The New Administration’s Healthcare Impact

The medical industry’s biggest concern is new leadership at the Ministry of Health, Labor and Welfare. Hatoyama has appointed Akira Nagatsuma, known as “Mr. Pension” because he had been at the forefront of an attack about the previous government’s poor administration of pension management—a primary concern for the Japanese people. Though he has promised to shake things up at the ministry, Hatoyama is an expert on the pension problem, but his political stance on medical, healthcare and labor issues is unknown. The medical device industry will be keeping a watchful eye on how he’s able to advance Japan’s pressing medtech issues.

Healthcare was part of a policy manifesto released by the DPJ before the general election in August. According to the document, the new government’s healthcare policy is focused on two major points. The first is a “fundamental reform of the public healthcare system,” including a review of the insurance system for the elderly and enhanced financial support to local governments. The manifesto also includes “environmental improvement of safe and comfortable medicine,” which includes an increase in medical spending and improvements to public hospitals.

In the last five years under the previous government, social security expenses have been cut by about $2.2 billion (220 billion yen) annually. As a result, Japan became 22nd in gross domestic product versus total medical expenditure, the 17th in medical expenditure per person and 26th in the number of physicians per 100,000 people among member countries of the Organization for Economic Cooperation and Development (OECD)—a membership of 30 leading countries.

OECD countries include Australia, Austria, Belgium, Canada, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Slovakia, South Korea, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States. Japan has 206 physicians per 100,000 people, while the OECD average is 310. DPJ is projecting an increase of medical expenditures to be closer to the OECD average of 8.9 percent (Japan’s GDP ratio is currently 8.1 percent).

More practically, the elderly healthcare insurance system for people older than 75 years of age, which started in April 2008, will be abolished, and

those beneficiaries will join the current standard insurance system for the elderly. As configured now, the system discriminates against the elderly and increases their burdens. In terms of medical reimbursement, the bundled payment system—called Diagnosis Procedure Combination (a per-diem bundled system per disease)—will be increased, particularly for acute medical care.

To prevent the collapse of medical services at local area hospitals and clinics and to cope with the constantly growing demand of medical needs among the elderly population, the quality and quantity of physicians will be improved. Notably, under the new government’s plan, the number of medical school students will be increased to one-and-a-half times today’s level, with the goal being an average similar to OECD countries.

In terms of new medical technology and pharmaceuticals, the judgment criteria for marketing and manufacturing approvals, in addition to new authorization of reimbursement, will be standardized and transparent. The government says the evaluation process will be open to the public. Once a product’s safety and efficacy are well validated, quick authorization of reimbursement will be made so that such new technology or drug can be brought into use quickly.

Medical technology, in particular, is regarded as a strategic industry to focus on along with automotive, information technology and the environment for the future growth of Japan’s economy.

To resolve the lag by Japanese regulators in the review and approval of new drugs and devices (which has been criticized by other countries for many years), a private sector-driven initiative will be undertaken, and Japan’s regulatory agency—the Pharmaceuticals and Medical Devices Agency—will be reorganized and expanded for the future. Drugs and medical materials reimbursement will be reassessed based on a comparison of reimbursement prices in international markets and the price difference between public and private institutions.

A new government and party control is only the first step. The Japanese people expect the DPJ to bring fundamental and realistic change to the healthcare system.