"Value-based approaches to healthcare systems and pharmacoeconomics requirements in Asia: South Korea, Taiwan, Thailand and Japan"

INSIGHTS: This article talks about Asian Healthcare System wherein it includes how it works and how did it develop in the beginning of the 21^st century. Also in this article you can see how Asian countries have similar driven forces and approaches to foresee some level of standards for development. I can say that this article can help us to gain information about key concepts and remarkable events regarding the development.

Author(s): Isao Kamae

Source: PharmacoEconomics. 28.10 (Oct. 2010): p831.

Document Type: Article

Asian healthcare systems are very diverse, representing cultures, political systems and economies from more than 30 countries with varying histories. Despite the diversity in the region, there has been enormous growth in health economics and outcomes research since the beginning of the 21st century. Whilst Japan has seen very limited use of health technology assessment (HTA), South Korea, Taiwan and Thailand have had remarkable success in establishing government agencies for HTA, employing HTA concepts from the UK National Institute for Health and Clinical Excellence (NICE). These three countries are driven by the following common factors: (i) a desire to establish universal healthcare insurance coverage in their respective nations; (ii) the need for rational allocation of scarce resources; (iii) a desire for government to provide leadership in HTA; and (iv) availability of HTA professionals and faculties through international networks. The HTA models introduced by these three countries are both similar to and different from those of HTA agencies in Europe, but might work well as examples for other countries in the region.

1. Overview of Health Technology Assessment in Asia

Healthcare systems in Asia vary widely, due to differing histories, cultures, political systems and economies between the approximately 30 countries in the region. Most of the systems tend to be more government-centred than those in western countries. As governments are responsible for the costs of healthcare, they are interested in efficiency as well as effectiveness when evaluating new drugs. Many governments, including those of China, Japan, Malaysia, Pakistan, Thailand and South Korea, control pricing and reimbursement for new drugs. Therefore, we have seen a rapidly increasing interest in value-based approaches to reimbursement, primarily using cost-effectiveness analysis (CEA).

In the US, although a need for CEA is not explicitly mentioned in the legislation surrounding comparative effectiveness research (CER), the federal support for CER has been regarded as a significant step forward in controlling healthcare spending. [4] As commonly seen in discussions around evidence-based decision making in healthcare, CER enables the evaluation of health interventions in terms of non-cost comparisons, while CEA assesses the added improvement in health outcomes relative to cost. Looking at the issues related to CER and CEA in Asia, the concept of health technology assessment (HTA) plays an important role, presuming that HTA is the umbrella for comparing heath interventions with CER and CEA, and for making decisions as to whether or not a new intervention could be accepted for reimbursement at the government level.

In particular, three countries in Asia (South Korea, Taiwan and Thailand) have started to take the leadership in implementing HTA in their healthcare systems. [5,6]

Asian countries can be classified into three categories according to HTA development: (i) rapidly changing countries (South Korea, Taiwan and Thailand), in which HTA is widely used in the regulatory processes for reimbursement of drugs and medical devices; [7] (ii) moderately changing countries (China, Japan and Singapore), in which pharmacoeconomic evidence is only partially, or not yet officially, utilized in informing reimbursement decisions; [8] and (iii) gradually changing countries (India, Malaysia, Pakistan, Philippines), which are just beginning to investigate the use of HTA in drug regulation. [9]

The introduction of HTA requirements at the government level in South Korea, Taiwan and Thailand has increased interest in HTA throughout Asia. As a result of this interest, the 6th Annual Meeting of Health Technology Assessment International was held in Singapore in 2009, [10] and the International Society for Pharmacoeconomics and Outcomes Research (ISPOR) 4th Asia-Pacific Conference will be held in Thailand in September 2010. [11]

2. Rapidly Changing Countries

The rising cost of healthcare and universal healthcare insurance coverage are two key drivers for using economic evaluation at the regulatory level. Four Asian countries have established universal healthcare insurance coverage: Japan (see section 3) was the first to introduce nationwide insurance coverage (1961) and, subsequently, South Korea, Taiwan and Thailand succeeded in establishing universal coverage by introducing social health insurance. These countries share concern that a failure to escape from financial insolvency will destroy universal coverage in the future. This concern may be driving the use of HTA in informing reimbursement decisions in South Korea, Taiwan and Thailand. The HTA requirements in these four countries are summarized in table I.

2.1 South Korea

In South Korea, new medical technology is approved by the Korean Food and Drug Administration. In December 2006, a new reimbursement system, including a 'Positive List', [7,12] was introduced. Under this system, only drugs proven to be economically and clinically valuable can be listed, and applicants must submit economic evaluation studies to demonstrate the cost effectiveness of their drugs. [12] 

Pharmacoeconomic appraisal is conducted by the Health Insurance Review and Assessment Service (HIRA) before drugs can be considered for 'positive listing'. Pricing is undertaken by the National Health Insurance Corporation (NHIC), which considers foreign prices, price-volume and budget impact. The HIRA published a draft (for public consultation) Korean pharmacoeconomics guideline [12,13] for reimbursement and pricing in June 2005, and a final version in June 2006. The formulation of new policy following these guidelines began in January 2008. The objective of the guidelines is to provide industry with instructions for submission of drugs for inclusion in the positive list, and to embrace rationality in the use of scarce healthcare resources. The Korean Government expects a gain of efficiency for the healthcare system through healthy price competition and through improved health outcomes via the products.

The mandatory implementation of HTA has raised some difficulties, including additional technical and financial burdens for the industry and the problem of so-called 'listing lag'. During the first implementation stage, 84 drug applications were submitted to the HIRA between January 2007 and April 2008. [12] After reviewing the pharmacoeconomic evidence, the HIRA approved only 47 drugs; [12] these drugs were subsequently sent to the NHIC for price negotiation. Only ten drugs (12% of the initial applications) were priced and listed. [12] This 'listing lag' caused some scepticism from the industry, which felt there was a lack of professionals trained in the discipline of pharmacoeconomics, especially among government regulators.

The National Evidence-based Healthcare Collaborating Agency (NECA) [14] is a new agency that opened in March 2009 and conducts research regarding comparative and cost effectiveness of drugs already listed on the National Health Insurance (NHI). The major responsibility for conducting HTA research in South Korea seems to be moving to the NECA, sponsored by the HIRA. [15]

2.2 Taiwan

In Taiwan, drug applications are reviewed and approved by the Taiwan Bureau of Food and Drug Analysis and the Center for Drug Evaluation (CDE). For listing onto the NHI formulary, evidence on effectiveness is required, but cost effectiveness is not mandatory. Price in the NHI formulary is set by the Bureau of National Health Insurance (BNHI), with periodic price revisions. The Taiwanese Government has been introducing various strategies to control increasing pharmaceutical expenditure in the NHI: [16] in February 2007, seeing the potential of HTA to provide efficient cost containment, an HTA division was established to support the work of the CDE in assessing the cost effectiveness of drugs. In June 2007, the HTA task force was organized to undertake reviewing of pharmacoeoconomic data. Between October 2007 and March 2008, the HTA division completed 30 pharmacoeconomic reports to the BNHI. [17]

The voluntary requirement for cost-effectiveness evaluation in Taiwan appears to have been more successful than the mandatory approach of South Korea. One of the reasons is the pharmaceutical industry's perception that in Taiwan the better the evidence provided for the target drug, the higher the reimbursement price; a value-based approach to pricing. From this, we learn that one key to the successful introduction of HTA policy is the construction of an evaluation mechanism that properly reflects value and so provides an incentive for industry whereby they obtain a higher price if a drug is proven valuable to society. In Taiwan, we cannot overlook the significant role of a study guideline [18] published in December 2006 by the Taiwan Society of Pharmacoeconomics and Outcomes Research (TaSPOR). As TaSPOR is the Taiwan chapter of ISPOR, we recognize that the development of the HTA/CDE model in Taiwan has been based on, and influenced by, activities of the ISPOR Asia Consortium.

2.3 Thailand

Thailand is the most recent of the three countries to establish universal healthcare insurance coverage (2001). Drugs are reviewed and approved by the Thailand Food and Drug Administration (TFDA), then listed on the National List of Essential Drugs (NLED) with 2-year temporary licensing plus safety monitoring for new drugs. Drugs listed on the NLED are reimbursable for all NHI schemes. Listing is determined based on safety and efficacy, and no pharmacoeconomic evidence is required in the TFDA approval process. However, the Ministry of Public Health (MOPH) recognized the need for introducing value-based policy making soon after the establishment of universal coverage. The MOPH established a unit for HTA at the Department of Medical Services in MOPH and subsequently established an HTA programme (Health Intervention and Technology Assessment Program [HITAP]) [19,20] in 2006. This was extended to an associate organization under the auspices of the International Health Policy Programme in the Thai Government. Having embraced economic studies in healthcare decision making, pharmacoeconomic evidence was officially considered for the revision of the NLED in 2008. To respond to regulatory requirements, HITAP developed the first national guideline for HTA studies [21] in the same year.

The HITAP is responsible for appraising a wide range of health technologies and programmes for Thai society (e.g. pharmaceuticals, medical devices, medical interventions, individual and community health promotions and disease preventions) and advocates four strategies: [19]

I. research and development of a fundamental HTA system;

II. strengthening of human capacity in HTA methods;

III. HTA model research;

IV. R&D of an appropriate structure and mechanism for future HTA.

This approach appears systematic and promising for the future of healthcare systems in Thailand; however, industry and academics must understand and respond to the additional burden of allocating specialists in pharmacoeconomics and the relevant disciplines.

3. Japan

Japan was the first Asian country to establish universal health insurance coverage (1961). [22] About 5000 insurers are categorized: Employees' Health Insurance (EHI) makes up 60% and NHI for non-employees makes up the other 40%. Fee for service is the principle of payment, with a co-payment of 30%, according to fee and reimbursement rules biennially revised by the Japanese Ministry of Health, Labour and Welfare (MHLW). The aging Japanese society is beginning to cause serious problems: the NHI is becoming financially weaker as many high-risk elderly shift from EHI (i.e. employment) to NHI (i.e. non-employed). 

Total health expenditure (Called the National Medical care Expenditure in Japan) was $US341 billion in 2007, approximately 9% of the Japanese National Income, with the average increasing at a rate of 1.7% per year between 1998 and 2007. [23] In response to concern about possible financial crises in healthcare in the future, the following three challenging reforms have been implemented by the MHLW over the last 10 years: [24]

1. Long-term Care Insurance (1) (since 2000); [25]

2. Diagnosis Procedure Combination (2) (since 2003); [26] and

3. The Healthcare Systems Reform Act (3) (July 2006). [28]

Although CEA is implicitly related to these reforms and is expected to have an important role to play in Japanese healthcare, [29] the Japanese Government has not yet explicitly incorporated HTA requirements in many reform processes. One exception was a recommendation, announced in 1992, that health economic evidence should be included in a dossier to the MHLW. [30] Despite this early effort to utilize HTA, interest in conducting pharmacoeconomic studies has been steadily decreasing among pharmaceutical companies in Japan since then. [30,31] A major reason for this is the lack of incentive for the industry to submit pharmacoeconomic evidence; all processes--from approval to pricing--are fully controlled by the MHLW, so there is no room for the industry to negotiate higher drug prices under the current rigid rules. In addition, the lack of government regulators, industry professionals and even academic faculties with skills in pharmacoeconomics has limited the capacity for undertaking value-based approaches in public policy making.

A recent report [32] from the Organisation for Economic Co-operation and Development (OECD) may provide some enlightenment as to reasons for different approaches to HTA by different Asian countries. In 2005, drug expense as a percentage of total health expenditure was 25.7% in South Korea and 19.8% in Japan. In 2006 it was 25.6% in South Korea and 19.6% in Japan. The average for the OECD was 19.0% in 2005. The increase in rate of spending for drugs from 1998 through 2005 was 13.3% for South Korea, 5.8% for Japan, and the OECD average was 5.5%. The higher figures for South Korea compared with Japan may explain the difference in attitude towards HTA despite both countries having similar healthcare systems.

Despite the lack of official legislation regarding HTA in Japan, some sound approaches to pharmacoeconomic assessment do exist outside of government. In 2003, the first ISPOR Asia-Pacific Conference was held in Japan, [33] and subsequently, the ISPOR Japan Chapter was established in 2005. Kamae et al., [34] the research group funded by the MLHW, drafted a pharmacoeconomic study guideline in 2007. In the same year, the Japanese Pharmaceutical Manufacturers Association (JPMA) began funding an education and research project for pharmacoeconomics, while the JPMA proposed a new pricing system. In 2008, an economic evaluation guideline for medical devices and diagnostics was published by the Ministry of Economics, Trade and Industry (METI); [35] however, it is still a recommendation rather than a regulatory requirement. Industry is concerned that it may not be as influential as the METI expects.

In January 2010, a modified, rather different, version of the new pricing system proposed by the JPMA was accepted by the MHLW. [36,37] This new pricing system may encourage industry to be more engaged in outcomes or pharmacoeconomic studies to justify the value for money of the product. Although the adoption of HTA seems slow in Japan, it is obvious that value-based approaches should be sought, not only for cost containment, but also to ensure that the healthcare system continues to be sustainable.

4. Key Priorities

The leading governments of Asia (South Korea, Taiwan and Thailand) envisioned utilizing explicit evidence of cost effectiveness in policy making. [7] This contrasts with legislation in the US, which does not explicitly include cost effectiveness in health legislation. The explicit use of cost effectiveness in legislation is considered the 'fourth hurdle' of HTA. It is obvious that the introduction of HTA requirements by regulatory authorities, as seen in South Korea, Taiwan and Thailand, implies that an era of the fourth hurdle has just begun in Asia. It may be similar to the HTA situation in Europe, where the UK National Institute for Health and Clinical Excellence (NICE) influenced other European countries. The appraisal methods for HTA introduced by the three countries (detailed in section 2) in Asia are based on the 'threshold' method using an incremental cost-effectiveness ratio (ICER). So far, none of these three countries has officially announced what ICER level to accept. The flexible approach to the ICER threshold seems to be similar to the case of NICE. However, South Korea takes a different approach to pricing, as the NHIC considers foreign prices, price-volume and budget impact when determining prices.

The following common factors drive the use of HTA in South Korea, Taiwan and Thailand: (i) substantial establishment of universal healthcare insurance coverage in the nation; (ii) a continuing need for rational allocation of scarce healthcare resources; (iii) leadership by government; and (iv) availability of HTA professionals and faculties working through international networks.

The first factor, universal healthcare insurance coverage, might have the potential to make the HTA model similar to that of NICE, even if Asian countries adopt their own specific cost-effectiveness threshold. It is likely that HTA will increasingly influence research, education, practice and funding in healthcare among Asia-Pacific countries over the coming decade. Nevertheless, there exist impediments that will need to be overcome. Some of the most serious problems include the lack of proper recognition of what 'value-based' means, the lack of scientific utilization of the HTA guidelines and the lack of human resources capable in the interdisciplinary fields relevant to HTA in all sectors such as government regulators, industry professionals and academic faculties. One of the most serious concerns surrounding the current HTA situation in Asia is the quality of studies being conducted. Lee et al. [38] critically reviewed published Korean economic evaluations of health technologies and found that many studies did not meet international quality standards.

Without successful elimination of these barriers, the emerging challenges in Asia might result in two problems. 

First, it is likely to limit access to an appropriate range of healthcare interventions due to incorrect interpretation of cost-effectiveness evidence. Second, a new system may not attain the efficient allocation of resources at the level intended by the regulators. The potential risks leading to such defects must be minimized, while the benefit of introducing value-based healthcare should be maximized across the broad spectra of patients, governments and companies operating in the region. In order to address these issues, ISPOR HTA Council Asia-Pacific 2008 [39] identified priority programmes emerging in Asia, and recommended that the following top three priorities should be implemented in the near future:

1. training/education;

2. information--patient databases/registries;

3. guidelines/methodological standards.

The first priority (training/education) should include decision makers in particular. The quality of HTA must be continuously improved. There is a gap between the vision of decision makers and the science of HTA, and this remains a critical challenge. For example, a recently published ISPOR Task Force report on quality improvement for CEA [40] will be useful to improve communication and fill that gap.

Regarding the second priority, those countries that have recently established universal health insurance coverage, such as Taiwan or Thailand, have an advantage in that they can use modern electronic health record systems. However, the social health insurance system in Japan was built more than 30 years ago and was not designed to make data available for pharmacoeconomic studies or for use in HTA applications.

Therefore, some countries have the added challenge of re-building an efficient and nationwide electronic health record system that can contribute to pharmacoeconomic studies.

Asia is not the only region that could benefit from establishing these key priorities; Europe, for instance, could also benefit. The Institute for Quality and Efficiency in Health Care (IQWiG) has disseminated a new guideline for HTA in Germany. [41] The IQWiG guidance used an 'efficiency frontier', a different approach from that of NICE. Such a new wave in Europe may influence Asian countries seeking any possible practical applications of value-based decision making in healthcare. Supposing that other countries in the region follow these three countries (section 2) in giving HTA a place in national policy making, they will need to consider which option is the most appropriate to satisfy local needs in each country: a similar approach to that of NICE; a different approach from NICE (e.g. IQWiG efficiency frontier), or a third method specific to each country (e.g. a way of mixing NICE methods with those of IQWiG). If Asian countries succeed in developing an alternative approach to HTA, it will become an 'Asia model', but so far no-one can tell what it is or what it should be.

Concerning cost containment, there is an optimistic opinion that an aging society will find a solution without any healthcare system reform. [42] Such a macroeconomic vision may or may not help Asian countries contemplate a third, alternative, approach towards a country-specific HTA model. This is an issue for further research and political judgement in each country.

All these changes continue to have an impact on the promising healthcare market in Asia. Asia is likely to establish more HTA agencies beyond the three already in the region, possibly in collaboration with western HTA agencies. As reported in an international overview of HTA agencies in Europe, [43] further international comparisons of how Asian HTA agencies include CER strategies will be useful for learning and helping each other grow.

Acknowledgements

No sources of funding were used to prepare this article. The author has no conflicts of interest that are directly relevant to the content of this article.

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(1) Nursing care insurance provided by the MHLW. The insurance covers those aged >65 years and patients aged >40 years with specific diseases. The premium payment is mandatory for any Japanese aged >40 years. A free-to-choose contract between the insured and a care provider is required in order to benefit from the insurance, which is provided as home-based nursing care. The government pays the care provider based on the flat payment tariff according to clinical needs and grades (six categories) regulated by the MHLW.

(2) A case-mix-based payment system that includes about 2000 categories combining diagnosis with procedures based on the International Classification of Disease, 10th edition (ICD-10). This system became a milestone that changed the fee-for-service policy into flat payment. It was initially applied for inpatient care in the acute phase, but has since been extended to include chronic-phase and outpatient care. The impact for cost containment is, so far, not as much as the government expected (the year-on-year increases of the National Medical Care Expenditure were 1.8% for 2004, 3.2% for 2005, 0% for 2006 and 3.0% for 2007 after the DPC was introduced in 2003). [23]

(3) The Koizumi Cabinet of the LDP (Liberal Democratic Party of Japan) suggested three directions for reform to control soaring healthcare expenditure: (i) initiatives for the prevention of lifestyle-related diseases; (ii) introduction of a new healthcare insurance system for those aged >75 years; and (iii) downsizing nursing hospitals from 380 000 to 150 000 beds by the year 2012 to save Japanese Yen (f)4 trillion by the year 2025. However, some of the goals for the reform have not been sufficiently attained due to political instability after the Koizumi Cabinet. That is, the new healthcare insurance system for those aged >75 years began in April 2008 and was entitled the 'medical care system for elderly in the latter stage of life', but in 2009 the Hatoyama Cabinet, a new administration of the DPJ (Democratic Party of Japan), declared their intent to abolish the new elderly system by 2013 and to implement another plan, called 'long life medical care system', which is still under government consideration. [27]

Correspondence: Professor Isao Kamae, JPMA Pharmacoeconomics Program, Graduate School of Health Management, Keio University, 4411 Endo, Fujisawa, Kanagawa 252-0883, Japan. E-mail: ikamae@sfc.keio.ac.jp

Isao Kamae

Japanese Pharmaceutical Manufacturer's Association (JPMA) Pharmacoeconomics Program, Graduate School of Health Management, Keio University, Fujisawa, Kanagawa, Japan

Table I. Health technology assessment (HTA) requirements

Country       Approval   Reimbursement

South Korea   No         Yes (mandatory submission and review listed

                         drugs by HIRA and NECA)

Taiwan        No         Partial (sampling review by HTA Division;

                         expectation for value-based pricing of some

                         products)

Thailand      No         Periodic revision of the NLED with HITAP

Japan         No         No

Country       Price

South Korea   No (negotiation by price-volume, expected sales amounts,

              etc.)

Taiwan        No (negotiation by government rules)

Thailand      No (negotiation for medium price ceiling, compulsory

              licensing)

Japan         No (negotiation by government rules)

HIRA = Health Insurance Review and Assessment Service; HITAP = Health

Intervention and Technology Assessment Program; NECA = National

Evidence-based Healthcare Collaborating Agency; NLED = National List

of Essential Drugs.

Kamae, Isao

Source Citation

Kamae, Isao. "Value-based approaches to healthcare systems and pharmacoeconomics requirements in Asia: South Korea, Taiwan, Thailand and Japan." PharmacoEconomics 28.10 (2010): 831+. Academic OneFile. Web. 4 May 2012.

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