Application Strategy and Insurance Coverage Strategy: Two Critical Hurdles in the Medical Device Business

In the medical device business, there are two major hurdles when introducing a product to the market. One is regulatory approval (application), and the other is insurance coverage. These two represent separate processes and require different strategies. Moreover, a “valley of death” exists where a device may obtain regulatory approval but fail to achieve insurance coverage. Therefore, an integrated strategic approach combining both is essential for market success.

Medical Device Application Strategy

A medical device application strategy is the approach to obtaining approval or certification from regulatory authorities (in Japan, the Ministry of Health, Labour and Welfare and the Pharmaceuticals and Medical Devices Agency [PMDA]) for market introduction of a medical device. The primary objective of this application process is to demonstrate that “the medical device is safe and has efficacy (effectiveness).”

Key Points of Application Strategy

Identifying Device Classification

Medical devices are classified into Classes I through IV according to the level of risk to the human body. Class I (General Medical Devices) present minimal risk and can be manufactured and sold upon notification to the PMDA. Class II (Managed Medical Devices) carry relatively higher risk; when certification standards are established, approval from a third-party certification organization is required, while other cases require approval from the Minister of Health, Labour and Welfare. Class III and IV (Advanced Management Medical Devices) carry high risk and mandate approval from the Minister, with PMDA review. As the class increases, the examination hurdles become higher and more clinical data is required. Accurately determining which class your product falls into is the first step in your strategy.

Utilizing Existing Certification or Approval Standards

When certification standards or approval standards exist for similar products, submitting an application that conforms to these standards can shorten the review period. This is important for achieving a more predictable examination process.

Design of Non-Clinical and Clinical Trials

Appropriate trial plans must be developed according to product characteristics. For highly novel medical devices in particular, determining what types of trials will demonstrate efficacy and safety is crucial. It is desirable to concurrently collect data for insurance coverage (healthcare economic indicators such as shortened hospitalization periods and reduced complications).

Utilizing PMDA Consultation Services

Effective use of PMDA’s various consultation services, including pre-development consultations, protocol consultations, and investigational new device consultations, can increase the likelihood of successful application. As of July 2024, the specialized review structure for software as a medical device (SaMD) has been strengthened, enabling more detailed consultation support.

Insurance Coverage Strategy

Conversely, an insurance coverage strategy is the approach to obtaining insurance coverage for medical devices that have received regulatory approval or certification. In Japan’s healthcare system, achieving insurance coverage reduces patient burden and is key to market penetration. The primary objective of insurance coverage is to demonstrate “healthcare economic value.”

It is important to recognize that even when a medical device obtains regulatory approval or certification, there is no guarantee that it will receive the reimbursement points the manufacturer expects. Even if a device has high technological innovation, insufficient evaluation from a healthcare economic perspective can result in a failure to establish viability. Therefore, insurance coverage strategy is an extremely important factor in determining the success or failure of medical device business.

Key Points of Insurance Coverage Strategy

Selection of Coverage Category

There are primarily two categories for insurance coverage. One is as a “Specific Insurance Medical Material (Material Price),” where an independent price is set, and the other is “Included in Technical Fee.” Determining which category is most appropriate for your product is important. When covered as a Specific Insurance Medical Material, a public list price is determined based on the Material Price Standard, and points are calculated by dividing the material price by 10 yen.

Identifying Similar Function Categories

When aiming for coverage as a Specific Insurance Medical Material, it is necessary to consider whether to classify the product within existing similar function categories or to establish a new function category. The latter may offer the possibility of higher price settings.

Healthcare Economic Evaluation

Particularly for highly innovative medical devices, analysis from a cost-effectiveness perspective (healthcare economic evaluation) may be required. Data demonstrating QOL improvement and cost-saving effects are important. Since fiscal 2024, the Central Social Insurance Medical Council (CSMMC) has been operating the cost-effectiveness evaluation system in full-scale. Highly innovative medical devices with significant fiscal impact may become evaluation targets. Evaluations use the Incremental Cost-Effectiveness Ratio (ICER), with a standard of 5 million yen/QALY (upper limit 10 million yen/QALY) for price adjustment.

Gaining Support from Academic Societies and Healthcare Settings

Obtaining recommendations from relevant academic societies and demonstrating clinical needs from healthcare professionals increases the likelihood of insurance coverage. Additionally, inclusion in clinical practice guidelines and documented clinical trial results strengthen the case.

Insurance Reimbursement Countermeasures and Consultation with Relevant Parties from Early Stages

To achieve successful insurance coverage, it is important to establish a strategy from the early stages of product development that anticipates review by the Central Social Insurance Medical Council (CSMMC). Specifically, pre-consultation with the Ministry of Health, Labour and Welfare’s Insurance Bureau Medical Services Division and Economics Division, as well as understanding the perspectives of committee members in the CSMMC’s Specific Insurance Medical Materials Specialist Subcommittee, is necessary. Beginning insurance coverage considerations only after regulatory application submission is too late. Rather, from the early development stages, developers should understand the insurance reimbursement point determination process and conduct necessary data collection and strategy planning.

Tips for Obtaining Favorable Insurance Reimbursement Points

Strategic Selection of Comparators

Even for highly innovative medical devices, demonstrating superiority over existing technologies that serve as comparators is necessary. Strategically selecting comparators that perform well from a cost-effectiveness perspective is important. The selection of comparators significantly influences ICER calculations, requiring careful consideration.

Quantifying Healthcare Cost Reduction Effects

Demonstrating specific, quantifiable benefits of introducing a new medical device, such as shortened hospitalization periods, reduced complications, and decreased reoperation rates, is effective. Particularly emphasizing long-term healthcare cost reduction effects is desirable.

Refining Market Size Predictions

Overestimating market size may lead to lower insurance reimbursement points. Conducting realistic and evidence-based market size predictions and constructing appropriate healthcare economic models are important.

Establishing New Technical Fees

In some cases, pursuing a strategy to establish new technical fees rather than coverage as a Specific Insurance Medical Material is also effective. This is particularly worth considering for medical devices where the procedure is an important component.

Clarifying Innovation

Clearly demonstrating differentiation from existing technologies is necessary. Rather than emphasizing mere improvements, innovations that bring fundamental changes to healthcare delivery methods or patient outcomes should be highlighted.

Quantitative Evaluation of Patient QOL Improvement

Demonstrating patient QOL improvements using appropriate indicators (such as EQ-5D) in addition to healthcare cost reduction effects is also effective. This is important as a contemporary evaluation perspective emphasizing patient-centered healthcare delivery.

Strategic Use of Health Technology Assessment (HTA)

When cost-effectiveness evaluation may be required, conducting HTA in-house beforehand and developing strategy based on the results is desirable. Performing analysis in accordance with the National Institute of Public Health’s Healthcare Economic Evaluation Research Center guidelines can facilitate smoother discussion in the CSMMC.

Presentation Strategy at the CSMMC

The deliberation at the CSMMC, which is the final stage of the insurance coverage process, is extremely important. Special attention should be devoted to document preparation and presentation, with consideration of the following points:

Creating clear and concise materials that can be understood in a short time, providing explanations understandable not only to specialists but also to general committee members, presenting evidence that clearly demonstrates both clinical utility and healthcare economic value, clearly articulating patient perspective benefits, preparing for and responding to anticipated questions, and highlighting differentiation points from competing products are all critical.

Since CSMMC deliberations are typically open to the public, the quality of presentations directly influences the evaluation. Creating anticipated question-and-answer documents and conducting thorough practice sessions are also important.

Differences Between the Two Strategies and Importance of Coordination

The Gap Between Regulatory Approval and Insurance Coverage

One important challenge faced in medical device development is the gap where a device may obtain regulatory approval or certification yet fail to receive the level of insurance reimbursement points the company expects. For example, even a technologically groundbreaking new medical device may fail to receive expected reimbursement points for the following reasons:

The product is classified within existing similar function categories, and its innovativeness is not appropriately evaluated; clinical utility is recognized but healthcare economic value is judged insufficient; market size is overestimated, resulting in lower reimbursement point assignments than anticipated; the device becomes incorporated into technical fees, preventing establishment of an independent material price.

To bridge this gap, it is essential to simultaneously consider regulatory strategy and insurance coverage strategy and to engage in early dialogue with insurance authorities.

Key Differences

There are important differences between application strategy and insurance coverage strategy, as shown in the following table:

Item	Application Strategy	Insurance Coverage Strategy
Perspective of Evaluation	Safety and Efficacy (Clinical Value)	Healthcare Economic Value (Cost-Effectiveness, Contribution to Healthcare System)
Required Data	Biological Safety Tests, Physical and Chemical Performance Tests, Clinical Trials	Market Size Forecasts, Healthcare Cost Reduction Effects, QOL Improvement Data, Healthcare Economic Evaluation
Primary Stakeholders	PMDA, Ministry of Health, Labour and Welfare Pharmaceutical and Food Safety Bureau	Central Social Insurance Medical Council (CSMMC), Specific Insurance Medical Materials Specialist Subcommittee
Review Period	Standard Review: Several Months to Over 2 Years; Priority Review: Shortened	Insurance Coverage: Several Months; Cost-Effectiveness Evaluation: 1 to 1.5 Years
Approval Standards	Certification Standards or Approval Standards May Exist	Existing Similar Function Categories or Establishment of New Function Categories

Importance of Coordination

While the two strategies represent separate processes, they are closely interrelated. Conducting data collection from the application stage with insurance coverage in view smooths market introduction following launch. For example, when designing clinical trials, it is desirable to incorporate not only efficacy and safety but also healthcare economic evaluation items (such as shortened hospitalization periods, reduced complications, and overall impact on healthcare costs).

Furthermore, evaluating patient QOL and impacts on daily life in clinical trials yields data directly applicable to insurance coverage evaluation. Additionally, inclusion in clinical practice guidelines and collection of real-world data become powerful evidence for demonstrating healthcare economic value following insurance coverage.

Conclusion

Medical device application strategy and insurance coverage strategy differ in their evaluation perspectives, required data, and relevant stakeholders. A “valley of death” exists where regulatory approval may be obtained without securing expected insurance reimbursement points. Therefore, an integrated approach coordinating both strategies is essential for market success.

From the early stages of medical device development, it is important to establish strategies encompassing not just regulatory approval but also insurance coverage, and to begin preparations in anticipation of CSMMC review. In particular, for insurance coverage, adopting a strategic approach from early development stages—rather than beginning consideration only after regulatory approval—enables shorter development timelines and more efficient market introduction.

For innovative technology to be appropriately evaluated and to establish a sustainable business model, strategy planning from both regulatory and coverage perspectives is indispensable. Since final reimbursement points are determined by the CSMMC, understanding and appropriately responding to its deliberation process is key to success.

When all stakeholders involved in the medical device business understand the differences between these two strategies and the importance of their coordination, and put a comprehensive approach into practice from early stages, the path opens for innovative medical devices to reach patients.