Cell Stem Cell
Letters
Undertested and Overpriced: Japan Issues
First Conditional Approval of Stem Cell Product
Christopher McCabe1 and Douglas Sipp2,3,*
1University of Alberta, Edmonton, AB T6G 2R3, Canada
2RIKEN Center for Developmental Biology, 2-2-3 Minatojima-minamimachi, Chuou-ku, Kobe 650-0047, Japan
3Keio University School of Medicine, Shinjuku-ku, Tokyo 160-8582, Japan
*Correspondence: sipp@cdb.riken.jp
http://dx.doi.org/10.1016/j.stem.2016.03.006
The first authorization of a regenerative
medicine product under Japan’s new
conditional approval system was issued
in September 2015, less than 1 year after
the enactment of an amended Pharma-
ceutical Affairs Law that introduced this
new regulatory approach (Konomi et al.,
2015; Sipp, 2015). The product, named
HeartSheet (Terumo Medical), is an
autologous skeletal myoblast preparation
using cell sheet technology. It has been
authorized for use in patients with
serious heart failure (LVEF [left ventricular
ejection fraction] <35%; III or IV on the
New York Heart Association [NYHA]
functional classification scale) for a
5-year conditional approval period during
which its use is restricted to qualified
physicians and facilities. All treated
cases are subject to mandatory postmar-
ket surveillance. According to the manu-
facturer, the product must show evi-
dence of efficacy in 60 cases treated
with the product, and additionally must
show that the product yields greater clin-
ical benefit than that achieved by 120
control cases treated with the current
standard of care in order to gain full mar-
keting authorization (Terumo, 2015). The
approval estimates use in a total of 123
patients during the 5-year conditional
period.
The pricing of the HeartSheet product,
as for many other reimbursed medical
products in Japan, was subject to deter-
mination by the Central Social Insurance
Medical Council (Chuikyo), which fixed a
price of 14.76 million yen (approximately
$122,000 USD) for a standard treatment
course involving a single ‘‘A kit’’ for use
in cell culture, and a set of five patches
(‘‘B kit’’) for transplantation. Terumo had
initially requested a higher reimbursement
point of 18.89 million yen, and has
signaled that the lower price is problem-
atic from a business perspective. (Hashi-
moto, 2015).
436 Cell Stem Cell 18, April 7, 2016 ª2016 Elsevier Inc.
From a broader perspective, however,
the price for this product is almost
certainly too high. The evidence provided
to support the conditional approval is a
single small-scale (n = 7), open-label
registered clinical trial (Sawa et al.,
2015). Patients receiving the investiga-
tional product showed no statistical
improvement in LVEF, the study’s primary
endpoint; five patients showed no
change; and two showed deterioration in
LVEF 26 weeks after transplantation.
Other endpoints included echocardiogra-
phy, computed tomography (CT), and
NYHA functional classification scores.
The last of these, a subjective measure,
saw the greatest improvement, with six
of seven patients showing better NYHA
scores after transplant.
While encouraging for an early phase
study, the clinical effects it has shown to
date do not appear to justify a price of
well over $100,000 USD. By approving
these prices, the Japanese ministry is
providing two pieces of information to
the market: first, that it has a very high will-
ingness to pay for innovation promising
health gain, and second, that it is insensi-
tive to risk or uncertainty in its assessment
of the value of new technologies. These
signals will likely incentivize two behav-
ioral responses from health technology
developers.
First, manufacturers of new technolo-
gies will use these prices as their refer-
ence point for negotiations around launch
prices for new technologies, and it may be
difficult for payers to justify paying less for
new technologies that have evidence of
equal or greater health benefit, simply
because they do not happen to be
‘‘regenerative medicines.’’ Hence, there
may be a step change in the launch price
of new technologies in Japan, with impli-
cations for the financial sustainability of
a system already under intense financial
pressure. While no public information is
currently available on other applications
for conditional approval, numerous firms
from within and outside Japan have ex-
pressed keen interest in taking advantage
of the system (Nikkei Asian Review, 2015).
Second, developers will design cheaper
and shorter research and development
processes that provide less convincing
evidence of the value of a new technology
because these funding decisions signal
that such evidence will be sufficient to
achieve market access at a favorable
price point. The investment risks that his-
torically have been borne by the devel-
opers through the phase 3 trial programs
will increasingly be shifted to the Japa-
nese taxpayer and the individual patients
who receive these technologies. The
USA Orphan Drugs Act and the EU
Orphan Drugs regulations provide clear
precedent for the impact of special regu-
latory status on the development of medi-
cal products. The FDA recently reported
that of 45 novel drugs approved in 2015,
21 were for rare or ‘‘orphan’’ diseases
(Food and Drug Administration, 2016).
The monopoly power conferred by such
policies translates into extremely high
prices; the average price for orphan drugs
in 2014 was over six times that of nonor-
phan drugs (EvaluatePharma, 2014).
This creates a third, indirect effect of
the funding decision. The reduced invest-
ment risk will make regenerative medicine
more attractive to venture capitalists in
the biotechnology space, potentially
crowding out investment in other cate-
gories of innovative technology, such as
immune and gene therapies. A policy
conceived to promote health innovation
has the potential to burden the Japanese
health system with the ‘‘triple whammy’’
of higher prices, less beneficial treat-
ments, and a narrower portfolio of new
technologies being brought to market.
The economic impact of the condi-
tional approval and reimbursement of
Cell Stem Cell
Letters
regenerative medicine products on the
basis of preliminary evidence may be
exacerbated by the breadth of its poten-
tial applications. Unlike in the case of
so-called orphan drugs, which by defini-
tion affect only small fractions of a
population, Japan’s new law focuses on
products rather than conditions and thus
lacks such a self-limiting function. The
HeartSheet authorization serves as a
case in point: chronic heart failure has
been described as a ‘‘growing epidemic’’
in Japan’s rapidly aging population and is
projected to peak at 1.3 million cases by
2035 (Okura et al., 2008). While we recog-
nize that the current usage estimates for
this product during the initial 5-year
period are low, it is unclear whether
this is self-imposed or subject to over-
sight. Moreover, usage restrictions for
HeartSheet currently focus on institutions
and practitioner qualifications; whether
off-label uses for conditionally approved
products are permissible remains another
important open question.
Regulations governing access to med-
ical product markets typically play three
main roles: protecting patient safety,
providing an evidence basis to inform
choice, and incentivizing rigorous scienti-
fic research by providers. Given the
continuing concerns about long-term
safety and efficacy of stem-cell-based
products, the low evidentiary require-
ments in place, and the high payouts
for the private sector for low-evidence
products, it seems unlikely that Japan’s
new rules will achieve any of the above.
To better incentivize truly meaningful in-
novations, Japan should explore equally
novel approaches to matching reward
to performance, such as through the
adoption of reimbursement schemes
such as leasing, in which upfront pay-
ments are replaced by a series of
payments dependent on the meeting of
predefined clinical endpoints over the
full period of expected clinical effect
(Edlin et al., 2014).
WEB RESOURCES
The URLs for data presented herein are as follows:
EvaluatePharma (2014). Orphan Drug Re-
port 2014, http://www.evaluategroup.com/
public/Reports/EvaluatePharma-Orphan-Drug-
Report-2014.aspx
Food and Drug Administration (2016). Novel
Drugs Summary 2015, http://www.fda.
gov/Drugs/DevelopmentApprovalProcess/
DrugInnovation/ucm474696.htm
M3.com, Hashimoto, K. (2015). Juushou shinfu-
zen-you haato shiito, 1476 man en
(HeartSheet for serious heart failure, 14.76
million yen), https://www.m3.com/open/
iryoIshin/article/376019/
Nikkei Asian Review (2015). Looser laws make
Japan a magnet for stem cell businesses,
http://asia.nikkei.com/Tech-Science/Tech/
Looser-laws-make-Japan-a-magnet-for-stem-
cell-businesses
Pharmaceuticals and Medical Devices Agency
(2015). Shingi kekka houkokusho (‘‘Report
on the results of review’’), http://www.
pmda.go.jp/regenerative_medicines/2015/
R20151008001/470034000_22700FZX00002_
A100_2.pdf
Terumo website (2015). Terumo Receives
Approval for the Manufacturer and Sale of
its HeartSheet Autologous Skeletal Myoblast
Sheets in Japan, http://www.terumo.com/
about/pressrelease/2015/20150918.html
REFERENCES
Edlin, R., Hall, P., Wallner, K., and McCabe, C.
(2014). Value Health 17, 438–444.
Konomi, K., Tobita, M., Kimura, K., and Sato, D.
(2015). Cell Stem Cell 16, 350–352.
Okura, Y., Ramadan, M.M., Ohno, Y., Mitsuma, W.,
Tanaka, K., Ito, M., Suzuki, K., Tanabe, N., Kodama,
M., and Aizawa, Y. (2008). Circ. J. 72, 489–491.
Sawa, Y., Yoshikawa, Y., Toda, K., Fukushima, S.,
Yamazaki, K., Ono, M., Sakata, Y., Hagiwara, N.,
Kinugawa, K., and Miyagawa, S. (2015). Circ. J.
79, 991–999.
Sipp, D. (2015). Cell Stem Cell 16, 353–356.
Cell Stem Cell 18, April 7, 2016 437