Building sustainable Pharmaceutical Innovation
Ecosystems through effective HealthTechnology Assessment (HTA) review in Japan
EFPIA Japan
7th June 2024

In collaboration with EY Strategy and Consulting

1Building sustainable PharmaceuticalInnovation Ecosystems througheffective HTA review in Japan
Summary▪

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Since its official implementation in 2019, the HTA system in Japan has rapidly evolved withbiennial updates enhancing its robustness. Although the latest revisions in 2024 haveadvanced the system’s transparency, the system still faces several challenges such as suboptimal process clarity and predictability, incomplete scientific basis for cost-effectivenessdetermination, fragile balance of HTA adjustment scope and innovation reward, andinsufficient patient stakeholder involvement. As such, further optimisation is warranted.
We believe the public and private sector can further contribute to improving the system via
enabling patient-centric regulation development, regular payer-industry dialogue, andbetter stakeholder engagement through public-private partnerships with academia.
Further optimisation of the HTA system in Japan has the potential to drive long-term
innovation by balancing patient, payer, and industry interests in a sustainable manner.

Cost-effectiveness assessment was adopted
as the HTA system in Japan, complementing
the drug pricing system and used for postlaunch price adjustment. First piloted in 2016
and officially introduced in 2019, it is still in its
early stages with only 50 drugs having been
selected as assessment candidates to date.
Japan is fundamentally different to othermajor markets in that HTA results do not
inform reimbursement decisions, as all
approved drugs in Japan are made available
to patients under universal healthcare
coverage without exception. The uniqueimplementation of HTA in Japan means thatit does not add delays to patient access todrugs.

1 Introduction to HTA in JapanTo effectively and sustainably drive thePharmaceutical Innovation Ecosystem, it is
crucial that the interests of patients andpayers are balanced in a predictable manner.
This allows patients to receive optimal care ata fair value, whilst pharmaceutical industry
players are being sufficiently incentivized toinvest in developing future treatments.
Health Technology Assessment (HTA) canenable this process by systematicallyevaluating the cost and impact of healthtechnologies via different methodologies
such as cost-effectiveness assessment andcomparative clinical benefit assessment.

1Since its 2019 launch, HTA in Japan has been
the topic of numerous discussions as it holds
an important role in shaping the future
healthcare landscape; one which has been
under substantial pressure due to the superaging and declining population in Japan. This
has resulted in the government looking forways to reduce the financial burden as there
are less people paying into the healthcare
system while costs keep increasing. However,at the same time there is a need to promotefurther innovation, as the pharmaceuticalmarket growth in Japan has been projected tolag severely behind other major markets(0.3% in Japan as compared to 2.5-5.5%
globally between 2023 and 2027)1. As a result,Japan’s current position as the third largest
pharmaceutical market with ~5% global shareis likely to be lost to Germany by 2026. In viewof this, we believe it is crucial to seek out
opportunities to continuously improve theHTA system such that both cost andinnovation are well balanced to ensure asustainable and thriving healthcare landscapein the long term.

subjected to the HTA system.
An example of rule ambiguity is where HTA isapplicable to drugs of considerable marketvalue (>5 billion JPY forecasted revenue atpeak year) and/or that are “significantly highpriced”, but the precise definition of“significantly high-priced” is not specified andis subject to the decision of the Chuikyo(Central Social Insurance Medical Council)’.
The fact that decisions to subject a treatment
to HTA can be made on a case-by-case basis
at Chuikyo’s discretion negatively impacts thetransparency and predictability of the HTA
process.
Another example that illustrates seemingly
conflicting definitions is that while current
HTA rules exempt drugs treating diseases forwhich there is no other cure or drugs
approved only for paediatric indications, therules do not elaborate on what would happen
if these exempted drugs are also considered
to be of considerable market value and/or“significantly high-priced”. 2024 guideline
updates saw the removal of “drugs fordiseases which are rare” from HTA exemption,and it can be speculated that the omission ispartly due to the fact that this category
includes Orphan Drugs that are in general
highly priced.

2 Challenges with the current
systemThe apparent prioritisation of NHI price in
HTA eligibility decisions can be illustrated
with the case of the first treatment to have its
price reduced as a result of HTA3. The subject,a cell therapy, is a Designated Orphan
Regenerative Medicine priced at 32.6 million
JPY (as of Apr 2024; one-off usage), causing it
to be classified as being “significantly highpriced” and thus subjected to HTA, despite
treating Orphan Diseases where there are noother indicated drugs.

• Sub-optimal process transparency andpredictability
A key challenge of the current HTA
implementation is the lack of transparency
and predictability. Identifying the latest set ofrules is not straightforward, and certain
criteria definitions within the rules lackclarity2. It is also unclear how certain
seemingly conflicting definitions will beaddressed, making it hard for industry players
to predict whether their products will be

It would appear that despite the ambiguity on
whether non-indicated treatments (chemotherapy in this case) are considered as a2

“cure”, it was nonetheless subjected to HTA
seemingly based on its price tag.

• Incomplete scientific basis for costeffectiveness determination

This is a potential cause for concern for theindustry, especially for smaller biotechs
focused on innovative therapies andtreatments for orphan diseases. Ambiguous
rules that leave room for interpretation meanthat there is a considerable amount of
uncertainty on how and when future
innovative treatments for Rare Diseases will
be subjected to HTA. This presents a risk toinvestors assessing investment returns thatpotentially translates to lower market
attractiveness and thus reduced investments,
resulting in the exacerbation of the ‘drug loss’
problem and directly affecting patients.
(Figure 1)

Once a drug is selected as an HTA candidate,its cost-effectiveness is calculated as the
Incremental Cost-Effectiveness Ratio (ICER)
against a designated comparator. The validityof ICER calculations depends heavily oncomparator choice, and in addition, ascientifically robust method for analysing
unquantifiable parameters of treatment
value improvement such as productivity gain
and reduction in caregivers’ burden, andcontinuous dialogue is warranted in order todetermine if and how these social benefits
can be incorporated into the costeffectiveness calculation.
While there are no set rules, in practice thecheapest treatment within the indication or
drug class can be selected with insufficientconsideration of clinical data and actual
usage and comparability. As an example, theHTA of an GLP-1 agonist was conducted using
the cheapest therapy in all analysis groups
within the indication. The fact that thecomparator is the cheapest but also only
represents 2% of the market share highlights
the limited clinical relevance of the chosencomparator4.

Figure 1. How suboptimal HTA decisions canexacerbate the Drug Loss problem

The 2024 HTA guideline updates5 partly
address these concerns with minor
specifications added to the comparator
choice criteria (such as defining ‘widespreadclinical use’ not only according to total
patient numbers but that the drug in questionis the recognised Standard of Care). While
this potentially facilitates better decision
making for choosing the most appropriatecomparator, concerns remain that the lack ofscientific evidence and rationale forcomparator choice compromises scientificvalidity of the cost-effectiveness assessment
outcome, as voiced by Health Economics andOutcomes Research (HEOR) experts6 and also

Drug Loss occurs when innovative treatments approved in the USand Europe are not available to Japanese patients (usually due todelays in regulatory submission, or Japan not being included in
global clinical trials). As of Nov 2023, 86 drugs are ‘lost’ in Japan,
including 39 indicated for diseases without existing treatment
locally.
Suboptimal HTA decisions can contribute to the Drug Loss
problem by negatively impacting marketing attractiveness, thus
decreasing the confidence of investors to include Japan in theclinical development stage.

3• Limited patient involvement

touched upon in a previous whitepaper from
EFPIA7.

Involvement of key stakeholders tocontextualize health technologies is crucial
for properly assessing the value of healthtechnologies, thus substantially reducing therisk of mis-assessment. Patients in particular
give meaning to new treatment technologies,
being the direct beneficiary of innovativetreatments. Within this context, updates
were made to the 2024 HTA guidelines
recommending QOL (Quality of Life) value
estimation to be based on patient responses
rather than proxy ones by HCPs, and toprioritise patient voices from Japan. However,
the effectiveness of this on patient inclusion
remains to be seen, and the issue remainsthat insufficient patient perspectives in HTA
decisions risk compromising the relevance ofthe cost-effectiveness assessments. Ifpatients are not directly engaged andinvolved, the HTA system will run the risk of amismatch with unmet needs and stray way
from a patient-centric system that is theheart of an innovative market.

As the value of HTA lies in securing thebalance between the cost to the healthcare
system and benefits to society with lifeimproving treatments, addressing theseconcerns to establish a solid scientific basis
for analysing cost-effectiveness is vital.

• Fragile balance between HTA repricing
scope and innovation premiums
Recent discussions on expanding the scope of
HTA price adjustments raises potential issues.
HTA is currently applied to the premium
portion of the drug price, and Chuikyo intends
to expand this scope for extremely highly
priced drugs (> 150 bil. JPY market size), andadoption of this new rule as a ‘Special
Provision HTA’ for a new drug for Alzheimer’s
Disease8 has been announced. Under thismeasure, a reference price point
corresponding to an ICER of 5 mil. JPY/QALY
will be used to determine whether the drug
price should be decreased (down to 85%) orincreased (up to 110%). While positioned as a
special provision, the Chuikyo has not ruledout broader applications in the future.

3 Towards the optimisation ofHTA in JapanIf broadly adopted in the future, the new rulepotentially allows HTA to erode into the baseprice, and may even result in a drug ending up
with a price lower than a less innovativecompetitor that was not selected for HTA. As
drug price is calculated based on multiple
factors including clinical efficacy, while HTA
assesses cost-effectiveness, these twosystems
shouldbeseparate
but
complementary, rather than interfering witheach other. More discussions must be
conducted on how to ensure fair HTA without
negating the value of a drug and hampering
innovation.

Having a clear view of current challenges
facilitates an effective review of the HTA
system, and we believe that the following
efforts from both the public and private
sector can contribute to optimising thesystem to drive cost-effectiveness andinnovation.

• Increase transparency of the rules anddecision-making processes
EFPIA regularly and actively work together

4with other industry bodies in Japan such as
JPMA (Japan Pharmaceutical Manufacturers
Association) and PhRMA (Pharmaceutical
Research and Manufacturers of America) toadvise the Chuikyo, providing highly relevant
and significant feedback on HTA. These input
and insights have so far been effective inpointing out gaps within the system fromboth local and global perspectives to help
shape HTA rules (as seen in some of the 2024
updates to the HTA guideline)4,6, andcontinued involvement of the industry will be
invaluable to evolve HTA in Japan.

Industry bodies can provide platforms forpatients and other stakeholders to exchange
ideas, drawing on successful examples toimprove the system. The government canalso initiate and embrace public-private
partnershipstosecure
stakeholder
involvement in building a compelling logic for
HTA that maximizes value for patients, andreference best practices from other markets
such as IMI9, the world’s largest publicprivate health partnership funded by the EUand industry in Europe through EFPIA.

Legislators and payers can also drive HTAchanges by enhancing assessment criteria
clarity by clearly outlining the scope and rulesfor HTA candidate selection. Scenarios whereexceptions to the rule can be expected should
be clearly defined to improve consistency andpredictability in the process.

4 Conclusion
To shape future assessments and decisionmaking, Japan should build on current
strengths including the short duration till
reimbursement, and address challenges that
may hinder long-term innovation. Tackling
the technical and scientific challenges withcurrent HTA will contribute to an optimised
system. In particular, increased transparency,
more careful deliberation of the HTA
adjustment scope, and the involvement ofpatients as facilitated by private-public
partnership can not only drive a patientcentric Pharmaceutical Innovation Ecosystemthat benefits all stakeholders involved, butalso allow the healthcare system to remain
affordable with demographic and socialchanges and continue to sustainably provide
true value to patients.

• Invite patients, industry, and academia
voices to shape regulations
While recent HTA guideline updates
demonstrated an appetite of the government
for taking industry opinion into account, thepositive changes are coupled with remaining
issues, where continued engagement of all
stakeholders will be crucial to ensure that
future policies do not hinder innovation andaccess.
Being the center of the PharmaceuticalInnovation Ecosystem, the involvement ofpatients and patient organizations in multistakeholder dialogues is crucial. Publicprivate
partnerships
withacademia
involvement can facilitate the selection of themost valuable and relevant patient voices tobe given the appropriate weight to address
unmet needs in the best way, and patientengagement can be encouraged by providing
accessible and inclusive education.

5

References

6. Shiroiwa, T. (2023) ‘Selection of a comparator andpopulation for cost-effectiveness evaluation’, J. Natl.
Inst. Public Health, 72 (2), pp. 152-160 (link)
7. Fundamental Observations on Cost-Effectiveness
Assessment of Drugs – Issues surrounding scientificvalidity. EFPIA Japan, August 2021 (link, Japaneseversion only)
8. Cost-effectiveness Assessment Subcommittee
meeting materials. Chuikuo, December 2023 (link,Japanese version only)
9. Innovative Medicines Initiative (link)

1. The Global Use of Medicines 2023: Outlook to 2027.
IQVIA Institute for Human Data Science, January2023 (link)
2. Cost-effectiveness Assessment Subcommittee
meeting materials. (See slide 4-5 for rules andselection criteria). Chuikyo, Sep 2023 (link, Japaneseversion only)
3. Report on Kymriah HTA and resulting priceadjustment. Chuikyo, April 2021 (link, Japaneseversion only)
4. Industry opinion towards the HTA system. Chuikyo,November 2023 (link, Japanese version only)
5. Cost-effectiveness Assessment Subcommittee
meeting materials. Chuikyo, January 2024 (link,Japanese version only)

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EFPIA Japan was established in 2002 and represents 23 R&D-based European
pharmaceutical companies operating in Japan, occupying 31% of the local
pharmaceutical market altogether in 2022. We actively engage in dialogue with policy
makers, and our mission is to contribute to the welfare of the Japanese population
through the provision of innovative pharmaceuticals and vaccines without delay.

Contact EFPIA Japan at info@efpia.jp

in collaboration withEY

ydCK.K.

Health Sciences & Wellness Consulting
At EY, we are building a better working world by transforming businesses through thepower of people, technology, and innovation. Our purpose is to lead the developmentof next-generation healthcare ecosystems of global standard and promote Japan as aleader in health innovation.

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