Comparison of Prescription Reimbursement Methodologies in Japan and the United States

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Comparison of Prescription Reimbursement Methodologies in Japan and the United States Eiichi Akaho, Eric J. MacLaughlin, and Yoshikazu Takeuchi

Objectives: To compare methods of prescription reimbursement in Japan and the United States. Data Sources: Data were obtained through interviews and a search of the pharmacy literature using MEDLINE, International Pharmaceutical Abstracts, the Iowa Drug Information Service, and the Internet. Search terms were pharmacy, dispensing fee, reimbursement, prescriptions, Japan, United

States, and average wholesale price (AWP). A comprehensive search was done (i.e., no year limits were observed). Study Selection and Data Extraction: Performed manually by the authors. Data Synthesis: The reimbursement systems for prescriptions differ widely between Japan and the United States. The reimbursement system in the United States is fairly straightforward and easy to understand; it is generally based on product cost (e.g., AWP minus a percentage) plus a small dispensing fee. The system in Japan is extremely complex. Reimbursement formulae have four components, including fees for professional dispensing, drug cost, counseling and administration, and medication supplies and devices. Additionally, various adjustments to the final amount are made based on dosage form, length of therapy, number of prescriptions dispensed by the pharmacy per month, and when the prescription is filled (e.g., after hours, on Sundays or holidays). In Japan, each pharmacist is limited to filling 40 prescriptions per day, but each “prescription” can involve several medication orders, making it difficult to compare Japanese pharmacists’ workloads with those of their counterparts in the United States. In addition, Japanese pharmacists are provided remuneration for providing various cognitive services, such as taking a patient history, counseling a patient, consulting with a physician, and identifying drug-related problems. Conclusion: Japan and the United States have very different methods of reimbursing pharmacists for dispensing prescriptions, each with positive and negative features. Based on the features of pharmacy reimbursement systems in each country, perhaps the optimal pharmacy practice system would have workload limits that reflect safety standards and amount of support staff available, provide a fair and standardized method for determining drug cost, are relatively straightforward, pay for cognitive services, and provide care for all of citizens through of some type of national health care system.

Keywords: Health care financing, reimbursement, pharmacy practice, United States, Japan. J Am Pharm Assoc. 2003;43:519–26.

Drug therapy is essential to providing optimal health care and is an important component of any country’s health care system. Even though the ultimate goals of health care systems are similar, if not identical, structure, organization, and processes vary considerably Received October 18, 2002, and in revised form February 14, 2003. Accepted for publication April 4, 2003. Eiichi Akaho, PhD, is professor of pharmacy, Faculty of Pharmaceutical Sciences, Kobe Gakuin University, Nishi-ku, Kobe, Japan. Eric J. MacLaughlin, PharmD, BCPS, is assistant professor of pharmacy practice, School of Pharmacy, Texas Tech University Health Sciences Center, Amarillo, Texas. At the time this article was written, MacLaughlin was visiting professor, Faculty of Pharmaceutical Sciences, Kobe Gakuin University. Yoshikazu Takeuchi, PhD, is professor of pharmacy, Faculty of Pharmaceutical Sciences, Kobe Gakuin University. Correspondence: Eric J. MacLaughlin, PharmD, BCPS, School of Pharmacy, Texas Tech University Health Sciences Center, 1300 Coulter Drive, Amarillo, TX 79106. Fax: 806-356-4018. E-mail: eric.maclaughlin@ ttuhsc.edu.

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from country to country. Two industrialized countries with democratic governments, free enterprise systems, and large economies, but very different health care systems, are the United States and Japan. The processes, structures, and systems in place in each country provide interesting models to consider in designing an ideal health care system. In the United States, prescription drugs account for an estimated 10% of total health care costs.1 In Japan, medications account for a much larger portion of national medical care costs. In 1998 medications accounted for approximately 30% of total Japanese medical care costs.2 In 2001 total prescription sales in the United States from community pharmacies were $164.0 billion.1 For the nearly 280 million residents of the United States in that year, this represented an increase of approximately 13% from 2000. Likewise, Japan spends a large amount of capital on medications for its approximately 126 million citizens.3 In 1998 about $232.0 billion (¥28.8

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trillion)a was spent on the national health care system, and of that, approximately $69.5 billion (¥8.64 trillion) was for medications.2 Table 1 presents a comparison of pharmacy and prescription statistics in Japan and the United States. The Japanese and American health care systems are very different. Japan has a national health care system, which pays for all health care needs, including medications, for every citizen. Unlike Japan, the United States does not have a public medical insurance system that covers all its citizens. The majority of U.S. citizens are covered by private insurance, which is often employer-paid.4 However, government-run programs cover citizens with limited income (Medicaid) or people 65 years of age or older, younger people with certain disabilities, and people with end-stage renal disease (Medicare). Medicaid is a state-funded system that usually covers the majority of health care costs, including those for medications. Medicare, established in 1965, provides payments for hospitalizations and physicians’ services (e.g., physician office visits).5 The original goal of Medicare was to provide an interim step toward achieving universal health coverage; however, this goal has not been achieved. Medicare has not covered most prescription medications, although this possibility is under active debate in the U.S. Congress at this time.

Objectives In this article we review the prescription reimbursement system in Japan and compare it with that used in the United States. An overview of each prescription reimbursement methodology is presented, as are perceived positive and negative aspects of each system. Through examination of the prescription reimbursement process in each country, the components of a potential “ideal system” are discussed with possible application to pharmacy practice in the United States.

The Bungyo : Separation of Prescribing and Dispensing Traditionally in Japan, physicians preferred to both prescribe and dispense drugs. Physicians significantly augmented their income by dispensing prescriptions. Additionally, physicians had a financial incentive to both prescribe and dispense because they were reimbursed ¥500 (approximately $4) for every prescription they wrote and received additional fees for dispensing drugs (this is discussed in more detail below).6 In 1956, acting upon a 1949 recommendation of an American Pharmaceutical (now Pharmacists) Association mission (see related article on page 541), Japan legally separated dispensing and prescribing of medications. This separation is known in Japanese aAll currency conversions were performed using Xe.com (www.xe.com) on October 9, 2002.

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Table 1. Pharmacy and Prescription Statistics for Japan and the United States Japan No. of community pharmacies Total no. of pharmacists No. of pharmacists in community pharmacies Estimated no. of prescriptions (medication orders) filled by pharmacists Mean prescription price Mean annual prescription sales

United States

42,412 a 194,300

55,000 b

c

196,000 d

69,890 c

130,802 b

1.7–3.4 billion e

3.0 billion b

$40.25 (¥5,000.00)f

$50.17 b

$16.1 billion (¥2.0 trillion)g

$164 billionb

Note: The conversion rate of $1.00 = ¥124.229, as given by Xe.com (www.xe.com) on October 9, 2002, was used in these calculations. a Number in 1997. Includes Class I (general pharmacy and wholesalers), Class II (pharmacy that can sell limited items to the public), Class III (permitted to deal with certain ª safe and mild drugsº {analogous to over-the-counter medications in the United States} for emergency or preventive purposes at railroad stations, airports, and remote areas), and door-to-door drug sellers who make at-home visits and leave safe and mild drugs for emergency or preventive use.1 9 b Number in 2001.1 c Number in 1996.2 4 d Estimated number in 2000.2 2 e Number of Japanese prescriptions filled by pharmacists in 2001 was 560 million.2 0 The estimate shown assumes approximately 4 to 6 medication orders per prescription (staff pharmacist, Aibe Pharmacy, Kobe, Japan, personal communication, February 14, 2003). fAverage prescription cost for free-standing pharmacy (consists of drug cost {67%} and all dispensing fees combined {33%}). Average prescription cost for pharmacies located in front of medical centers or hospitals is $88.50 (¥11,000) and consists of drug cost (81%) and all dispensing fees combined (19%) (H. Shimodaira, Hachiogi Pharmacy Center, personal communication, May 2, 2002). g Annual prescription sales frompharmacies (does not include sales fromphysicians).2 3

as the Bungyo.7 However, because of many exceptions to the law, this separation did not become widespread for many years. The primary reason for the delay was resistance from Japanese physicians. In addition to financial incentives, both dispensing and prescribing historically came under the purview of physicians. Indeed, the Japanese character for physician is yaku-shi, which means “drug specialist.” Despite the 1956 law, most physicians insisted on both prescribing and dispensing for many years. Because of concern for patient safety, diminishing reimbursement for physician dispensing, and government pressure, the Bungyo has begun to take hold within the last few years. The separation of prescribing and dispensing practices and having one pharmacy fill a patient’s prescriptions allow for the development of comprehensive patient medication profiles. These allow pharmacists to detect and prevent various drug-related problems when medication orders come from multiple prescribers.8 In 1992 Japanese pharmacists dispensed only 14% of outpatient prescriptions.9 However, as a result of compliance with the Bungyo, the percentage of prescriptions dispensed by pharmacists has increased dramatically. The most recent data, from June 2002, indicate that pharmacists are dispensing 46.9% of all prescriptions

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written in Japan.10 This trend will likely continue to increase as the pharmacist’s role as a member of the health care team is further recognized and as physician dispensing of medications declines.

Japanese Pharmacy Regulations To appreciate some of the differences between pharmacy reimbursement in Japan and the United States, it is necessary to understand the basics of Japanese pharmacy regulations. Two different types of community pharmacies exist in Japan: those that sell over-the-counter (OTC) medications and those that sell only prescription medications. Generally, pharmacies do not sell both OTC and prescription-only medications, unless special circumstances apply (e.g., rural areas, holidays). While this contrasts with the operations of most pharmacies in the United States, the pharmacy environments are similar between the two countries. The pharmacist is likely to be in their respective department’s (depending upon the type of pharmacy) performing similar activities as those in the United States (e.g., dispensing medication, counseling patients, helping patients with their nonprescription needs). In Japan, patients must go to a pharmacy to obtain nonprescription items (unless the patient is in a rural area or where a pharmacy is not conveniently located, in which case a patient may obtain OTC medications from a door-to-door drug seller). Either a pharmacist or a pharmacy worker supervised by a pharmacist may provide the nonprescription item to the patient upon request. While there are some prescription-only chain pharmacies in Japan, most are small independents. In the future, it is expected that there will be an increase in prescription-only chain pharmacies, similar to what has occurred in the United States. Another important fact regarding Japanese pharmacy regulations is that in the prescription-only pharmacies, each pharmacist may fill no more than 40 prescriptions per day.11 However, in Japan, each prescription may contain several medication orders. Although current data are not available, one prescription typically contains between four and six separate medication orders, depending on the type of pharmacy and its location (staff pharmacist, Aibe Pharmacy, Kobe, Japan, personal communication, February 14, 2003), meaning that each pharmacist could handle 160 to 240 medication orders per day, a volume similar to that handled by many American pharmacists. If a pharmacy fills an average of more than 40 prescriptions per day, an additional pharmacist must be hired. For example, if a Japanese pharmacy fills 60 prescriptions per day, two pharmacists are needed.

Prescription Reimbursement in Japan Prescription reimbursement in Japan is extremely complex. All Japanese citizens are entitled to prescription drug benefits under a national health care plan. Whereas Japanese citizens may have dif-

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ferent insurance plans, the prescription reimbursement system is the same under each policy. The reimbursement formula includes several different factors and varies according to length of therapy, frequency of administration, dosage form, and types of cognitive services provided.12 The total prescription payment comprises four fees, one each for professional dispensing, drug cost, counseling and administration, and medication supplies and devices. The professional dispensing fee has two elements: a basic dispensing fee and a dispensing fee. The prescription volume calculation is based on the pharmacy, but it is the pharmacist who gets the reimbursement payments. The basic dispensing fee describes the reimbursement a pharmacy may receive based on prescription volume per month and number of prescriptions received from one particular clinic (Table 2). The pharmacist may claim a basic dispensing fee each time a prescription is received from a patient. For example, if a pharmacist receives a prescription for tetracycline 250 mg three times daily for 14 days from a pharmacy that fills fewer than 4,000 but more than 600 prescriptions/month, of which more than 70% comes from one individual clinic, 39 reimbursement points (¥390 [1 point = ¥10, thus 1 point ´ 39 = ¥390] or $3.14) may be awarded, as shown in Table 2. A Japanese pharmacist may claim a dispensing fee based on the dosage form (e.g., oral capsule, cream, injectable) and length of therapy for each prescription (see Table 3). Using the above example of an oral tetracycline prescription, since the length of treatment is £ 14 days and for an oral dosage form (e.g., capsule), 5 points/day are awarded for days 1–7 and 4 points/day are awarded for days 8–14. Thus, 35 points are awarded for days 1–7 (5 points/day ´ 7 days), and 28 points are awarded for days 8–14 (4 points/day ´ 7 days). The total dispensing fee is 63 points (35 points + 28 points = 63 points; since 1 point = ¥10, the reimbursed amount would be ¥630, equivalent to $5.07). A pharmacist may claim additional fees when prescriptions of high complexity are involved or if a prescription is dispensed after hours, on Sundays, or on holidays (see Table 4). If one assumes Table 2. Types of Basic Dispensing Fees in Japanese Pharmacy, Based on Number of Prescriptions Received per Month

Type of Basic Reimbursement Dispensing Fee Points a Ia

49

% Total Prescriptions Received From a No. of Prescriptions Specific Received/Month Clinic £ 4,000

£ 70

Ib

44

> 4,000

£ 70

IIa

39

£ 4,000 but > 600

> 70

IIa

44

£ 600

> 70

IIb

21

> 4,000

> 70

a Reimbursement points are fixed, regardless of

how many prescription medication orders are written on one prescription: 1 point = ¥10 ($1.00 = ¥124.229) Source: Adapted fromReference 12.

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Table 3. Factors Used for Calculating the Dispensing Fee in Japan

Dosage Form Oral scheduled (dispensing form)b

Calculation Unit

Reimbursement Points a

—

—

A. £ 14 days For days 1-7

5 points/day

For days 8-14

4 points/day

B. ³ 15 days and £ 21 days

70

C. ³ 22 days and £ 30 days

80

D. ³ 31 days and £ 60 days

90

E. ³ 61 days

95

Oral as needed

Per prescription

21

Injection

Per prescription

26

Topical

Per prescription

10

a Reimbursement points based on dosage formand duration of

therapy. 1 point = ¥10 ($1 = ¥124.229. b If more than one medication is given via the same route (e.g., oral) and for the same length of time, this is considered ª one dispensing form,º and points are calculated accordingly. If more than one medication is prescribed, but the duration of therapy, frequency of administration, or dosage formis different, then this is considered more than one dispensing form.1 2 Source: Adapted fromReference 12.

Table 4. Additions to the Japanese Dispensing Fee Additional Charges 1 Narcotic Antipsychotics, amphetamines, stimulants, “potent” drugs b 2 Compounded prescription c Liquid Ophthalmic drops Ointment or cream 3 Compounded prescription requiring additional pharmaceutical calculations d 4 Sterilized products (intravenous)

Pointsa 70 8

30 (adults) 50 (pediatric) 75 90 35, 45, 80 40 e

5 After-hours dispensing

10% f

6 Sunday and holiday dispensing

14% g

7 Prescription dispensed from 10 pm to 6 am

20% h

a 1 point = ¥10 ($1.00 = ¥124.229).

Any medication with a lethal dose ³ 20 mg/kg. pharmaceutical calculations needed. Other compounded prescriptions not listed include extractions, intranasal dosage forms, otic drops, enemas, and suppositories. d Additional 35, 45, or 80 points are added for compounded prescriptions that require more extensive pharmaceutical calculations (i.e., a prescription for atropine sulfate {potent drug} that requires addition of an excipient to aid in compounding). Thirty-five points are awarded for liquids, 45 points for granules and powders, and 80 points for ointments. e Points allotted per day of therapy. f An additional 10%may be added to the basic dispensing fee and the dispensing fee if a prescription is dispensed after hours. g An additional 14%may be added to the basic dispensing fee and the dispensing fee if a prescription is dispensed on a Sunday or a holiday. h An additional 20%may be added to the basic dispensing fee and the dispensing fee if a prescription is dispensed from10 pmto 6 am. Source: Adapted fromReference 12. b

c Minimal

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the previous prescription was filled on a Sunday, an additional 14% would be added to the basic dispensing fee and the dispensing fee. Thus, an additional ¥144 (14% of the sum of ¥390 + ¥630), or $1.16, may be claimed.6 The next step in computing the charge for a prescription is to calculate the drug’s cost. The costs of prescription medications, set by the national government, are published in a compendium titled Current Therapeutic Drugs,6 which is updated approximately every 2 years. This publication lists the prices the pharmacy may claim as reimbursement from the insurance organization. By law, a wholesaler cannot sell a medication for more than the official drug price. The drug charge for a particular medication is determined by factors such as total number of dosage units, frequency of administration, and length of therapy. For example, consider the prescription for tetracycline 250 mg three times daily for 14 days. The first step in calculating the drug charge for this prescription is to determine the cost for 1 day of treatment. In 2002 the official drug price for a single 250 mg tetracycline capsule was ¥16.10 ($0.13).6 Thus, the daily drug cost would be 3 ´ ¥16.10, or ¥48.30 ($0.39). Using the formula in Figure 1, the number of points allowed per day for this prescription is 4.3. Because fractions of points are always rounded up in the Japanese system, this figure, when rounded up, yields 5 points/day. As this prescription is for 14 days, the total points awarded for drug cost is 70 (5 points/day ´ 14 days). Since 1 point equals ¥10, the reimbursement rate for drug cost of this prescription is ¥700 ($5.64). The final step in calculating the reimbursement for a Japanese prescription involves determining the fee for cognitive services provided to the patient. The counseling and administration fee allows pharmacists to receive reimbursement for services such as counseling a patient, providing drug information to a physician, and identifying drug-related and other problems (see Table 5). Generally, the higher the level of cognitive services and the greater the time required, the more reimbursement a pharmacist may receive. Changes are made to the prescription reimbursement system on an every-other-year basis by the Japanese Ministry of Health, Labour and Welfare.12 These changes are often made upon the requests and recommendations of pharmacists. For example, pharmacists were previously reimbursed only when the identification of a drug interaction resulted in a change to the prescription. Pharmacists were not reimbursed for just detecting a drug interaction and contacting the prescriber. However, at the request of pharmacists, a fee was added so that a pharmacist is reimbursed regard-

Figure 1. Fee Calculation for Drug Cost in Japan Points for drug chargea,b = 1 + (official drug price for 1-day supply – ¥15) ¥10 a

Fractions for drug charge are always rounded up.

b 1 point = ¥10 ($1.00 = ¥124.229).

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Table 5. Factors Included in the Japanese Pharmacy Counseling and Administration Fee Category Service Provided

Points a/Prescription

A. Patient history and counseling 1. Pharmacist assessment of patient adherence and medication counseling b 2. Pharmacist assessment of patient adherence and medication counseling for the second time in same month 3. Narcotics counseling and administration c 4. Physician contacted regarding duplication of therapy or drug interaction and prescription changed 5. Physician contacted regarding duplication of therapy or drug interaction and prescription not changed

17 30 25 5 20 10

B. Drug information 1. Drug information fee 1 d 2. Drug information fee 2 e

15 10

C. Chronic medication (medication that lasts = 14 days) 1. Chronic medication drug information 1 f 2. Chronic medication drug information 2 g

15 25

D. Drug information provided on drug quality h

10

E. Home care counseling 1. First time in the month 2. Second time and thereafter in the month

500 300

a 1 point = ¥10 ($1.00 = ¥124.229). b If

the pharmacist assesses the patient’s adherence to therapy, documents this assessment, and counsels the patient for the first prescription in a month, the pharmacist may add 30 points to the reimbursement fee. c Conducting patient counseling and instructing on administration procedures. d Drug information provided to patients. The pharmacist must write the name of drug, dosage regimen, and precautions in the patient’s individual health booklet, which contains details about all of the patient’s medications. Drug interaction information does not need to be written in the patient’s health booklet. The pharmacist must also provide a drug information sheet on each medication prescribed. The fee for providing drug information to a particular patient can only be charged four times per month. e Drug information provided to patient in formof an instruction sheet. Information must include the name of the drug, dosage regimen, use, adverse effects, and drug interactions. f Patient counseling regarding administration issues, side effects, expected benefits, and other relevant areas provided upon patient request. Points are provided for each prescription that lasts at least 14 days. g Patient counseling regarding administration issues, side effects, expected benefits, and other relevant topics for the same prescription a second time provided upon patient request. h Upon patient request, the pharmacist provides information regarding generic equivalency and changes the prescription to a generic medication if a brand name is written on the order. Source: Adapted fromReference 12.

less of how the physician reacts to the information provided by the pharmacist. This change authorized remuneration for time spent on cognitive services and, thus, provided an incentive to pharmacists to promote their professional activities. The more pharmacists request that additional cognitive services be included in the reimbursement system, the more likely the government will be to provide reimbursement for services. This underscores the importance of professional activism in Japan. Using the tetracycline example, assuming the pharmacist counsels the patient, provides drug information, and writes the name of the drug, dosage regimen, and precautions in the patient’s individual health booklet (which lists all of the patient’s medications) 15 points, or ¥150 ($1.21), is paid to the pharmacist. Thus, the total number of points awarded for filling a prescription on a Sunday for oral tetracycline 250 mg three times daily for 14 days, from a pharmacy that fills £ 4,000 but > 600 prescriptions/month, of which more than 70% come from one individual clinic, and provides drug counseling and information is ¥ 2013 ($16.20; see Figure 2).

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Prescription Payment Reimbursement Method in the United States Compared with Japan, the method of prescription payment in the United States is relatively straightforward. The cost of a prescription is calculated by adding the product cost (average wholesale price [AWP] minus a percentage) and a small dispensing fee, as follows: Pharmacy Payment = Product Cost (AW P – ~5–15%) + Dispensing Fee (~$2.50–$6.00)

The dispensing fee is meant to cover several different costs, including staff salaries, pharmacy supplies, medication containers, insurance, and professional service (e.g., counseling, detecting and acting on potential drug-related problems).13 The gross profit made on a prescription in the United States is the difference between the acquisition cost (i.e., true pharmacy cost for the prescription product) and the reimbursement rate paid by third party payers (e.g., AWP – ~5–15%) plus the dispensing fee (see Figure 3). At present, profit from prescriptions is tied primarily to the product; pharmacists are not uniformly reimbursed for providing cognitive services, although this is beginning to change. While it appears that this method of calculating reimbursement

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Figure 2. Sample Reimbursement Calculation for a Prescription Dispensed by a Japanese Pharmacy

Patient presents prescription for 250 mg oral tetracycline, 3 times a day for 14 days on a Sunday afternoon

Basic Dispensing Fee: Pharmacy receives £ 4,000 but > 600 prescriptions/month, of which > 70% come from 1 clinic (see Table 2, category IIa): 39 points a = ¥390 + 14% (Sunday dispensing) = ¥445 ($3.58) b

Figure 3. Sample Reimbursement Calculation for a Prescription Dispensed by a U.S. Pharmacy

AW P of drug X = $50

Product acquired by pharmacy at AW P – 20% = $40 ($50 –20%)

Insurer’s reimbursement rate is AWP – 12.5% = $43.75 ($50 – 12.5%) Dispensing fee: Length of therapy and dosage form (see Table 4): 63 points a = ¥630 + 14% (Sunday dispensing) = ¥718 ($5.78)b Dispensing fee = $4.00 1 day therapy (3 capsules) is ¥48.30, thus 5 points/day awarded (see Figure 1). Total points awarded 5 points/day X 14 days: 70 points = ¥700 ($5.63)b Total cost of prescription for drug X = $47.75a ($43.75 + $4.00)

Pharmacist provides drug information to the patient in the form of writing the name of drug, dosage regimen, and precautions in the patient’s individual health booklet (see Table 5, category B.1): 15 points = ¥150 ($1.21)b

Total reimbursement = ¥2,013 ($16.20)

AWP = average wholesale price. a Pharmacy profit = $7.75 (profit fromproduct acquisition {$43,75 ± $40.00} + dispensing fee {$4.00}).

In addition, in the United States, discounts and rebates to pharmacies or institutions and inclusion of medications on preferred drug lists or formularies often encourage use of one agent over another in ways that are not always readily apparent.

a 1 point = ¥10 ($1.00 = ¥124.229). b See Reference 6.

for a prescription is relatively simple, there are complicating factors; namely, the calculation of product cost and AWP. The AWP of prescription drugs is a figure that is reported by manufacturers, wholesalers, and other suppliers.14 It was originally meant to be an average cost wholesale companies charged to physicians, pharmacists, and other health care providers for a product. Products’ AWPs are reported in various sources (e.g., the Red Book), and those prices have become equated with the manufacturer suggested retail price or sticker price for products or services—that is, a suggested price that few people ever pay.14 Thus, the AWP is generally considered to be inflated. To correct for this inflated price, insurers and third party payers typically base their reimbursement rate on the AWP minus a percentage (e.g., ~5–15%).

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Lessons From the Japanese System One lesson U.S. health care policy makers might learn from the Japanese system is standardization of drug prices. In Japan, the government establishes an official price for each prescription drug. Pharmacists obtain reimbursement based on this official price for the drugs they sell, regardless of the cost the pharmacy pays to acquire those drugs. For instance, pharmacists may negotiate with drug wholesalers for lower prices. Therefore, the difference between the cost the pharmacy paid for the product (from the wholesaler) and the standardized drug price at which the pharmacy is reimbursed is profit. Because pharmacies are reimbursed on the basis of the official drug price, problems such as fraudulent billing may be avoided. For instance, if an American third party contract required billing at the actual acquisition cost, and the

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pharmacy billed at AWP, the billing would be considered fraudulent. This is generally not a problem in Japan, as third parties reimburse pharmacies based on the official drug price, regardless of the true acquisition cost of the drug. In the United States, a different system is used. Currently, costs vary depending on the various parties involved, such as the manufacturer, wholesaler, purchaser, and insurer, and also as the result of factors such as various rebates and discounts. Additionally, insurers in the United States have the ability to set their own reimbursement fees, which pharmacies can do little about. Thus, large chain pharmacies or mass-merchandising stores that make the majority of their profit on front-end items or merchandise and depend largely on consumer traffic may see less overall impact due to decreased reimbursement rates. However, for smaller pharmacies that depend on prescriptions for a large amount of their profit, such decreased reimbursement rates significantly degrade the gross profit and the economic viability of the pharmacy. A more equitable method for setting uniform drug prices might be to use an independent third party that could develop a standard drug price based on national survey data on drug manufacturing and acquisition costs. This official drug price would ideally allow for sufficient profit for both the manufacturers and pharmacists, and it could be updated annually. The pharmacist could then use this official price for prescription reimbursement. Further, the United States might also learn from Japan’s system of reimbursement for cognitive services. Such a system offers further incentives to provide cognitive services (e.g., patient counseling, prospective review of medication records, identification of potential drug-related problems), thereby both improving the health of patients and enhancing the professional role of pharmacists. As a step to guaranteed payment for such services, a clearly described law would be needed. Ideally, such a law would provide fair remuneration for pharmacists’ time and expertise. Two bills that would have authorized payment to pharmacists under Medicare were considered by the U.S. Congress in 2001 (S. 974 and H.R. 2799).15,16 Passage of such bills would clearly benefit the profession of pharmacy and also improve patient care. Currently, bills that would provide Medicare patient with a prescription drug benefit have been passed by the House of Representatives (H.R. 2473) and the Senate (S.1). Although the specific language regarding reimbursement for cognitive services differs, it is hoped that if passed and made into law, payment to pharmacists for such services will be authorized. The health insurance issue is one of the most difficult problems the United States has yet to solve. It is possible that Japan’s national health insurance system, which includes the coverage of prescription drugs, may be preferable. National health insurance often imposes a heavy financial burden on a country’s total revenue. However, Japan’s total spending on health care as a percentage of gross national product is the smallest among developed countries,17 even though—or perhaps because—the percentage of health care resources devoted to medications is very high. In addition, the Japanese enjoy the greatest life expectancies in the world for both men and women, as well as a lower infant mortality rate

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than the United States or any of the European nations.18 Therefore, to provide optimal health care, including medications for all citizens, the United States might want to reexamine the possibility of developing a national health care system similar to the one in Japan. Such a system could divide health care costs among the government, employers, and patients.

Limitations Several limitations restrict the conclusions we can reach in this review article. First, unfortunately, few specific pharmacy and prescription statistics are available for Japan. For this reason, making direct comparisons of the Japanese and U.S. pharmacy professions and medical systems is not possible. Another limitation of this article is that the presentation of the United States’ method of reimbursement is somewhat simplified. While this method is relatively straightforward (i.e., reimbursement is based on the drug cost and a dispensing fee), calculation of fees is not the same from pharmacy to pharmacy nor from one payer (including the cash-paying patient) to another. Additionally, many other factors are involved in determining the expenses of a prescription, including pharmacist salary, supplies, prescription containers, and professional services. The present article is meant to be a concise overview. A detailed review of all costs associated with dispensing a medication and obtaining reimbursement in the United States is beyond the scope of this study.

Conclusion Japan and the United States have very different methods of reimbursement for prescriptions, each with positive and negative features. Some important differences are that Japanese pharmacists are limited to dispensing only 40 prescriptions per day (but a single prescription may have several medication orders), and the methods of calculating reimbursement are extremely complex, necessitating additional billing services assistance and/or computers. Another unique characteristic of Japanese pharmacy practice is that prespecified cognitive services (e.g., patient counseling, drug information for physicians, identification of drug-related problems) are covered. Pharmacists in Japan need to fully use this aspect of the reimbursement system. This will likely help promote pharmacy in terms of professionalism and patient care, and at the same time assist in generating income. In comparison, U.S. pharmacies have no regulatory limits on the number of prescriptions one pharmacist may fill, and the method of calculating reimbursement is comparatively easy. However, a major drawback for the system in the United States is that pharmacists receive no prespecified reimbursement for cognitive services when dispensing a prescription. While some state Medicaid programs and private prescription plans allow for payment of cognitive services, this reimbursement is generally for clinical services that

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go beyond dispensing medications. With the current trend of increasing drug acquisition costs, decreasing reimbursement rates for prescriptions by insurers, and increasing complexity of drug regimens necessitating more time for pharmacist review and patient counseling, pharmacies in the United States might benefit from a system that provides specific remuneration for cognitive services performed. Additionally, such remuneration would validate the view of pharmacists as medical professionals who provide valued cognitive services. Based on the features of pharmacy reimbursement systems in each country, perhaps the optimal pharmacy practice system would have workload limits that reflect safety standards and amount of support staff available, provide a fair and standardized method for determining drug cost, be relatively straightforward, pay for cognitive services, and provide care for all citizens through some type of national health care system. The authors declare no conflicts of interest or financial interests in any product or service mentioned in the article, including grants, employment, gifts, stock holdings, or honoraria.

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July/August 2003

Vol. 43, No. 4