A comparison of healthtech regulatory issues in North Asia

Drug pricing and reimbursement top the agenda in South Korea, while Japan is exploring the impact of digital technology on medical information.

JAPAN

Healthcare technology is attracting significant attention in Japan, and the market size of the Japanese healthcare industry is expected to continue to grow. According to a report by the Ministry of Economy, Trade and Industry, the healthcare industry’s value is projected to reach JPY33 trillion (USD230 billion) by 2025. In addition, patent applications for healthcare technologies are growing steadily; they doubled worldwide between 2013 and 2019, according to the Japan Patent Office. The Japanese government has been promoting healthtech and medical digital transformation (DX). It established what it calls a Medical DX Promotion Headquarters in the Cabinet Office in 2022 for sharing and verifying progress in DX. It appears their mission is to facilitate use of a personal health record (PHR) and they expect a national ID card will become a portal of PHR. Whichever direction it takes, personal information protection is an important legal issue in healthtech, including medical DX.

INFO-SHARE ISSUES

Medical DX must simultaneously solve the conflicting issues of improving the availability of large volumes of medical information and appropriately protecting personal information.

Medical information is, as a matter of course, categorised as “personal information” and protected under Japan’s Act on the Protection of Personal Information (APPI). In addition, medical information is subject to stronger protection as “sensitive personal information”.

In principle, the APPI requires data subjects to consent to their sensitive personal information being provided to a third party. However, individual opt-in consent presents practical difficulties for medical institutions wanting to collect and analyse large amounts of medical information – say, for research.

The APPI provides an alternative: sensitive personal information, including medical information, may be provided to third parties without the data subject’s consent if it is anonymised so individuals cannot be identified. However, when using the alternative avenue, each medical institution bears the burden of making the data anonymous. Another drawback is that research institutions that receive anonymised medical data cannot perform cross-institutional analyses because anonymised medical data lacks cross-reference information.

NEXT-GEN LAW

The Next-Generation Medical Infrastructure Law (NGMIL, formally known as the Act on Anonymised Medical Data that are Meant to Contribute to Research and Development in the Medical Field) was enacted on 11 May 2018, to solve such issues.

It is designed to promote the use of anonymised personal medical information, such as medical checkup results and medical records, for research and development in the medical field. It also establishes a certification system where the government examines whether an applicant producer meets certain technical criteria (for example, whether the applicant producer can ensure high information security and has sufficient anonymisation technology), and whether the applicant producer can appropriately and reliably perform anonymisation for management and utilisation of medical information.

Medical institutions may provide medical information to a certified producer until a data subject refuses (opts out of) the provision. Certified producers may anonymise information and provide the anonymised medical data to research institutions for medical research and development.

In short, the NGMIL aimed to develop a mechanism to facilitate use of medical information by allowing medical information to be provided only to certified producers, unless the data subject refuses the provision, while protecting individual rights and interests.

NGMIL REVISED

However, some issues remained unsolved. Certified producers can only provide research institutions with data in the form of anonymised medical data. This means:

(1) Even if research institutions want data containing a small number of medical cases and unique information, such data is virtually unusable because of the possibility of identifying specific individuals when combining it with other information.

(2) Under the pre-amended NGMIL it is almost impossible to keep providing individual patients’ medical data for tracking chronological changes in their condition.

(3) Even if, after research institutions analyse anonymised medical data, they discover further research should be done, it is almost impossible for them to be provided with other medical information from a data subject’s medical records in the form of anonymised medical data.

(4) It is impossible to verify the reliability of particular anonymised medical data by referring back to the original medical information such as the medical record, even when that would be desirable.

To address such issues, the NGMIL was amended in May 2023 to include a new data category, later named “pseudonymised medical data”. The amended law is to take effect within one year from its promulgation – that is, May 2024.

Pseudonymised medical data is data that has been processed so an individual cannot be identified unless it is matched with other information. To be categorised in this new data category, it is not necessary to delete unique data from personal medical information. However, it is still necessary to delete names and other identifying information.

The revised law establishes mechanisms to:

Certify a producer to create and provide pseudonymised medical data; and allow the certified producer to provide pseudonymised medical data only to users certified by the government on criteria such as safety management.

The first mechanism – whereby the government certifies a producer who may create and provide pseudonymised medical data – has a common structure with that of anonymised medical data. On the other hand, the second mechanism is unique to pseudonymised medical data.

Pseudonymised medical data is at greater risk of being personally identifiable than anonymised medical data, so users are also restricted through certification by the government. In addition, for the purpose of applying for pharmaceutical market approval, certified users may provide pseudonymised medical data to the Pharmaceuticals and Medical Devices Agency (PMDA) and other regulatory authorities including those in foreign countries under the mechanism of pseudonymised medical data, and a certified producer may submit original data to the authorities.

EUROPEAN PARALLELS

The revised NGMIL appears to have something in common with the European Commission’s proposed European Health Data Space (EHDS), which is intended to regulate the primary and secondary use of medical data. Note:

Primary use refers to use by the data subject, and is intended to allow the patient to retain medical records, prescriptions and test results as electronic data compatible across EU member states. Secondary use refers to utilisation in research and development, policy making and the like.

In the proposed EHDS, member states must designate one or more health data access bodies (HDABs) that are responsible for granting access to electronic health data for secondary use. Data users may apply to the HDAB for data access and, when granted, can use the health data.

In the proposed framework, data users can use only anonymised or pseudonymised health data processed by the HDAB. It may be said that the revised NGMIL has something in common with the secondary use mechanism of the EHDS proposal in that it aims to achieve broader utilisation of medical information by having specific, government-designated bodies serve as data provider and data processer, and having anonymised or pseudonymised medical information available.

Japan’s personal information protection system relies heavily on the consent of data subjects. However, the fact that the design of systems that allow the use of personal information without the consent of the data subject, such as the revised NGMIL and the proposed EHDS, are being considered one after another seems to suggest the consent-centric approach to personal information protection itself should be reviewed in Japan.

OUTLOOK

The NGMIL and its amendments are intended to promote the use of medical information and have undoubtedly solved some practical issues. Nevertheless, due to in part a lack of awareness of the systems themselves, they have not been greatly utilised.

This does not necessarily mean they will not be used much in the future. The authors believe the momentum for medical DX will not wane. By the time databases and other platforms are developed, and the use of medical information becomes even more active, there will be a greater demand for personal information protection law professionals who are also familiar with the medical field.

South Korea’s medical security system comprises mandatory health insurance and medical benefits. More than 97% of the population is covered by the National Health Insurance (NHI) system, while the remaining 3% receives medical benefits through public assistance for low-income individuals.

The primary institutions administering the NHI system in Korea are the Ministry of Health and Welfare (MOHW), the National Health Insurance Service (NHIS), and the Health Insurance Review and Assessment Service (HIRA). Specifically, the MOHW oversees the NHI system, the NHIS serves as the insurer, and the HIRA functions as the review and assessment authority.

As of 2022, total health insurance expenses in Korea amounted to about KRW100 trillion (USD76.22 billion), with drug expenses constituting about KRW23 trillion. Korea adopts a positive list system, reimbursing only those drugs deemed cost-effective. The MOHW regulates the prices of drugs eligible for NHI reimbursement, setting and announcing the maximum reimbursement prices (MRPs). Within the context of the NHI in Korea, a drug price typically refers to the MRP (the same meaning applies in this article).

Following marketing approval from the Ministry of Food and Drug Safety based on drug safety and efficacy, manufacturers or importers may apply for NHI reimbursement listing. The Drug Reimbursement Evaluation Committee of the HIRA then assesses clinical utility and cost-effectiveness to determine listing eligibility and initial prices for subsequent drug price negotiations.

If a drug is deemed eligible for reimbursement listing, the NHIS and the pharmaceutical company negotiate the drug price based on its financial impact. For high-priced anti-cancer drugs or rare-disease drugs that meet specific criteria, a risk sharing agreement may be arranged where the NHIS and the company share the uncertainties related to the efficacy and effect, as well as financial impact, of the new drug.

After the determination of the drug price, the Health Insurance Policy Review Committee, under the MOHW, reviews and approves it. This is followed by an MOHW notification that effectuates the reimbursement listing.

These procedures, including the HIRA assessment and the NHIS’s negotiation of drug prices, apply to first-listed drugs, such as new drugs. In contrast, generics and combination products are listed and priced according to set MOHW calculation criteria, which are based on the prices of already listed drugs.

Various post-listing control systems are in place to manage the prices of listed drugs, or to delist them from reimbursement. These systems include:

1. Reducing drug prices if the actual transaction price falls below the MRP announced by the MOHW;
2. Reducing drug prices through negotiations with the NHIS if drug usage volume exceeds a specified threshold;
3. Reducing drug prices in anticipation of increased claims after an expansion in reimbursement coverage;
4. Reducing the prices of original drugs on the entry of generics; and
5. Delisting drugs from reimbursement or reducing their prices according to re-evaluation.

RE-EVALUATION OF LISTED DRUGS

After the publication of the first National Health Insurance Comprehensive Plan, in 2019, the MOHW has been implementing re-evaluation systems. South Korea now has four re-evaluation systems for listed drugs.

(1) Criteria requirements for re-evaluation. From 1 July 2020, this system has transitioned from the previous drug pricing system, which based prices on calculation standards rather than negotiations, to a new approach where pricing is differentiated according to whether a drug meets two criteria: the conduct of its own bioequivalent test; and the registration of a drug master file. This system requires all previously listed drugs priced under the old criteria to comply with new requirements to maintain their existing prices. Consequently, the prices of about 7,000 drugs were reduced in September 2023, with a second re-evaluation scheduled for early 2024 to further adjust (reduce) prices of additional drugs.

(2) Re-evaluation for drugs with approval changes. This system, implemented on 8 October 2020 through an amendment to the Rules on the Criteria for NHI Reimbursement, empowers the MOHW to adjust eligibility for NHI reimbursement, or the MRP, as needed in response to changes in marketing approval details such as alterations in active pharmaceutical ingredients. However, the system has encountered a significant legal challenge. The first application resulted in an administrative lawsuit filed by pharmaceutical companies contesting the applicable price reduction decision. Represented by Shin & Kim, the companies won in the Supreme Court, and no applications of this system have been announced since.

(3) Re-evaluation for appropriateness of reimbursement. This system, initiated in 2020, involves the MOHW annually selecting drugs to assess whether their reimbursement should continue. The process considers clinical utility, cost-effectiveness and social need. The system allegedly places a substantial burden on the pharmaceutical industry. In October 2023, the Seoul Administrative Court ruled in favour of the pharmaceutical companies, represented by Shin & Kim, marking the first successful challenge by the industry against a price reduction under this system.

(4) Foreign drug price comparative re-evaluation. The MOHW has announced a plan, scheduled to be implemented in early 2024, to reduce the prices of listed drugs, including originals with expired patents and generics, by comparing their prices to those in eight countries: the US, Britain, Germany, France, Italy, Switzerland, Japan and Canada. This impending re-evaluation is expected to potentially trigger legal challenges from the pharmaceutical industry, particularly in cases where this re-evaluation leads to drug price reductions.

INJUNCTION REDEMPTION LAW

The MOHW’s notifications to reduce drug prices or delist drugs from reimbursement are considered administrative dispositions, which can be contested through administrative legal proceedings. If a pharmaceutical company files for and is granted an injunction, the MOHW’s disposition does not take effect.

If a pharmaceutical company obtains an injunction but later loses the lawsuit on the merits, it is required to redeem the NHIS’s costs for all or part of the differences in reimbursements paid by the NHIS during the injunction period. Conversely, if a pharmaceutical company proceeds with a lawsuit without an injunction and ultimately wins, the NHIS should refund the company for all or part of the differences in reimbursement expenses.

This law, amending the National Health Insurance Act, took effect on 20 November 2023. Because of the inclusion of redemption and refund provisions, this mechanism is known as the Injunction Redemption and Refund Law.

Opinions are divided on the law’s impact on the pharmaceutical industry’s willingness to seek injunctions against the MOHW’s drug price dispositions. Some argue that the possibility of having to redeem after a loss in court might dissuade companies from pursuing injunctions, while others believe the law will not significantly affect companies’ decision-making. There are also concerns about whether the law infringes the right to a trial.

EXPENDITURE DISCLOSURE

The expenditure report system, mandated by the Pharmaceutical Affairs Act and the Medical Device Act, requires pharmaceutical companies and medical device companies to record detailed accounts of economic benefits provided to healthcare professionals (HCPs) and to maintain relevant evidentiary material.

This system, inspired by the Sunshine Act in the US, was introduced in South Korea in 2018. Its primary objectives are to enhance transparency in pharmaceutical and medical device transactions, and to facilitate voluntary ethical practices in these industries.

A recent amendment has expanded the scope of these requirements to include contract sales organisations in addition to drug suppliers, requiring them to prepare, retain and submit expenditure reports. It has strengthened criminal punishment for non-compliance with these reporting obligations.

To improve the system’s effectiveness, regulations have been instituted regarding the conduct of a fact-finding survey on the status of expenditure report preparation and the disclosure of these reports. The survey results were announced on 29 December 2023, and the expenditure reports are expected to be disclosed for the first time around August 2024.

The disclosure of expenditure reports raises significant concerns, however. There is a risk of privacy infringement, especially if the reports contain personal information such as HCP names. Furthermore, revealing proprietary information such as clinical study data risks trade secret misappropriation. Public access to expenditure reports could also lead to misconceptions that the HCPs have improperly received economic benefits from pharmaceutical companies or others. This misunderstanding could discourage the HCPs from engaging in legitimate activities such as proper product presentations or academic forums.

Ahead of the first disclosure of expenditure reports in 2024, several critical issues remain under discussion. These include determining the appropriate level of personal information disclosure regarding the HCPs, developing strategies to effectively educate the public about the expenditure report disclosure system, and resolving potential conflicts between the HCPs and the companies resulting from the disclosure of expenditure reports.