. Vaccines: MHLW is developing guidelines on vaccines in a study group, where industry, including U.S. industry, has participated. The Government of Japan will continue to discuss with industry, including U.S. industry, to improve regulatory reviews of vaccines.
2. Medical Devices:
a. Performance Goals and User Fees: MHLW devised the “Action Program for Acceleration of Medical Device Review” in December 2008 following discussion with industry, including U.S. industry. In accordance with the Action Program, PMDA will measure review times for the approval cohort median, and for reference PMDA will also measure review times for the submission cohort in median. PMDA will continue to publish this information, enabling industry to evaluate the performance of PMDA. PMDA will work to collect sufficient data that will promote meaningful discussions at semi-annual meetings of regulators and industry to measure progress of the Action Program.
b. Medical Device Review Staff: PMDA increased its staff in the Office of Medical Devices to 47 as of April 2009 on the basis of the Action Program and will continue such increases in accordance with the program goals. To ensure knowledgeable and skillful reviewers, PMDA will create training programs by: 1) promoting personnel exchanges among domestic and foreign universities and research institutions; and 2) referring to U.S. Food and Drug Administration training programs. The progress of the Action Program will be reviewed twice a year in meetings of regulators and industry, including U.S. industry.
c. Review Criteria and Class II Devices Eligible for Third Party Review: In accordance with the Action Program, MHLW continues to work with industry, including U.S. industry, to clarify review criteria and ensure that all Class II devices will be eligible for third-party review by FY2011 as a matter of principle.
d. Partial Change Approvals: MHLW, PMDA and industry, including U.S. industry, formed a working-level task force to discuss issues related to reviews and approvals. Following discussion in the task force, MHLW issued two notifications about the procedure for partial changes regarding medical devices. The task force will continue to work on a flow chart which helps to clarify the required regulatory procedure for a partial change. Under the pilot program for the real time review process for “special designated changes” mentioned in MHLW’s November 2008 notification, MHLW and PMDA will endeavor to achieve the two month target indicated in the notification.
e. Accelerated Stability Test Data: In September 2008, MHLW issued a notification clarifying accelerated testing as the basis for approval where scientific evidence validates the testing methods. MHLW will continue to work on a question-and-answer notification to increase the understanding of when accelerated stability test data can be used as a basis for approval. Issues related to accelerated stability testing will be discussed at a task-force meeting upon request.
f. Bundling of Device Applications: MHLW and industry, including U.S. industry, agreed to discuss the issue of bundling of device applications, and a new working group was formed under the working-level task force to handle the issue in May 2009. MHLW will continue to work with industry, including U.S. industry, to specify the scope of “one product” and to develop guidelines for bundling of device applications where scientific and regulatory issues can be addressed most efficiently in one review.
g. Raw Material Data Requirements: In order to expedite device reviews, MHLW will streamline the requirements for raw material data in submissions, taking into consideration the nature of medical devices and that certain medical devices present greater risks than others. In addition, MHLW will continue to ensure that Japan’s requirements for biocompatibility testing are fully consistent with ISO 10993. MHLW will continue to work with industry, including U.S. industry, to further streamline the raw material requirements.
h. Accreditation of Foreign Manufacturer: MHLW and PMDA have published instructions for industry on applications for the Accreditation of Foreign Manufacturers both in Japanese and English to encourage industry to make valid applications for prompt processing. MHLW will discuss at the task force meeting with industry, including U.S. industry, their proposals on further streamlining procedures to obtain the Accreditation of Foreign Manufacturers.
i. Factory Inspection Program: MHLW has been utilizing several fora for discussion with third-party certification bodies, industry, local governments and PMDA to create streamlined QMS conformity assessments. MHLW will continue to discuss this issue with these groups.
j. In-Vitro Diagnostic (IVD) Approvals: MHLW plans to issue a notification about stability testing and the effective period of IVDs based on the discussion in the working level task force. MHLW will discuss with industry, including U.S. industry, such as on issues related to pre-approval evaluation by the National Institute of Infectious Diseases. MHLW is open to discussing with industry its proposals regarding IVD regulations including the continuation of clinical performance testing after regulatory application.
XVII. MEDICAL DEVICES AND PHARMACEUTICALS
The Government of the United States and the Government of Japan have discussed the Government of Japan’s recommendation regarding the protection of undisclosed test or other data generated to obtain marketing approval for pharmaceutical products.