[Special Feature: Cancer and Society] Rei Goto: Economic Evaluation of Cancer Care—Focusing on the Cost-Effectiveness of Anticancer Drugs

2025/07/07

In cancer care, new technologies are being developed daily, ranging from diagnosis to prevention and treatment. In every country, there are public regulations in place before people can use these technologies. This is because it is extremely difficult for individuals to understand the effectiveness and safety of specific medical technologies.

Public regulations can be broadly divided into two categories. The first is "approval." New technologies such as pharmaceuticals and medical devices are reviewed for their efficacy and safety, and if there are no issues, they receive approval from a public agency and are marketed. The second is "reimbursement." This involves deciding whether to pay for the medical technology through public healthcare systems or private insurance, as well as determining the payment amount.

In Japan, "approval" is decided by the PMDA (Pharmaceuticals and Medical Devices Agency), and "reimbursement" is decided by the Ministry of Health, Labour and Welfare. Since almost all pharmaceuticals that receive approval (known as pharmaceutical approval) are reimbursed by public medical insurance (known as insurance coverage), the two regulations are effectively integrated.

Outside of Japan, it is not uncommon for approved drugs not to be reimbursed. Since the United States does not have a universal health insurance system like Japan, many people enroll in private medical insurance rather than public healthcare systems. Whether an individual drug is reimbursed depends heavily on which insurance plan the person is enrolled in. In Europe and other regions, unified healthcare systems are operated in each country similar to Japan, but the reimbursement status of drugs varies by country.

As a result, the types of drugs available to patients, even anticancer drugs, vary by country. The United States is the country where drug development by pharmaceutical manufacturers and startups is most active in the world. How many of the drugs approved in the U.S. are available for use in other countries? Shiraiwa (2025) investigated the proportion of anticancer drugs approved in the U.S. between 2017 and 2022 that are in circulation in various countries. The results were 50–60% in Germany and the UK, approximately 40% in Japan, 30–40% in Switzerland and Canada, approximately 30% in Australia, and approximately 10% in New Zealand. While the inability to use drugs approved overseas in Japan is sometimes viewed as a problem, in the U.S., availability depends on the insurance plan, and in other countries, it varies by nation; in any case, it is not the case that all drugs are available everywhere.

Even if a drug is approved, if it is not reimbursed by the public healthcare system, one must either pay the full amount out of pocket or enroll in private insurance that reimburses that drug. Thus, reimbursement decision-making is crucial for whether many citizens can use a particular drug.

"Approval" and "reimbursement" have different roles and evaluation points. As shown in Figure 1, "approval" evaluates whether the medical technology is safe and has health improvement effects. On the other hand, "reimbursement" judges how to use money collected from everyone—such as public systems or private insurance—compared to "approval," which simply judges whether it can be used even if paid for out of pocket. Therefore, evaluations from a medical economic perspective are necessary, such as whether the technology is worth the money and its impact on the overall budget.

Regarding health improvement effects, the absolute effect of the new technology itself is important for "approval," but for "reimbursement," the relative effect compared to technologies used previously is important. A technology is "approved" if it is safer and provides health improvement compared to when it is not used, but for "reimbursement," it is important whether more health improvement is obtained compared to when existing technology is used, and further, whether that is worth the cost.

Therefore, the hurdle for "reimbursement" is generally higher than for "approval." Japan's system, where almost all pharmaceuticals that receive pharmaceutical approval are covered by insurance, can be said to be an excellent system in terms of equitable access to medicines.

How medical economic evaluations are implemented in policy varies considerably by country. The overall process—including the evaluation of medical technology value, such as the relative effect of individual medical technologies and medical economic analyses like cost-effectiveness, as well as policy decision-making using the evaluation results—is called Health Technology Assessment (HTA).

In Japan, cost-effectiveness evaluation of pharmaceuticals and other products began in April 2019. Even before then, there was a system for new drugs to determine their official price (drug price) by comparing them with existing drugs. Therefore, it could be said that HTA, which involves evaluation at the "reimbursement" stage from a different perspective than "approval," was partially being conducted. However, until then, cost-effectiveness had never been explicitly evaluated and incorporated into decision-making.

Currently, the cost-effectiveness of pharmaceuticals and other items selected based on market size and other factors is examined, and the results are used to adjust official prices. A characteristic of the Japanese system is that, unlike other countries, cost-effectiveness is not used to determine the eligibility for reimbursement itself. It can be described as a system that emphasizes consistency with the existing medical system and fairness in access to new medical technologies.

Coinciding with this institutionalization, Keio University was commissioned in 2019 by the Graduate School of Health Management to conduct a human resource development project for individuals involved in the economic evaluation of medical technologies, including cost-effectiveness evaluation. Furthermore, since 2020, the School of Medicine has been commissioned to conduct public analysis projects that actually perform evaluations of pharmaceuticals and other products.

More than six years have passed since institutionalization, and evaluations of over 50 items have been conducted. Of the 10 items for which evaluation began in fiscal year 2024, seven were anticancer drugs.

The Incremental Cost-Effectiveness Ratio (ICER) is used globally as an indicator of cost-effectiveness and can be expressed by the formula above.

Since ICER is an indicator of how much additional cost is required per improvement in effect, the larger the ICER, the worse the cost-effectiveness of the new medical technology. In this way, the cost-effectiveness of new medical technologies can be quantitatively evaluated using ICER.

Regarding the indicator of effect, an indicator called QALY (Quality-Adjusted Life Year) is used, which considers both quality of life (QOL) and survival period, so that as wide a range of medical technologies as possible can be compared using the same effect indicator. Since 1 QALY represents one year of survival in perfect health, ICER carries the meaning of the additional cost required to extend survival by one year in perfect health.

What level of ICER is considered to have good cost-effectiveness is a significant issue, but the guideline for judging cost-effectiveness as good in Japan is set at an ICER of up to 5 million yen/QALY. This amount is used in current cost-effectiveness evaluations, but for items deemed to require special consideration, such as anticancer drugs or those where pediatric use is included in the indications, 7.5 million yen/QALY is used.

There have been seven anticancer drugs for which evaluations have been completed so far. Even for the same anticancer drug, cost-effectiveness may differ depending on the type of cancer, the timing of treatment, and the existing treatments being compared. Out of a total of 16 cases, 11 (69%) were cases where cost-effectiveness was good—that is, the ICER was less than 7.5 million yen/QALY. Among them, two cases showed higher efficacy compared to existing treatments and also reduced costs, meaning the results showed very good cost-effectiveness. On the other hand, there were five cases (31%) where cost-effectiveness was poor—that is, the ICER was 7.5 million yen/QALY or higher. Incidentally, there were no cases where the effect was inferior to existing treatments.

In Japan, these results are used to adjust official prices. Even if cost-effectiveness is poor, the drug will not become unavailable under public insurance. If the official price is lowered, the patient's out-of-pocket cost for the drug may also decrease, so there is unlikely to be confusion in medical settings (though in the long term, there is a possibility that lower prices could reduce development incentives and make it harder for new technologies to be developed).

The idea of considering cost-effectiveness in medicine is far more accepted now than it was 25 years ago when the author entered graduate school. Policy discussions regarding the cost-effectiveness evaluation of pharmaceuticals and other products began around 2010 and started after a preparation period of about 10 years. First, an academic consensus was reached among domestic researchers regarding the methodology of medical economic evaluation, and methodologies for conducting high-quality medical economic evaluation research were compiled as guidelines. In fiscal year 2016, a trial introduction of cost-effectiveness was conducted for seven drugs and six medical devices. In this way, careful consideration was given to institutionalization, and regarding policy application, it was decided to use it for adjusting official prices rather than deciding the eligibility for reimbursement itself.

What should be done if further efficiency in medical expenses becomes necessary in the future? Although it was not the case in the cost-effectiveness evaluations of anticancer drugs, if there is no improvement in effect compared to existing treatments, there would likely be little resistance to actively using cheaper treatments, as this is already being done through the promotion of generics. In fact, research is underway to see if cost reductions through drug holidays or dose reductions are possible for anticancer drugs if the effects are equivalent.

In cases where the effect is improved compared to existing treatments but the cost is high, deciding on the eligibility for reimbursement by considering cost-effectiveness is difficult to introduce through technical discussions among experts alone. For example, is the guideline of 5 million yen/QALY for good cost-effectiveness truly appropriate? While anticancer drugs are allowed a certain degree of lower cost-effectiveness at 7.5 million yen/QALY compared to other diseases, are there other diseases that require consideration?

These issues were discussed over time at government committee meetings where medical stakeholders gathered during the introduction of the cost-effectiveness evaluation system. However, if medical economic evaluation is to be used more actively for resource allocation in healthcare in the future, it will be necessary to engage in discussions involving experts, patients, and the general public who pay insurance premiums and taxes, as is done in other countries.

* Takeshi Shiraiwa (2025) "The Problem of 'Over-development' and 'Under-development': Or a Study on Local Drugs and Drug Lag," Japanese Journal of Health Economics and Policy 36(2)