A new pricing regulation proposed by the government of Japan has drawn fire from the Advanced Medical Technology Association (AdvaMed; Washington), which said last month that the policy violates existing U.S.-Japanese trade agreements, including the Market-Oriented, Sector-Selective (MOSS) agreement of 1986. At the heart of the matter is a decision by the Japanese Ministry of Health and Welfare and its advisory body, Chuikyo, to adopt what AdvaMed termed "discriminatory foreign reference pricing rules,"and other measures to cut payments for approved advanced medical technologies in that country. The policy was finalized Dec. 12 and is scheduled for full implementation April 1.
The policy is aimed at product groups where U.S. companies are the sole or dominant suppliers. Specific targets cited by the Japanese for foreign reference pricing in the medical device industry include pacemakers, balloon catheters and orthopedic implants. Edward Rozynski, AdvaMed's executive vice president for global strategy and analysis, said that if the policy is put into effect, it "could cost the [medical device] industry more than $500 million because of the price cuts it could lead to." The Japanese market is critical to the U.S. device industry, since it is the second-largest market for its products outside the U.S. and represents more than $24 billion in potential revenue.
Especially alarming, Rozynski said, is that the policy was announced and put into affect within a week's time, which he said clearly violates the MOSS agreement which requires consultations with U.S. industry before policy is put in place. He added that historically such price controls have not worked and these may backfire on Japan. "It's not going to improve their health care system, which is in need of improvement."
The Japanese regulatory agency said it would reimburse the specified medical technology at no more than one-and-a-half times a yet-to-be-determined foreign price, which AdvaMed said does not take into account inherent market differences between the U.S. and Japan. The Japanese system is more tightly controlled by government and has a multi-layered distribution system between the manufacturer and the hospital. Overall, it has substantially higher overall costs of doing business than other nations.
Traveling to Japan, Rozynski told ministry officials there that this is an important issue to the industry, but not to the device industry alone. "This is a make-or-break issue because it sets a precedent that could be applied to other products, and even other industrial sectors in Japan." Rather than restructure their economy internally, said Rozynski, "all the Japanese government does is come up with a bunch of foreign reference price caps that they put on a variety of sectors. You can see how this could impact any U.S. industry doing business in Japan." He added that the U.S. government has a long history of opposing foreign reference pricing "precisely for these kind of reasons."
AdvaMed also informed the U.S. government of its concerns, and is ready to take the issue to the World Trade Organization (WTO), it said, if the referencing pricing plan is put in place. "I think there's an opportunity in the WTO if we wanted to pursue that route, because foreign reference pricing is something that should not be used within any country within any trading system," said Rozynski. However, he said that AdvaMed would prefer to resolve the issue bi-laterally "because the issue will have a potentially huge impact on our industry within a matter of weeks or months," and the WTO generally takes much longer to resolve such issues.
The concern over Japan's pricing policies is at the center of the larger global patient access issue that AdvaMed has listed as one of four key priorities on its agenda for 2002.
The other three priorities are:
Advancing legislation that will aid the FDA in approving developmental breakthroughs and products in medical technology. It is backing legislation introduced by Reps. Jim Greenwood (R-Pennsylvania) and Anna Eschoo (D-California) to bring more expertise into the agency and expedite third-party reviews.
Continuing to push for improvements in Medicare coding procedures. It will work on a number of issues in this area, including seeking greater accountability and timeliness in national coverage policies while maintaining a strong local coverage process.
Working closely with congressional leaders in the coming year to ensure preparedness against bioterrorism.
Bioterror: A shift to bugs
Vaccine and pharmaceutical developers are likely to benefit from any market shift required in the battle against bioterrorism, but the first to be called on will be diagnostics firms, according to George Poste, MD, in a presentation at last month's 20th annual JPMorgan H&Q Healthcare Conference in San Francisco, California. After diagnostics, information technology will be called upon next in the battle, he said.
Poste, affiliated with Health Technology Networks, was the initial speaker during a panel on "Bioterrorism: Issues and Implications for Industry." Emphasizing that the war against bioterror should be considered part of a larger emphasis on biosecurity, Poste cited a basic and dramatic shift in the "calculus" of modern warfare. Specifically, he described that change as a shift from "big bang" and "big metal" to "bugs."
Until now, he said, modern war power has been the product of physics, mathematics and engineering, these disciplines producing big metal in the form of bullets, planes and missiles directed toward military targets. No longer, he contended. The new weapons will be "bugs" — that is, the many things that can be produced as the result of new biological discoveries and genetic engineering techniques. Further, he said that these new weapons would be directed against civilian targets and with great stealth. He characterized those wielding these new bioterror weapons as "agile and intelligent," the weapons themselves of relatively little cost but "high impact," and the civilian targets of those attacks "legion."
After reviewing some of the more extreme potential scenarios for destruction — from bugs that eat plastic and on to cyberterror — Poste outlined the need for three types of responses: pre-emptive capabilities in order to prevent bioterror attacks, detection and diagnostic systems for determining the nature and extent of an attack, and forensic science following an attack to determine its cause and source. Given the potential varieties of these new bugs and bioterror agents, Poste said he had little confidence in the ability to prevent new attacks and that after-the-fact forensics were of the least help.
Thus, the main priority is diagnostics, he said, and, after that, a system for broad communication of information to the public concerning a bioterror attack with an integrated IT approach.
Poste noted that the U.S. Department of Defense already has put heavy emphasis on new rapid diagnostics for earlier placement of appropriate therapies. Early diagnostics, he said, would produce more effective triage or, by determining the absence of an attack, provide reassurance of the "worried well," i.e., those who believe they many have been victimized in an attack. But good diagnostic systems must be reinforced by an "alerting network" to be truly effective, he said.
At a conference specifically focused on extolling the many virtues of biotechnology, Poste's comments clearly offered a more balanced view of the discipline, citing biotech's "dual-use implications" — that is, both "munificent and malignant." And biotech's ability to produce both good and evil results, he emphasized, further underlines the need for a more focused emphasis on all types of biosecurity.
Panelist Michael Friedman, MD, addressed the complexity of the bioterror problem and some of the key barriers to implementing biotech security. Like Poste, he pointed to biotech as a national strength that could be turned against us in a variety of major ways.
Through governmental support of the National Institutes of Health (Bethesda, Maryland) and other research efforts, U.S. biotech "is one area where we are strongest in the world," he said. But this strength, he added, contained a major weakness, shared by allied nations: a poorly coordinated public health infrastructure.
Reiterating Poste's analogy to warfare metal, Friedman noted an important contrast between traditional weapons of war and the potential arsenal to fight bioterrorism. While helicopters, airplanes and tanks can be engineered with a high level of reliability, drugs and vaccines, he noted, are much more likely to fail.
While Poste and Friedman did not dwell on the need for new information technologies in this fight, that issue was raised in a following panel addressing the high-profile issue of medical errors.
Bruce Marlin Fried, an executive with ShawPittman, underlined the need for effective IT systems to monitor the "sentinel events" of bioterrorism.
And this need was further pointed up, he charged, by the way the U.S. government reacted to the post-Sept. 11 anthrax scare. He said the general confusion characterizing that reaction showed that the government's information systems had "failed and failed miserably."
Heart disease firmly a No. 1
Cardiovascular disease has helped to drive the markets for new medical technologies in this century, and that is unlikely to change, according to a recent overview report from the American Heart Association (AHA; Dallas, Texas). That report says that somewhat more than 60 million Americans suffer from some form of heart disease, producing nearly one million fatalities each year. And this makes it the No. 1 killer in the U.S., producing 40% of the deaths in this country each year.
Improved diet and consistent programs of exercise — as well as cessation of smoking — could reduce this toll by nearly one-third, according to the AHA report. But since this trend is generally being ignored, the disease offers continuing opportunities for those making devices and drugs to treat heart disease and related illnesses.
Broken out from the heart disease statistics, strokes killed 167,366 people in 1999, still leaving the total of heart disease deaths far ahead of the No. 2 killer — cancer, accounting for nearly 550,000 deaths in 1999. Computed by itself, stroke was No. 3 on the AHA list. Accidents claimed nearly 100,000 lives and Alzheimer's disease nearly 45,000 yearly.