AMDD Vol.24
NEWSLETTER

February 2017

English translation of the Japanese newsletter

CONTENTS- Proposal for Ensuring Access to Advanced Medical Devices and Promoting Sound
Finances for Medical Insurers- AMDD Holds 8th New Year’s Party- Value of Medical Technology <Diagnosis and Treatment of Cancer>
Capsule Endoscopy Effective for Image Diagnosis of Small and Large Intestines- AMDD Holds a Lecture for Member Companies

Proposal for Ensuring Access to Advanced Medical Devices andPromoting Sound Finances for Medical Insurers- Constructing a Reimbursement System for Medical Supplies Premised on ValueBased Health Care AMDD had developed a proposal on creating a reimbursement system that measures thevalue of innovation to then be reflected in pricing. The proposal also includes
recommendations for creating a resource investment framework that focuses on high-value
medical devices and innovation, with the goal of “promoting innovation and ensuring accessto medical care for patients” and “promoting sound finances in health care and nursing.”(Please see the following pages for specific details of the proposal.)Measuring the Value of Innovation and Reflecting the Value in Reimbursement
Prices
AMDD believes we should aim to achieve more efficient health care, not by seeing medicaldevices as mere costs, but by making full use of their innovation, while maintaining patients’
access to health care as much as possible. To accomplish that goal, we need a reimbursement
system that properly measures the value of innovation and reflects it in pricing, and aresource investment framework that focuses on high-value medical devices and innovation.
This approach is in keeping with global trends; and by encouraging high-value innovation,
we believe we can achieve an environment in Japan that will foster the creation of globallycompetitive medical devices.
The Japanese market for medical devices is worth approximately 2.7 trillion yen, which
accounts for only about 7% of the national health care expenditures, yet advanced medical
technologies developed by innovation save lives, act on behalf of lost functions, and improve
QOL after treatment. The innovation of medical devices improves continuously supporting
governmental initiatives, such as extending healthy life expectancy, increasing productivity
and reducing early retirement for nursing care. We consider that expenses for medical devices
should be evaluated extensively and comprehensively from social standpoints. This should1

be done not only by considering the price of medical devices themselves, but also from theperspective of the productivity loss of patients and caregivers, including indirect costs ofmedical devices, and by quantifying such prices, productivity, and costs. By fostering medical
device innovation to achieve more efficient medical care, it should be possible to create evengreater benefits for Japan in terms of medicine and economics.
Limiting Medical Device Costs During Transition Periods
A number of measures aimed at promoting the soundness of health care finances have been
instituted, and a reduction in unit prices for medical devices has also been implemented
through measures that include the FAP (Foreign Average Pricing) system. We at AMDD
believe that making it difficult to invest in innovation by further reductions in unit prices,limiting patients’ access to health care by excessive restriction of indications and facility
standards, and being too careful in widespread use would not be a wise policy if we wish tokeep Japan’s health care system and finances sustainable for the future.
Given this goal, it is necessary to design an appropriate valuation system based on thedistinctive characteristics of medical device innovation, which differs from pharmaceuticalproducts. Based on this awareness, AMDD has developed ideas for providing future
valuations based on the value of medical devices, and for determining a clear distribution ofresources within a limited budget. This can be done from both perspectives of maintaining
a sound medical insurance system and continuing to promote innovation. We strongly hopethat this will be an opportunity to start discussions with the people concerned.

Mr. Kosuke Kato
Chairman, American Medical Devices and Diagnostics
Manufacturers’ Association (AMDD)
Managing Director,Edwards Lifesciences Corporation

1. Promotion and rapid introduction of innovation, as well as securing patient
access to healthcare
A value based evaluation of medical devices is necessary, centered around clinical efficacy
delivered to the patient and benefits to the family providing care. To this end, value largely
stems from aspects such as invention/innovation, and so efficient and accurate criteria
assessing these will allow effective devices to rapidly enter the medical setting and provide
reliable access to healthcare (i.e. opportunities to receive accurate care).


Medical devices are known to provide long-term sustained care for the patient, anddevices such as prosthetic joints/limbs, pace makers, intraocular lenses are primeexamples which support the patient’s ADL (Activities of Daily Living).

2More recently devices which contribute to prevention/diagnosis are gaining traction,such as a diagnostic device which monitors cardiac function, assessing the formulationof blood clots which may lead to stroke, thereby providing early indications fortreatment. This in turn has led to the support of patient ADL, reductions in necessary
future care and treatment costs.

1.1 Introduction of a price adding system based on extensive economic assessment(①)
In addition to conventional criteria such as efficacy and safety, we would like to propose
methods that assess, from an economic perspective, the contribution a device makes in
optimizing resources for health and nursing care.
Currently, additions for innovation and additions for usefulness are evaluated from threepoints of "new mechanisms", "efficacy and safety", "improvement of the method oftreatment". We propose to add “economics” standing in the value as a new requirement
for compensated additions.

“Economics” should assess not only the cost for treatment, but also the savings on
nursing care costs and burden for caregivers.

In the case of evaluating innovation from an economic perspective, pricing will bedetermined based on the Japanese healthcare market environment, and so the device
should be excluded from the foreign price re-pricing policy.

1.2 Creation of a to-be-proven forerunner assessment policy (②)
In order to realize rapid promotion of innovation, we propose a “to-be-proven forerunnerassessment” policy whereby devices are evaluated based on clinical data (efficacy, safety andeconomics) collected post-launch.
All too often, medical devices are unable to collect sufficient clinical data at the time oflaunch. And due to the long-term effect of treatment, devices often require a prolonged
assessment period. In order to ensure rapid access to cutting-edge treatment, assessment
and pricing at the approval stage based on probabilistic efficacy, safety and economic
viability can be regarded as a reasonable approach.

Devices that attain forerunner assessment will be re-assessed after a certain period postlaunch based on finding from post-launch clinical study schemes which may utilize
publically available database, etc.

If data collected during the post-launch clinical study do not meet the initially expected
efficacy, safety or economics, the price added due to the “forerunner premium policy”
may be reduced.

In the case of evaluating device for a forerunner premium from an economic perspective,pricing will be determined based on the Japanese healthcare market environment, andso the device should be excluded from the foreign price re-pricing policy.

1.3
Creation of a post-launch C1/C2 re-application policy (③)
For specifically insured medical treatment materials included in existing functionalsubdivisions, allow for a re-assessment of functional subdivision based on clinical and/or3

economic data collect post-launch through the creation of the “post-launch C1/C2 reapplication policy”.
 If clinical data/study results post-launch show aspects (efficacy, safety, economics etc.)that were not evaluated during reimbursement listing, the company may apply for reassessment of the product.
In the instance where product economics are re-evaluated through the C1/C2 reapplication policy, pricing will be determined based on the Japanese healthcare market
environment, and so the device should be excluded from the foreign price re-pricing
policy.

2. Fiscal improvement of healthcare/nursing care medical devices/treatment
material policies
In order to improve the fiscal efficiency of Healthcare and Nursing care, expenditure cutsmust be driven through effective management of listed reimbursed products in addition toimproved economics from innovative medical devices. The savings must then be re-invested
into driving further innovation.
2.1
Increased inclusion range for treatment materials within technical fees (④)
Medical devices/treatment materials with relatively low-price and standardized quantity perprocedure may be considered for inclusion within technical fees from simplifying
reimbursement policy perspective.
If STMs are to be included in technical fees, corresponding technical fees should be
increased by the amount equivalent to STM reimbursement price.

It is necessary to involve members of Academia, Government and Industry when
considering “device inclusion”.

2.2
Flexible management of the re-pricing policy (⑤)
Although AMDD is against the foreign re-pricing policies that fail to capture differences inhealthcare systems among referencing countries, we propose conventional re-pricing policies
to employ more flexible management approaches. These approaches include utilizing
differing coefficients to conventional re-pricing depending on functional subdivisions etc.
In the case a subdivision is established for specifically insured medical treatment
materials, foreign price adjustments will be made in the initial assessment, and so any repricing post-division establishment should exclude foreign price re-pricing policy forseveral revision cycles.

We propose raising limit of foreign price magnification for functional subdivisions
consistently introducing new devices, as is the case with subdivisions determined to havestrong medical demand through conferences such as “The commission to determine
rapid introduction of high-demand medical devices”.

Concomitantly, for subdivisions that have experienced a reasonable time since creation
without having new products over a set period of time, we propose a lower foreign pricemagnification limit provided benchmark and average all available foreign prices
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(nevertheless, in the case where the market is niche and thus product development islimited, the effect on supply sustainability should be taken into consideration).
Image of Value-Based Reimbursement System

Examples of the Innovation of Medical Devices

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AMDD Holds 8th New Year’s Party
The American Medical Devices and Diagnostics Manufacturers’ Association (AMDD) held
the New Year’s Party at the Sakura-no-ma of the Imperial Hotel on January 12. In thegreetings at the beginning of the party, Mr. Kosuke Kato, Chairman of AMDD (Managing
Director of Edwards Lifesciences Corporation) expressed his hope that “AMDD will actively
focus on three pillars this year: reforming the evaluation of innovation, accelerating reviews,
and contributing to industrial development in Japan.” Regarding the evaluation of innovationin particular, he said that AMDD will develop a proposal for an insurance system for patientsby again clarifying the differences between medical device innovation and pharmaceuticalproducts, and by linking it to industrial development in Japan.
In the greetings from the guest, Ms. Noriko Furuya, Senior Vice Minister of Health, Labourand Welfare (MHLW), offered encouragement by saying that “the medical device industry isimportant as a growth industry and the Japanese government will give All Japan support tothe development of medical devices.” After, Mr. Andrew Wylegala, Minister Counselor forCommercial Affairs at the Embassy of the United States of America, and Mr. Koji Nakao,
Chairman of the Japan Federation of Medical Devices Associations (JFMDA), gave theirgreetings. The New Year’s Party then began with the participation of guests from all walksof life after Mr. Kenichi Matsumoto, Chairman of the Japan Association of Medical Devices
Industries (JAMDI) proposed a toast.

Left: Ms. Noriko Furuya, Senior Vice Minister of Health, Labour and Welfare
Right: Kosuke Kato, Chairman of AMDD

New Year’s Party7

Value of Medical Technology<Diagnosis and Treatment of Cancer>
Capsule Endoscopy Effective for Image Diagnosis of Small and Large
Intestines
Capsule endoscopy is a process that uses a tiny capsule the size of a large vitamin pill. It canbe easily swallowed and is used in a test that takes pictures of the mucous membrane of thegastrointestinal tract. Small bowel capsule endoscopy and large bowel capsule endoscopy
started being covered by insurance in 2007 and 2014, respectively. They are relatively new
imaging test technologies.
A capsule endoscopy system is composed of (1) a capsule endoscopy (for small and large
intestines) with a built-in ultra-small camera that wirelessly transmits the images taken, (2) asensor array and data recorder that receives the images, and (3) a workstation in whichsoftware is installed for interpretation and diagnosis.
Capsule endoscopy for the small intestine is a new testing method that sheds light on organs
known as the “dark continent.” Since its arrival in Japan, many clinical applications of thisendoscopy have been advanced. When it obtained pharmaceutical approval, gastrointestinal
bleeding of an unknown cause was the only indication. But now, the indication of thisendoscopy has been expanded to all diseases of the small intestine, including Crohn’s disease.
Capsule endoscopy for the large intestine has generated the value of satisfying unmet medicalneeds, for example, by providing patients who could not undergo colon fiberscopy becauseof a physical difficulty and other reasons, with an opportunity to undergo a test. Since
capsule endoscopy can be performed by physicians other than endoscopy specialists, it isexpected that this method will spread to areas with scarce healthcare services and utilized forearly detection and treatment of large intestine carcinoma, which is considered likely toincrease in the future.
In a clinical setting, various efforts for proper use of capsule endoscopy have been made,including a large-scale post-marketing clinical study by registry, under the initiative of theJapanese Association for Capsule Endoscopy.
It is considered that in the future there will be advancesin the clinical applications of capsule endoscopy, so thatburdens on patients can be reduced and image
recognizing technology can be improved to make iteasier for doctors to interpret the images.
(Article written with full responsibility by Go Ikeda,
Medtronic Japan Co., Ltd.)Left: Large bowel capsule endoscopy
Right: Small bowel capsule endoscopy

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AMDD Holds a Lecture for Member Companies- Diversity and Women’s Success The American Medical Devices and Diagnostics Manufacturers’ Association (AMDD) held
an Internal PR Meeting on “Diversity and Women’s Success” in Tokyo on December 8 lastyear. The target for this lecture was persons in charge of or related to public
relations/communication and personnel affairs from member companies. This meeting isevery year to deepen people’s understanding of AMDD activities and to exchange
information among AMDD member companies.
In the 5th meeting in 2016, the results of the survey on “diversity” which had been conducted
for AMDD member companies beforehand were presented. Ms. Kathy Matsui, Vice Chairof Goldman Sachs Japan, who advocates womenomics, delivered a special lecture titled“Womenomics 4.0: Time to Walk the Talk.” Also, three companies on behalf of AMDD
member companies introduced examples of their efforts for diversity in the workplace.
Inspired by Ms. Matsui’s strong messages and the various examples of other companies,participants renewed their pledge to work on promoting diversity.
The AMDD Diversity Working Group, which started its activities, such as a survey, last year,
will continue to get actively involved in various efforts, including external ones, aiming topromote diversity within AMDD.

Left: Ms. Kathy Matsui
Right: Presentation of the Survey from the Public Awareness Committee

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