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INTERNATIONAL REIMBURSEMENT STRATEGIES:
OVERVIEW OF REIMBURSEMENT STRATEGIES IN
EUROPE, JAPAN, AP AND LM
Mike Sanchez, M.A., CCA
Reimbursement Advisor
Independent Consultant
Copyright Michael Sanchez 2010
1
INTRODUCTION
Reimbursement mechanisms for medical technology are
highly complex in most countries, with different systems
applicable to private and public healthcare, to different
product categories and even to different regions of the
same country…
for a medical technology company to be successful, it must
devote significant time and resources to keeping abreast of
the latest developments and devising strategies to best
address the requirements.
Source: Global Trends in Reimbursement of Medical Technology (Clinica Reports, CBS948, July 2007):
http://www.1jra.com/Reimbursement%20report%2007%2020071.pdf
Copyright Michael Sanchez 2010
2
Copyright Michael Sanchez 2010
3
HEALTHCARE SYSTEM MODELS
Beveridge Model Named after William Beveridge, who designed Britain's National Health
Service. In this system, health care is provided and financed by the
government through tax payments, just like the police force or the public
library. In Britain, you never get a doctor bill!
Many, but not all, hospitals and clinics are owned by the government
Some doctors are government employees, but there are also private
doctors who collect their fees from the government
These systems tend to have low costs per capita, because the government, as
the sole payer, controls what doctors can do and what they can charge.
Countries using the Beveridge plan or variations: Great Britain, Spain, most of
Scandinavia, New Zealand, Hong Kong, and Cuba
Source: Reid, T.R. (2009). The Healing of America: A Global Quest for Better, Cheaper and Fairer Health Care. The Penguin Press.
ISBN 978-1594202346.
Copyright Michael Sanchez 2010
4
HEALTHCARE SYSTEM MODELS
Bismarck Model Named for the Prussian Chancellor Otto von Bismarck, who invented the
welfare state as part of the unification of Germany in the 19th century.
It uses an insurance system ("sickness funds“) usually financed jointly by
employers and employees through payroll deduction.
Unlike the U.S. insurance industry, though, Bismarck-type health
insurance plans have to cover everybody, and they don't make a profit.
Doctors and hospitals tend to be private in Bismarck countries
Although this is a multi-payer model tight regulation gives government much of
the cost-control clout that the single-payer Beveridge Model provides.
The Bismarck model is found in: Germany, France, Belgium, the Netherlands,
Japan, Switzerland, and, to a degree, in Latin America.
Source: Reid, T.R. (2009). The Healing of America: A Global Quest for Better, Cheaper and Fairer Health Care. The Penguin Press.
ISBN 978-1594202346.
Copyright Michael Sanchez 2010
5
HEALTHCARE SYSTEM MODELS
National Health Insurance (NHI) Model This system has elements of both Beveridge and Bismarck. It uses private-
sector providers, but payment comes from a government-run insurance
program that every citizen pays into.
The single payer system tends to have considerable market power to
negotiate prices (E.g., Canada's lower prices from drug companies)
NHI plans also control costs by limiting the medical services they will pay for,
or by making patients wait to be treated.
These universal insurance programs tend to be cheaper and much simpler
administratively than American-style for-profit insurance
The NHI model is found in Canada, Taiwan, and South Korea
Source: Reid, T.R. (2009). The Healing of America: A Global Quest for Better, Cheaper and Fairer Health Care. The Penguin Press.
ISBN 978-1594202346.
Copyright Michael Sanchez 2010
6
HEALTHCARE SYSTEM MODELS
Out-of-Pocket Model This is the kind of model followed in most poor countries. There is no wide
public or private system of health insurance. People mostly pay for the services
they receive 'out of pocket'.
Most of the nations on the planet are too poor and too disorganized to
provide any kind of mass medical care.
Almost all countries with such a system have much lower life expectancy and high infant
mortality rates.
The basic rule in such countries is that the rich get medical care; the
poor stay sick or die.
Only the developed, industrialized countries -- perhaps 40 of the world's 200
countries -- have established health care systems.
In rural regions of Africa, India, China and South America, hundreds of millions
of people go their whole lives without ever seeing a doctor.
Source: Reid, T.R. (2009). The Healing of America: A Global Quest for Better, Cheaper and Fairer Health Care. The Penguin Press.
ISBN 978-1594202346.
Copyright Michael Sanchez 2010
7
HEALTHCARE SYSTEM MODELS
The American Model The U.S. has elements of all four models in its fragmented national health care
system. For example:
For Veterans and military personnel, we're like Britain’s Beveridge Model,
where the government acts as both the payer and provider.
For working Americans who get insurance on the job, we're like Germany’s
Bismarck model, although in the U.S. health insurers can be for-profit
For Americans over of 65 on Medicare, we're like Canada’s NHI Model,
where government is the insurer and the private sector provides the care
For the uninsured, we’re like the Out-of-Pocket model of various poor
countries with little access to quality health care unless you can pay
The United States is unlike every other country because it maintains so many
separate systems for separate classes of people.
All the other countries have settled on one model for everybody.
Source: Reid, T.R. (2009). The Healing of America: A Global Quest for Better, Cheaper and Fairer Health Care. The Penguin Press.
ISBN 978-1594202346.
Copyright Michael Sanchez 2010
8
RELATION BETWEEN HEALTHCARE SYSTEM AND
UTILIZATION OF MEDICAL TECHNOLOGY
The reimbursement system and the magnitude of health care
resources provided have a considerable influence on the
accessibility of medical technology. In Europe for example,
The relative usage of coronary stents has been greater in countries
with a social health insurance-based funding system.
Likewise there is generally a greater usage of implantable
cardioverter defibrillators in countries where funding is primarily from
social health insurance source
Patient access to these technologies varies across Europe and
appears related to the type of healthcare funding system in place.
Source: European Heart Journal (2004) 25, 611–616
Copyright Michael Sanchez 2010
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REGIONAL OVERVIEW
Copyright Michael Sanchez 2010
10
UNITED STATES
The U.S. healthcare system, a blend of multiple public
payers and private third party payers, represents a
manufacturer's largest market opportunity for most
products and has the most stakeholders impacting the
reimbursement process…
Manufacturers must understand the payer mix for their
product relative to the payer mix for the US market to assure
that the reimbursement strategy aligns to the particular payer
sector that will be the most prominent decision-maker.
Source: Global Trends in Reimbursement of Medical Technology (Clinica Reports, CBS948, July 2007):
http://www.1jra.com/Reimbursement%20report%2007%2020071.pdf
Copyright Michael Sanchez 2010
11
EUROPEAN UNION
In Europe, reimbursement systems vary between each
country and different systems are applicable to private and
public healthcare, to different product categories and even
to different regions of the same country…
The European Union has “one-stop” for regulation but 25 stops for
reimbursement. Throughout Europe there are few regulatory hurdles,
but rising reimbursement hurdles. Additionally, Reimbursement is used
politically as a means of price curbing and slowing access to the latest
technology, which leads to frequent overhauls of the systems in an
attempt at achieving the best value for money.
European Union Case Study to follow
Source: Global Trends in Reimbursement of Medical Technology (Clinica Reports, CBS948, July 2007):
http://www.1jra.com/Reimbursement%20report%2007%2020071.pdf
Copyright Michael Sanchez 2010
12
JAPAN
In Japan, a country with one of the oldest populations in
the world, healthcare resources have been stretched for
many years, leading to various attempts to curb
spending…
Japan sources most of its medical technology from indigenous
suppliers. Despite this, the sheer size of the market and the
country’s return to economic growth make it increasingly
attractive for foreign suppliers. There are still a great many
[reimbursement] hurdles to selling products in Japan. What’s
more the regulatory approval system in Japan is one of the
slowest in the world.
Source: Global Trends in Reimbursement of Medical Technology (Clinica Reports, CBS948, July 2007):
http://www.1jra.com/Reimbursement%20report%2007%2020071.pdf
Copyright Michael Sanchez 2010
13
JAPAN: RESPONSIBLE GOVERNMENT AGENCIES
Ministry of Health, Labor & Welfare (MHLW) is the sole agency responsible for regulation and payment of medical devices:
Pharmaceutical and Medical Devices Agency (PMDA) is a third-party regulatory review agency under MHLW
Health Insurance Bureau (HIB) sets rates and approves reimbursement coverage
Central Social Insurance Medical Council (Chuikyo) is an outside advisory body to HIB on reimbursement/coverage decisions
Ministry of Finance (MOF) approves the healthcare budget proposed by MHLW, may adjust line-item expenditures for devices, etc.
Ministry of Economy, Trade and Industry (METI) supports development and competitiveness of Japanese Med Tech industry
Source: Medical Device Reimbursement in Japan (Paul Barry, Presented to MassMEDIC, April 10, 2008)
MHLW
Applicant
Dossier
Expert
Committee Chuikyo
6. Public Announcement: Listing in NHI Reimbursement
Eco Affairs Div
Health Policy Bureau
Med Economics Div
Health Insurance
Bureau
Shonin (Regulatory)
Approval
1. Application for
reimbursement
2. Hearing
5. Notification of Approval
3. Expert
opinion
4. Listing
decision
Source: Medical Device
Reimbursement in Japan (Paul
Barry, Presented to MassMEDIC,
April 10, 2008)
JAPANESE PRODUCT PRICING CLASSIFICATION
SYSTEM
A1 Covered under technical fee. Product reimbursement is
included in technical fee. Commodity-type products,
e.g., sutures, gauze.
A2 Covered under technical fee. Product itself gives
technical fee. High-end products such as MRI, CT, etc.
B “Me-too” product reimbursement category. Existing
technical fee and separate device fee, with predicates in
the market.
C1 “New products” that are based on existing products/
therapies. Technical fee exists for procedure, but new
functional category needed to account for incremental
improvement in technology.
C2 “New products/therapy.” New technical fee and device
reimbursement category must be created.
Source: Medical Device Reimbursement in Japan (Paul Barry, Presented to MassMEDIC, April 10, 2008)
TIMING OF JAPANESE REIMBURSEMENT
A1 Automatically after 20 days of filing
A2 1st day of every month, when filed before 10th day of
previous month
B 1st day of every month, when filed before 10th day of
previous month
C1 4X / yr – Jan 1, Apr 1, July 1, Oct 1 (submitted at least 4
months prior); Provisional coverage prior to final listing
C2 4X / yr – Jan 1, Apr 1, July 1, Oct 1 (submitted at least 4
months prior); Provisional coverage prior to final listing
Source: Medical Device Reimbursement in Japan (Paul Barry, Presented to MassMEDIC, April 10, 2008)
CHINA
Access to the Chinese market is very difficult due to the
size of the country and the complexity of the regulatory
and reimbursement systems…
Pricing of medical devices in China is primarily up to the
manufacturer but government agencies and provincial bureau
are starting to put into place more rules and regulations to limit
prices all the way through the chain from the manufacturer’s
price to the end user price; in many cases the patient pays for
the device.
Source: Global Trends in Reimbursement of Medical Technology (Clinica Reports, CBS948, July 2007):
http://www.1jra.com/Reimbursement%20report%2007%2020071.pdf
Copyright Michael Sanchez 2010
18
CHINESE AGENCIES INVOLVED IN
REIMBURSEMENT
Ministry of Health
Administers rural health insurance system
Administers public hospitals
Bidding/tendering system
Ministry of Labor and Social Security
Administers urban health insurance system
Provincial Health and Pricing Bureaus
Review regional purchases of large scale medical devices
Establish reimbursement rates for medical devices
Source: China’s Medical Device Market (Presentation: Jay Biggs, U.S. Department of Commerce, Office of Health and Consumer Goods)
CHINESE MEDICAL DEVICE REIMBURSEMENT
China’s reimbursement system for medical devices is at an early stage of development
Policies and procedures are not uniform and may vary significantly from region to region
There are several Chinese agencies involved, but they do not necessarily work in harmony
With 22 Provinces, four Municipalities and five Autonomous Regions, an important component of the medical device pricing structure takes place at the Provincial and City level.
Source: China’s Medical Device Market (Presentation: Jay Biggs, U.S. Department of Commerce, Office of Health and Consumer Goods)
LATIN AMERICA
All countries in the Latin American region legally
recognize the right to health care, but almost one out of
two inhabitants is excluded from social security systems.
Because of diverse historical processes, each country in Latin
America has developed its own system of social protection.
Even if some are partly covered by other public or private
systems, a large number is still excluded for financial (poverty),
geographical or cultural reasons. Although the private sector is
growing in Latin America, the majority of healthcare is public-
based.
Sources: Overview of the exclusion of social protection in health in Latin America and the Caribbean, ILO/PAHO report to the ILO
Tripartite meeting on the extension of social protection in health to excluded groups in Latin America and the Caribbean, Mexico, 29
November - 1 December 1999.
RESHAPING HEALTH CARE IN LATIN AMERICA: A Comparative Analysis of Health Care Reform in Argentina, Brazil, and Mexico, Edited
by Sonia Fleury, Susana Belmartino, and Enis Baris
Copyright Michael Sanchez 2010
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MEXICAN EXAMPLE
“Everyone has the right to health protection “ Art 3 Constitución
México (Dr. Antonio José Caso, México)
Social Security Institutions (Public Sector)
1. Instituto Mexicano del Seguro Social (IMSS)
2. Instituto de Seguridad Social para Trabajadores del Estado (ISSSTE)
3. Secretaría de Salud (Hospitales generales, Regionales, Institutos,
etc.)
4. Seguro Popular
5. Otras instituciones paraestatales (PEMEX, Secretaria de la Defensa,
Marina etc.)
6. IMSS Oportunidades
Source: INEGI. XII Censo General de Población y Vivienda, 2000. Base de datos de la muestra censal
Copyright Michael Sanchez 2010
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MEXICAN EXAMPLE
In Mexico, the penetration rates in the adoption of new
technologies on Health (Medical devices) are much lower in
comparison with other countries in the region
Public Sector: not enough infrastructure for the implementation
of new health technologies (medical devices)
Few doctors trained in the use of new technologies
Currently the Mexican population has little access to medical
devices
Source: Is Equity of Access to Health Care in Latin America Achievable? (Presentation by Antonio Caso MD, Med. Post Graduate
Professor and Distance Learning Coordinator, Post Graduate Division, Faculty of Medicine, National University of Mexico, Mexico D.F,
Mexico)
Copyright Michael Sanchez 2010
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CASE EXAMPLE:
THE EUROPE UNION
Copyright Michael Sanchez 2010
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ECONOMICS OF HEALTH CARE IN EUROPE
Access to medical technology differs across Europe. Differences in
funding and reimbursement systems create barriers for the
adoption of new and innovative medical technology.
Rising costs pressures due to the continued introduction of
new and innovative technologies.
Government pressures to remain within budgetary and
spending limits.
Governments pressures for greater efficiencies by introducing
health care reforms.
Despite different funding mechanisms, all health care systems in
Europe are experiencing conflicting pressures
Source: European Heart Journal (2004) 25, 611–616
Copyright Michael Sanchez 2010
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STRATEGIC CONSIDERATIONS FOR DEVICE
COMPANIES
There are no easy answers but device companies need to have a
strategic reimbursement plan in place for the European Union
countries in addition to their regulatory strategy
Which markets should we address and why?
What should our pricing strategy be?
What clinical data needs to be developed?
What cost data needs to be collected?
How de we ensure market adoption of a new technology?
Source: UK Medical Device Access – Hurdles and Opportunities (Presentation by Synergus, Minneapolis, MN, Nov. 11, 2010)
Copyright Michael Sanchez 2010
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EUROPEAN UNION
Competing goals of cost containment and improved health care
lead to increased consideration of cost and value of technology.
Competitive pressures: The cost and value of technology
Understanding the value of technology allows full economic
and cost benefits for the medical device to be considered
Enables competing products to be reviewed on the basis
of total cost including purchase price and long-term health
costs and benefits
Ultimately improves the quality of medical care for patients
Source: Medical Devices In Europe: Market Overview; MassMEDIC Presentation by N. Gerard Zapiain, U.S. Department of Commerce October 19, 2007
EUROPEAN UNION
Understanding the value of technology through Health Technology Assessment (HTA)
HTA evaluates the cost and benefits of a medical technology
Cost impact and benefit cannot always be evaluated in a pre-market setting
Data must be collected using “real” market experience
The value of technology takes into account long-term health benefits
In most cases, once the true value of long-term health benefits are considered a higher technology medical device with a higher purchase price, will actually have a lower total cost
Source: Medical Devices In Europe: Market Overview; MassMEDIC Presentation by N. Gerard Zapiain, U.S. Department of Commerce October 19, 2007
HEALTH TECHNOLOGY ASSESSMENT (HTA)
Health technology assessment (HTA) is a
multidisciplinary process that:
Summarizes information about the medical, social, economic
and ethical issues related to the use of a health technology in a
systematic, transparent, unbiased, robust manner.
Its aim is to inform the formulation of safe, effective, health
policies that are patient focused and seek to achieve best
value.
Source: EUnetHTA
Copyright Michael Sanchez 2010
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HTA EXAMPLE: THE UK
National Institute for Health and Clinical Excellence (NICE)
Evaluation Pathway Programme focuses specifically on the
evaluation of innovative medical technologies
The Medical Technologies Advisory Committee (MTAC) supports
the Evaluation Pathway Programme
The National Health Service (NHS) wants NICE to bring together
knowledge and guidance (e.g., “Technology Appraisals”)
TA process is slow (124 are currently pending)
NICE encourages industry and stakeholder inputs to the TA
process, which is relatively transparent
Source: http://www.nice.org.uk/aboutnice/whatwedo/aboutmedicaltechnologies/MTACmembers.jsp
Copyright Michael Sanchez 2010
30
HTA EXAMPLE: THE UK
National Institute for Health and Clinical Excellence (NICE)
TAs take into account a balance between clinical outcomes and
cost effectiveness
Political pressure may remove cost element from NICE TAs
(Recent cancer drugs not recommended by NICE)
Once NICE guidance is published, health professionals are
expected to take it fully into account when deciding what
treatments to give people.
NHS funding is mandatory within 3 months of NICE guidance by
law. However, this does not happen in reality
Source: http://www.nice.org.uk/aboutnice/whatwedo/aboutmedicaltechnologies/MTACmembers.jsp
Copyright Michael Sanchez 2010
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NICE EXAMPLE: DRUG ELUTING STENTS
Drug-eluting stents (DES) are recommended for use in
percutaneous coronary intervention for the treatment of coronary
artery disease, within their instructions for use, only if:
the target artery to be treated has less than a 3-mm calibre or
the lesion is longer than 15 mm, and
the price difference between drug-eluting stents and bare-
metal stents is no more than £300.
DES initially recommended by NICE in 2003 over Bare Metal
Stents (BMS). Then, BMS market prices plummet. DES is re-
evaluated in 2008, and is no longer considered cost-effective if
the price premium is < £300 ($ differential in U.S. is thousands)
Source: http://www.nice.org.uk/nicemedia/pdf/TA152Guidance.pdf
Copyright Michael Sanchez 2010
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IN SUMMARY
Reimbursement and healthcare systems varies
globally by each country
HTAs are commonplace
Cost pressures are driving reform and constant
changes in country specific reimbursement funding
requirements
Strategically, companies must be prepared with both
clinical and cost effectiveness data regardless of the
country
Copyright Michael Sanchez 2010
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CONTACT INFORMATION
Committed to helping your company make
intelligent, informed decisions that includes
sound reimbursement advice
Michael Sanchez, M.A., CCA
Reimbursement Advisor
Independent Consultant
651-472-3442
Copyright Michael Sanchez 2010
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