Cost-Effectiveness Analysis (CEA) in Japan:
Basic Understanding and Implications for Japan“Putting the patients at the center of healthcare

EFPIAJanuary, 2019

Full scale implementation of CostEffectiveness Analysis in 2019

Cost-effectiveness analysis (CEA) is a mechanism to calculate
the appropriate price for pharmaceuticals after
reimbursement decision has been made. Japan’s "Central
Social Insurance Medical Council (Chuikyo)", an advisory bodyof the Ministry of Health, Labor and Welfare (MHLW) isdeliberating CEA with a view to full scale introduction inFY2019. The council commenced the debate on CEA in 2011
and introduced a pilot program from 2016 on selectedproducts1. The trial included novel therapies such as Opdivo,
an anticancer drug, where the discoverers were awarded theNobel Prize in Physiology or Medicine in 2018. A decision on
the implementation of CEA is expected in FY2018.

What is Health Technology Assessment?

Health technology assessment (HTA) is a scientific tool used
for making policy decisions2. The International Society for thePromotion of Health Technology Assessment (HTAi) defines
HTA as a multidisciplinary field that addresses the clinical,
economic, organizational, social, legal, and ethical impacts ofa health technology whilst considering its specific healthcare
context as well as available alternatives.
There is need for a transparent, systematic, and rigorous CEA
processes and methods used to evaluate the value of new andconventional pharmaceuticals and medical equipment.
For example, suppose a new breakthrough anticancer agent B
becomes available in cancer therapy for which anticancer
agent A was conventionally used.
When the anticancer agent is switched from A to B, CEA isevaluated from a combination of a cost and effect perspective.
Cost refers to the difference existing from medical expenses
and the effect refers to the time patients live more healthily
with an improved quality of life (QoL). An incremental costeffectiveness ratio (ICER), an assessment index, is calculated
to compare differences for each increment if/when A isswitched to B for increase in cost and effect.
ICERs uses the unit quality-adjusted life year (QALY) - survival
year x quality of life (QoL) - to demonstrate spuriously thepharmaceutical value in the form of "XXXyen/QALY" on how
much it costs additionally to achieve at full health for a year
using the drug.

Challenges in Cost-Effectiveness Analysis

Demonstrating the value pharmaceuticals provide is not as
simple as displaying mechanically ICER or mathematicalformulas. For example, to judge that CEA is not good for costs
in cancer treatment exceeding XXXyen the input from citizens
about "what medical care should be" is essential.
Moreover, CEA for drugs a difficult problem exists on how
to solve uncertainties such as range for ICER and drugs
selected for comparison.
The ICER is used to measure the effect of the drug and varies
greatly depending on the difference in targeted patient group,evaluation method for efficacy. When there are multiple
1. Isao K 2016 HTA Workbook Application in clinical, policy, and business application
2. Mie A 2013 Global overview and challenges in Health Technology Assessment (HTA) JPMA News Letter No.153
3. Takeru S 2013 A commentary on “Guideline for economic evaluation of healthcare technologies in Japan” Vol.62 No.6 p590-598
4. Chuikyo 11th Assembly (2018Nov7) https://www.mhlw.go.jp/stf/shingi2/0000211220_00002.html

studies for reference to decide ICER it is difficult to set it toone3.
The adjustment of premium rate by ICER for drug pricing isbeing considered for the current debating system. A
standard threshold such as 5million yen/QALY is currently
set to adjust the premium rate. A 5million yen/QALY was
set as the threshold amount based on prior research
investigating the amount for willingness to pay by peopleon "How much can an individual will pay for health in 1year?" On the other hand, health economists believe pricesetting is difficult in a price set of 4-6million yen/QALY for
ICER range4.
Results from CEA will change by comparators with respect
to drugs selected for comparison. However, within CEA
guidelines the drug’s comparators or its method forevaluation has not been decided3. Even at the trial program
problems related to this are cited as issues pending
decision.
Within the current CEA process (Fig 1.) stakeholder
participation is limited and contrary to other countries
there is no direct involvement of patients. Systems for CEA
such as in the UK the structure is set to reflect opinions ofpatient groups and to improve patient access topharmaceuticals by giving patients an opportunity to
express their opinion.
Furthermore, the debate in Japan for full scale
implementation has a negative influence on "evaluation forinnovation"5. Innovation of new pharmaceutical such as in
UK is also subject to evaluation for social and ethicalconsiderations that cannot be assessed by ICERs alone.

Overlap of Pricing and Reimbursement
SystemIn Japan there has been already a standard drug pricing
system which will overlap with the system for CEA. For
example, during new drug pricing, a rule (similar efficacy
comparison method) in the price system states to add thepremium to the evaluation for efficacy etc. compared tosimilar existing drugs. This is said to be a drug pricing
method based on a concept like HTA. At the same time,with full scale implementation under debate, a system of
CEA based on such rules for the purpose to adjust the drug
price afterwards will result in an "overlap of HTA".
Figure 1: Flow of CEA for full scale implemenation6
Reimbursement
decision

Selection oftarget items

Confirmation ofIndustry analysis<Special org.><Chuikyo>

Public Analysis（Validation/Reanalysis）

Pre-Analysis(Industry, MHLW,National Instituteof Public Health)Overall
Evaluation(Appraisal)

AnalysisFrame work

<Special org.>

Evaluation/Pricing<Chuikyo>

Analysis byIndustry

Price
Adjustment

5. Chuikyo Assembly (2017Aug9) https://www.mhlw.go.jp/stf/shingi2/0000174273.html
6. Chuikyo 12th Assembly (2018Nov21) https://www.mhlw.go.jp/stf/shingi2/0000211220_00003.html

CEA in Japan: Basic Understanding and Implications for Japan1

Global Overview of HTA Systems
Japan is still in its early days in HTA and much can be adoptedfrom countries with full implementation whereby various
challenges have been met. Whilst transparency of the systemis still low in some countries, common issues such as adverse
effects on patient access and restricted patient participationin HTA exists in each country. (Fig 2).
Countries such as UK focusing on health economics
assessment have experienced restricted patient access due toreimbursement decision of a new pharmaceuticals being
made based on HTA; causing a societal problem2. An example
has been the delay in the introduction of a new breast cancer
drug in UK7.
In principle, all pharmaceuticals authorized for marketing inJapan are subject to reimbursement in accordance with thepublic health insurance system for the whole nation.
Currently the Chuikyo is debating on the full
implementation of CEA and has confirmed that it will not be
used for reimbursement decision8.
Learning from other countries it is recommended Japan toincorporate a system which includes unrestricted patient
access, patient participation in policy decision processes
from all stakeholders, and a detailed and evidence-definedtransparent system for CEA. It is vital to design a systemcapable of evaluating the total value of pharmaceuticals andnot excessively dependent entirely on ICER whilst
maintaining the balance between patient needs andnational health insurance system.

Figure 2: Global overview of HTA

7. The Telegraph (2016) https://www.telegraph.co.uk/news/2016/11/03/joy-as-first-breast-cancer-drug-approved-forwidespread-use-in-t/
8. Chuikyo Council 41st Assembly (2017June28) https://www.mhlw.go.jp/stf/shingi2/0000169311.html

CEA in Japan: Basic Understanding and Implications for Japan

2EFPIA Viewpoint – Four Principles of CEAThe European Federation of Pharmaceutical Industries and Associations (EFPIA) has significant experience in theapplication of HTA in European markets. EFPIA suggests the following four principles for CEA system in Japan.
1.

Should not be used to reimbursement determination in order to protect patients’ access2.

CEA should be used as a complementary tool for the system of drug pricing and reimbursement

3.

Evaluate ethical and social value of pharmaceuticals from a long-term perspective

4.

Involve all stakeholders in comprehensive evaluation to secure transparency

Drug lag exacerbates
patient accessFigure 3: Europe & Japan – Patients W.A.I.T. Indicator
Patients Waiting to Access Innovative Drugs

A major cause of drug lag – adelay in making drugs available
for patient access in a country –is drugs approved in othercountries but not permitted forJapan. The problem has started
to resolve in recent years. Froman EFPIA survey, it is evident
that Japan has the shortest
time for patients to accesstreatments after marketing
authorization (Fig. 3).
However, a CEA system used todecide drug pricing andreimbursement will again giverise to drug lag in future.

Percent Available (2013)

Elapsed time after EMA* approval (days)
75

Japan:60-­‐90 days

102
107

2013
2010

131
177

Japan
90

Denmark
83

Switzerland

89

Austria71

Finland83

Sweden364

Belgium

368

63
90

Norway

378

Spain

384

74
71

Italy

432

France63

Source: EFPIA Market Access Delays Analysis443(2018)
29 declining the average.
* ■Some products are not covered by the general reimbursement
schemePortugal
and so the zero-delay is artificially602
Japan: 100%
In France, some innovative products without competitors can be made Greece
available prior to market authorisation under
55 the system of Temporary
611 the average for France is higher than in reality.
Authorisations. As there are not taken into account in analysis,
The average time between marketing authorisation and patient access, measured 0by the number
from the datemarketing
20 of days
40 elapsing60
80 of EU100
authorisation
effectivemarketingin non-European
Economic Area countries) to the day of completion of post-marketing
0100 (or200300
400 authorisation
500600700■いくつかの医薬品は保険償還でカバーされていないため、それらの待ち時間のない医薬品が不自然に待ち時間の平均を短くしている。
**In‐country availability. In % of medicines with an EU central authorization
authorisaion
administrative
processes.
*Elapsed time between Marketing Authorization and Accessibility
フランスでは競合のない革新的な医薬品は一時的な許諾によって市場に早くだすことができる。この分析ではそれを考慮していないため、
in 2011-­12, e.g., 70 at the time of survey.
Fundamentally the “waiting time” in Japan is 60 days and as only the timing of coverage by reimbursement for price revision is 90 days, the weighted
実際の待ち時間より高めに数値が出ている。
Figure
3. Source:
EFPIA
annual& 2013. NB: UK and Germany allow access immediately upon marketing authorization, butaverageof thesevalues
are survey
used in 2010
this analysis.
**The rate ofwithin
availability,
measuredby thenumberof medicines available
to patients.
most*EMA:
countries,
this is theMedicines
point at which
product gains access
HTA hurdles—not
the scopeof thisW.A.I.T.
analysis—apply
and delay
actual Foraccess.
EuropeanAgency.
to the reimbursement list.

Adequate management ofdrug expenses*1,2 theInnovation
premium
Figure4:
Adequate
managementof drug
expensesandannualCosts
Well Controlled,
MarketBroadly
Flat (¥Tn)*1,2 scheme and biennial
Forecast
marketgrowthbysegment
average growth rate is forecasted to be -1.5% (1T yen unit)
pricing continue

Drug costs in Japan are
managedadequately
by
1.77%
10.5
10.2
10.2
promotion
policiesof 9.9inexpensive generic drugs due
to patent expiration and
4.8
4.8
4.8
current
effective
pricingsystem. A recent study by EFPIA
0.8
1.3
0.3
1.0
and IQVIA revealed that costs
2.7
2.4
2.2
are managed appropriately (Fig4). Furthermore, growth in the
1.6
1.1
1.3
1.4
pharmaceutical market is 0.6
0.6
0.6
0.6
projected as unchanged until ’14
’15
’16
’17
2026 and no sharp cost
Source: IQVIA Japan IMS Base JPM
increase is forecasted.

3

0.14%
10.6

-1.48%

10.6

10.4

4.8

5.0

5.1

1.3

1.3

1.2

2.0

1.9

1.8

1.7

1.6

1.7

1.8

1.8

1.9

0.6

0.6

0.6

0.6

’18

’19

’20

’21

10.4

4.6

1.7

10.3

10.4

4.4

4.3

10.0

10.0

4.4

4.3

1.7

1.8

1.5

1.4

1.3

1.9

2.0

1.9

2.0

0.6

0.6

0.6

0.6

’22

’23

’24

’25

1.9

2.0（FY）*1: In Fig. 4, Long-listed products (LLPs) are products whose first generic alternative was launched. LLPs (a) products were launched before 2016; LLPs(b) are the other LLPs, launched/scheduled to be launched after 2017.
*2: Assumption of requirements such as continuing price maintenance premium, achievement of 80% generic drugs, and annual price revision ofproducts with large divergence rate for long-listed and generic products.

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