Value assessment has been a part of reimbursement in Japan at some level for at least two decades. For new devices a budget impact analysis has been a mandatory part of submissions  for many years.  Moreover, the Ministry of Health, Labor, and Welfare (MHLW) began accepting health economic evidence as a voluntary addition for new drug and device reimbursement submissions in 1992.  

Initially the submission of health economic evidence for new drugs spiked but then fell sharply around 2002. Findings from research conducted by Dr. Shunya Ikeda and Dr. Shuji Onotsuka in 2004 suggest that the fall in submissions was driven in part by a perceived lack of benefit in submitting health economic evidence among manufacturers and lack of availability of data to conduct the analyses. The inclusion of health economic evidence in reimbursement submissions is expected to increase based on revisions to the reimbursement system in Japan that are described below. These revisions will put more emphasis on health economic evidence as a form of value assessment.

Regardless of the recent revisions to the reimbursement system in Japan, an assessment of the value of new technologies has been a part of the reimbursement process in Japan since the introduction of the current reimbursement system in 1998. The current system, which I describe in detail in the Reimbursement page, includes premiums for innovation, usefulness, and improvements relative to similar existing treatments that are effectively a form of value assessment. This point has caused some contention when discussing the formal introduction of health economic evaluation as a part of reimbursement in Japan with some asking whether both systems of value assessment can co-exist without confounding or disrupting one another.

Despite the skepticism mentioned above, a more formal process for value assessment through health economic evaluation has essentially be launched in Japan and is being referred as health technology assessment (HTA) in most of the English literature - although it is simply referred to as cost-effectiveness evaluation in most Japanese literature. Although the details are still under discussion, I have included a description of that value assessment process below. Again, it is important to keep in mind that this is just one of several forms of value assessment used in Japan and you should review the Reimbursement page to learn about other forms of value assessment used in Japan.

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Health Economic Evaluation in Japan


As mentioned above, a budget impact analysis has been a mandatory part of new device reimbursement submissions in Japan for many years and health economic evidence has been accepted on a voluntary basis as part of new drug and device submissions since 1992. That data is then reviewed by the MHLW and its advisory committees as described in the Reimbursement page. However, based on findings from Dr. Shunya Ikeda and others there was a substantial decline in the submission of health economic evidence from 2002 in part due to a general feeling that its inclusion did not benefit manufacturers.

In 2007, as part of the Ministry of Education, Culture, Sports, Science and Technology (MEXT) 5-Year Strategy for the Creation of Innovative Pharmaceuticals and Medical Devices, a “more proper evaluation of innovative products in drug pricing system” was set as a major over-arching goal. This sparked a debate about the proper assessment of healthcare innovation in Japan which grew in intensity following remarks in 2011 from Professor Hisao Endo, the outgoing Chairman of the Central Social Insurance Medical Council (Chuikyo), suggesting that the use of cost-effectiveness in the evaluation of healthcare be discussed more in Japan. These remarks echoed previous remarks by other members of the Chuikyo suggesting that an HTA organization similar to NICE be established in Japan. In 2012 a new Special Committee on Cost-Effectiveness Evaluation was established under the Chuikyo to review the use of cost effectiveness evaluation in other countries and to consider its possible use in Japan. Shortly thereafter the Cabinet announced its intention to incorporate cost effectiveness evaluation in reimbursement in Japan.

Guidelines for cost-effectiveness evaluation were released in 2016 and, after several years of debate within the MHLW and the Chuikyo, a pilot program for the use of cost-effectiveness evaluation in healthcare reimbursement was kicked off in April 2016 with the intention incorporating the results of the pilot program into the biennial reimbursement revisions planned for April 2018. 13 products including 7 drugs and 6 medical devices were selected to be reviewed for the pilot program. The products initially selected for the pilot were as follows:


  • Sovaldi (sofosbuvir)
  • Harvoni (ledipasvir, sofosbuvir)
  • Viekirax (ombitasvir, paritaprevir, ritonavir)
  • Daklinza (daclatasvir)
  • Sunvepra (asunaprevir)
  • Opdivo (nivolumab)
  • Kadcyla (trastuzumab emtansine)


  • Najuta Stent Graft System
  • Activa RC neurostimulator
  • Vercise™ Deep Brain Stimulation System
  • Brio Dual 8 neurostimulator
  • “JACC” autologous cultured cartilage
  • SAPIEN XT transcatheter heart valve

Criteria were also introduced for the selection of newly launched technologies for review in the future. A summary of those criteria are shown below:


1. DOES NOT meet any of the following criteria:

  • Is a treatment for a specified intractable disease, hemophilia, or HIV
  • Has been requested for development by the Evaluation Committee on Unapproved or Off-label Drugs with High Medical Needs

2. DOES meet one of the following criteria:

  • Requested a premium of 10% or more under the Similar Efficacy Comparison Method AND has an estimated peak annual sales of 50 billion yen or higher
  • Requested a premium of 10% or more under the Cost Accounting Method AND has an estimated peak annual sales of 10 billion yen or higher


1. DOES NOT meet any of the following criteria:

  • Is a treatment for a specified intractable disease, hemophilia, or HIV
  • Has been requested for development by the Investigative Committee on Medical Devices of High Medical Need 

2. DOES meet one of the following criteria:

  • Requested a premium of 10% or more under the Similar Functional Category Comparison Method AND has an estimated peak annual sales of 5 billion yen or higher
  • Requested a premium of 10% or more under the Cost Accounting Method AND has an estimated peak annual sales of one billion yen or higher


Since then 2 more drugs and 2 more devices have been added to the list of those included in the pilot program including the following:


  • Keytruda (pembrolizumab)
  • Ibrance (palbociclib 


  • Absorb GT1® Bioresorbable Vascular Scaffold System

The general process for cost-effectiveness evaluation in Japan under the pilot program is described in the flow chart below.  Data submitted by manufacturers was reviewed by a designated third party (review team). Results were then submitted to the Special Organization for Cost-Effectiveness Evaluation designated by the Chuikyo for appraisal prior to the 2018 medical free revisions.


The impact the results of cost effectiveness evaluations on reimbursement for products is a bit complicated but is summarized in the image below. Repricing only occurs when the ICER is estimated to be higher than 5 million yen / QALY. If the ICER falls between 5 million yen / QALY and 10 million yen / QALY, then the ICER would be used to determine an adjustment coefficient to adjust the original premium awarded to the agent downward. If the ICER estimated is 10 million yen / QALY or higher then the maximum reduction coefficient of 90% used.  


Moreover, for products that are being considered for a downward adjustment certain other criteria are taken into consideration in determining their premium adjustments included the following:

  • If is useful for public safety such as a reduction in infection disease transmission
  • It helps with reducing public long-term care expenses / productivity losses
  • It is for a severe disease and although it may not dramatically improve QOL it prolongs survival
  • It is for a condition for which there are insufficient alternative treatments available

A 5% discount in the ICER is permitted for each of the criteria above that are met.

An upward adjustment in the originally awarded premium is also possible if an overall cost reduction can be shown with the use of a technology and the technology offers a similar or better efficacy than existing technologies. To qualify a new technology must also meet one or more of the following criteria:

  • It has been shown to have better efficacy than the comparator
  • It offers a completely different mechanism of action than the existing treatment

An increase of up to 50% for the original premium awarded may be allowed without the overall price of the agent exceeding 10% of the originally calculated price. 

Results of the initial products included in the pilot program were announced in March 2018 . Two products, Opdivo and Kadcyla, received a decrease in their reimbursement and one product, the Najuta Stent Graft System, received an increase in its reimbursement. Six products including Harvoni, Viekirax, Daklinza, Sunvepra, Opdivo, and SAPIEN XT were flagged to be reviewed again due to discrepancies in the manufacturers' analysis and that of the re-analysis group. Analyses submitted for the newly listed 4 products are also being reviewed again. Some of the discrepancies raised thus far include:

  • Disagreement concerning the appropriate comparator
  • Disagreement concerning the target indication (patient population)
  • Disagreement concerning the appropriate time horizon for the analysis
  • Disagreement concerning the data used in the analysis
  • Disagreement concerning the calculation of treatment costs


As of December 2018, debate is still ongoing about the full implementation of cost effectiveness evaluation for reimbursement in Japan. Some of the topics still being debated are as follows:

A. Selection of Products

  1. Scope of products to be reviewed
  2. Selection criteria of products to be reviewed
  3. Cost-effectiveness exemption criteria and how to handle treatments for rare diseases and for severe diseases
  4. Selection timing
  5. Process for selection and announcement of selection items

B.  Submission of Data by Manufactures

  1. Preliminary discussion process
  2. Standard timing for analysis
  3. Process for discussions during the analysis
  4. Handling of situations with insufficient data
  5. Handling of analysis guidelines
  6. Role of the Special Organization for Cost-Effectiveness

C. Re-Analysis (Public Analysis)

  1. Standard timing for analysis
  2. Development of an organization / system with a high degree of transparency from a 3rd party perspective
  3. Role of the Special Organization for Cost-Effectiveness
  4. Strengthening of the system for conducting cost-effectiveness analysis in Japan

D. Appraisal Process

  1. Review / verification method from a scientific perspective - including validation of the results, handling ICER for treatments that target more than one indication, and situations where the treatment is dominant (cheaper and similar or better efficacy)
  2. Consideration of aspects such as rationality and impact on society
  3. Method of summarizing evaluations
  4. Method of reporting and publishing evaluation results
  5. Development of an organization / system with a high degree of transparency from a 3rd party perspective

E. Repricing

  1. Repricing scope
  2. Repricing rate
  3. Setting of the reference value for repricing (including willingness to pay)
  4. Repricing coefficient - including considerations such as rationality and societal impact  and the handling of re-pricing for items for which an ICER cannot be calculated
  5. Repricing timing, etc.

The above list of topics being discussed suggest that we could see a slightly different process emerge in the future, but I personally think there are unlikely to be major shifts in the overall direction. Regardless, there is a commitment on the part of the MHLW to fully incorporate cost effectiveness evaluation in the reimbursement of drugs and devices in Japan and that might be extended to other areas of reimbursement such as technical (procedure) fees, long-term care insurance, and possibly even regional or local healthcare initiatives involving national funding. Please subscribe to my updates to keep abreast of the evolving landscape for cost effectiveness evaluation and HTA in Japan.

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DPC Evaluation System

As mentioned in the Funding & Provision page, there are primarily two types of reimbursements for inpatient care in Japan – the fee-for-service (FFS) system (which also applies to outpatients) and the diagnosis procedure combination/per-diem payment system (DPC/PDPS). About 20% of hospitals in Japan and most large hospitals (about 50% of beds) operate under DPC/PDPS system.  Please refer to the Funding and Provision page for more information on reimbursement under the DPC/PDPS system in Japan.

The per-diem reimbursement fee provided under the DPC/PDPS system is weighted based on several coefficients that are unique to each hospital.  Originally the hospital-specific coefficients were meant to encourage participation in the system, but they have evolved to reflect the type and level of care provided by each hospital. The overall (total) coefficient calculation is based on a sum of the following coefficients:

Basic coefficient:  A coefficient that accounts for fees using a revision rate X the average number of points under the DPC system

Functional coefficient I:  A coefficient based on personnel distribution (i.e. patient to nurse ratio), hospital type (e.g. specific function hospital, specialized hospital, etc.) and hospital structure.

Functional coefficient II:  A coefficient consisting of 6 indices including an efficiency index, an emergency care index, an insured care index, a complexity index, coverage index, and a regional care index.

  • The regional care index also makes reference the 5 priority conditions (cancer, stroke, myocardial infarction / cardiovascular disease, psychiatric care) and 5 priority treatment areas (disaster, perinatal, remote, and emergency care) that have been prioritized by the national government.
  • The insured care index also includes new input items such as the SOFA score, surgery code, degree of care needed, nursing care information, elderly information, and functional independence measures

The DPC/PDPS evaluation system is essentially a hospital-level evaluation system and it will be important to understand it impact on hospital procurement and treatment decisions moving forward.   Please subscribe to my Japan healthcare market access updates to keep abreast of the evolving DPC evaluation system.

Other Useful Info

Health Economic Guidelines for Japan

The MHLW has published Guidelines for Preparing Cost-Effectiveness Evaluation for the Central Social Insurance Medical Council in 2016

Real-World Data (RWD) Sources for Japan

The Japanese Society for Pharmacoepidemiology (JSPE) maintains a comprehensive list of RWD sources in Japan

HEOR Department, The University of Tokyo

Please reach out to me and/or our growing department if you need additional support for Japan

Health Technology Assessment in Japan [Prof. Isao Kamae]

A great book to get an applied understanding of health economics and its usage in Japan. 

Disclaimer: All opinions expressed on this site are my own and not necessarily those of my department or employer.