In the health insurance listing of medical devices, the C1 (new function) category is an important classification for medical devices where the technology itself is evaluated under existing medical fee items, but the establishment of a new functional category is required under the material price standards.
To receive an appropriate evaluation in the C1 category, simply explaining that it is a "new product" is not sufficient. From the stage of pharmaceutical approval, it is necessary to comprehensively organize the differences from existing functional categories, clinical utility, basis for price calculation, applicability of supplementary additions and economic additions, and the relationship with foreign prices.
This article organizes application strategies for achieving appropriate evaluation in the C1 new function category from a practical perspective.
Table of Contents
- Organization of Medical Device Insurance Application Categories
- What is the C1 New Function Category?
- Designing Pharmaceutical Approval and Insurance Listing in Parallel
- Starting Line of Application: Selection of Similar Functional Categories
- Basics of Price Calculation: Two Methods
- Overall Picture of Supplementary Additions and Economic Additions
- Requirements for Breakthrough Additions
- Requirements for Utility Additions
- Requirements for Improvement Additions
- Practical Aspects of Evidence Organization
- Expression of Opinion at the Expert Organization for Medical Materials, etc.
- Responding to Foreign Average Price Adjustments
- Utilizing Challenge Applications
- Summary
1. Organization of Medical Device Insurance Application Categories
When considering a C1 application, it is important to first organize which insurance application category the medical device may fall under. Medical device insurance application categories include A1, A2, A3, B1, B2, B3, C1, C2, R, F, etc. Among these, C1 is positioned as "technology fees are existing, but a new functional category needs to be established under the material price standards."
| Category | Main Concept | Practical Points |
|---|---|---|
| A1・A2 | Evaluated comprehensively under existing medical fee items | May not be individually evaluated as material prices |
| A3 | Evaluated as existing technology, but involves changes in cautionary notes, etc. for calculation | Organize whether changes in technology fees are necessary |
| B1 | Falls under an existing functional category | Clearly explain applicability to an existing functional category |
| B2 | Existing functional category, but requires changes in definition, cautionary notes, etc. | Organize reasons for changing existing category |
| B3 | Provisional improvement additions or temporary functional categories are considered | Organize improvement and post-market evaluation prospects |
| C1 | Technology fees are existing, but a new functional category needs to be established under the material price standards | Design of similar functional categories, additions, and price calculation basis is important |
| C2 | Requires setting new technology fees for the technology itself using the medical device | Medical technology evaluation and positioning in medical fees become important |
| R | Requires setting new functional categories for reprocessed single-use medical devices | Organize functional category of original medical device, quality/safety as reprocessed product, and treatment in price calculation |
| F | Not suitable for insurance application | Confirm applicability to insurance medical care and impact on business plan |
C1 and C2, in particular, are often confused, so identifying from the early stages of development whether material prices should be evaluated within existing technology fees or if new technology fees need to be set is the starting point for the application strategy. Furthermore, it is necessary to organize the boundaries of B2, B3, and C1 from the perspective of whether changes to existing functional categories are sufficient or if new functional categories need to be established.
2. What is the C1 New Function Category?
C1 (new function) is one of the decision categories for medical device insurance application.
C1 applies to cases where the technology using the medical device is already evaluated by one of the items listed in the Notification on Calculation Methods for Medical Fees, but the establishment of a new functional category under the Material Price Standards requires deliberation by the Central Social Insurance Medical Council (Chuikyo).
In other words, C1 is easier to understand as a category that "does not involve setting new technology fees, but rather seeks new material price evaluation for medical devices used within existing technology fees."
On the other hand, if new technology fees need to be set for the technology itself using the medical device, it may be categorized as C2 (new function/new technology). Therefore, it is important to determine at an early stage of product development whether to proceed with C1 or if there is a possibility of C2.
3. Designing Pharmaceutical Approval and Insurance Listing in Parallel
The C1 application is closely linked to the pharmaceutical approval process.
Medical device manufacturers, in principle, submit an insurance application request according to the applicable category after receiving approval or certification based on the Pharmaceuticals and Medical Devices Act. Therefore, if the insurance listing strategy is only considered after obtaining approval, the preparation of materials and organization of evidence may fall behind, potentially affecting the launch timing.
In practice, it is important to organize the following points in parallel with PMDA review and preparation of approval application documents:
- Similarity to existing functional categories
- Differentiation points that should be claimed as new functional categories
- Whether the similar functional category comparison method or the cost calculation method is anticipated
- Clinical and non-clinical data to claim supplementary additions
- Medical material cost reduction effects when considering economic additions
- Basis documents for overseas prices, import costs, and sales prices
- Explanatory materials in preparation for expressing opinions at expert organizations
It is important for C1 applications to design pharmaceutical affairs and insurance listing as an integrated process to maximize value at launch, rather than considering them separately.
4. Starting Line of Application: Selection of Similar Functional Categories
The first important decision in a C1 application is the selection of similar functional categories.
A similar functional category refers to the existing functional category that is most similar to the newly established functional category. In the similar functional category comparison method, the standard material price of this similar functional category serves as the starting point for price calculation, so the validity of the selection significantly impacts the final reimbursement price.
Similarity is primarily organized from the following perspectives:
- Structure
- Purpose of use
- Medical efficacy and effect
- Performance
- Method of use
- Target patients
- Positioning with existing treatments or products
Strategically, it is important to select the most valid similar functional category based on objective evidence, rather than simply claiming a category with a high price level. Furthermore, the reasons why the differences from existing products should be evaluated as a new functional category should be explained from the perspectives of structure, clinical aspects, and value in medical settings.
5. Basics of Price Calculation: Two Methods
For price calculation in the C1 category, the following two methods are primarily considered:
Similar Functional Category Comparison Method
The similar functional category comparison method uses the standard material price of a similar functional category as the basis for the standard material price of the new functional category to which the newly listed product belongs.
This method is fundamental when there is a certain degree of similarity with existing functional categories. If necessary, combinations or differences of existing functional categories, or proportional allocation based on length, area, volume, etc., may be considered.
Cost Calculation Method
The cost calculation method is used when no appropriate similar functional category exists. It calculates the price by accumulating manufacturing costs or import costs, selling, general and administrative expenses, operating profit, distribution costs, consumption tax, etc.
In the cost calculation method, the degree of cost disclosure and the accuracy of supporting documents affect the evaluation. For imported goods, it is important to prepare documents explaining import costs, transaction prices overseas, and the domestic sales system at an early stage.
6. Overall Picture of Supplementary Additions and Economic Additions
In a C1 application, not only is the establishment of a new functional category requested, but the applicability of supplementary additions is also considered based on the innovativeness and utility of the product. Furthermore, if a reduction in medical material costs can be expected compared to existing products, the applicability of economic additions is separately considered.
Representative items categorized as supplementary additions in the system include the following. Marketability additions are considered separately as Marketability Addition (I) and Marketability Addition (II).
- Breakthrough Addition
- Utility Addition
- Improvement Addition
- Marketability Addition (I)・Marketability Addition (II)
- Pioneer Addition
- Specific Use Addition (Additions for medical devices for pediatric use, specific rare disease use, or specific uses)
In addition to these, if a reduction in medical material costs is expected, it may be eligible for an economic addition. Therefore, in practice, it is important to categorize "supplementary additions claiming innovation and utility" and "economic additions claiming medical economic effects" separately.
For breakthrough additions, utility additions, and improvement additions, the institutional目安 (guideline) for A-value is 50-100% for breakthrough additions, 5-30% for utility additions, and 1-20% for improvement additions. However, the A-value does not directly become the final supplementary addition rate. The actual supplementary addition rate is determined based on the calculation method, formula, degree of disclosure, addition coefficient, etc., so it is important not to confuse the A-value with the final addition rate.
In practice, it is important to organize not only "which addition to aim for" but also "which institutional requirements are met and with which evidence to objectively demonstrate it."
7. Requirements for Breakthrough Additions
Breakthrough additions are considered for medical devices with extremely high innovativeness.
For breakthrough additions, it is generally required to meet all three of the following requirements:
- Possess a clinically useful new mechanism.
- Objectively demonstrate higher efficacy or safety compared to existing listed products belonging to similar functional categories.
- Objectively demonstrate improvement in the treatment method for the target disease or injury.
What is important here is that mere structural novelty or improvement in operability may not be sufficient to claim a breakthrough addition.
Improvements in safety for healthcare professionals, reduced invasiveness, improved operability, and improved durability may be categorized as requirements for improvement additions depending on their content. When claiming a breakthrough addition, it is necessary to demonstrate clinical efficacy or safety compared to existing products, and improvement in the treatment method itself, based on objective clinical findings.
8. Requirements for Utility Additions
Utility additions are considered for newly listed products that meet any one of the three requirements for breakthrough additions. While it is not as strict as breakthrough additions to meet all three requirements, it is necessary to objectively demonstrate improvements in efficacy, safety, and treatment methods compared to existing listed products.
When claiming a utility addition, the following data are important:
- Comparative studies with existing products
- Improvement in clinically important efficacy indicators
- Reduction in serious side effects and complications
- Shortening of treatment time
- Reduction of patient burden
- Utility in patient groups difficult to treat with existing therapies
Note that if a reduction in medical costs is claimed, it is more accurate in terms of the system to categorize it as eligibility for an economic addition, separate from a utility addition.
9. Requirements for Improvement Additions
Improvement additions are considered when certain clinical utility or operational improvements are demonstrated compared to existing listed products, through innovations in structure, shape, design, usage methods, etc.
Points of discussion for improvement additions include, for example, the following:
- Improved safety for healthcare professionals, such as reduction of occupational infection risk
- Reduction of environmental burden in waste disposal, etc.
- Reduced invasiveness and incidence of complications
- Expanded adaptation to children, etc., through miniaturization and weight reduction
- Realization of safer and simpler procedures
- Improved durability and potential for long-term use
- Improved operability for enhanced safety and ease of home care
- Ensuring equivalent functions when biological raw materials, etc., are excluded
For improvement additions, it is important not only to explain the structural and design changes but also to demonstrate what clinical and practical value these changes bring to the medical field. This should be explained by combining technical documents, performance tests, usability evaluations, non-clinical tests, and clinical data as necessary.
10. Practical Aspects of Evidence Organization
The evaluation in a C1 application depends not only on the strength of the claim but also on the quality and organization of the evidence.
In practice, the following materials are systematically organized:
- Domestic and international papers
- Clinical trial results
- Non-clinical trial results
- Comparison table with existing products
- Opinions from academic societies and specialists
- Actual usage in medical settings
- Data on operability and procedure time
- Medical economic impact
- Basis documents for overseas prices and import costs
Especially when claiming an addition, it is important to establish a one-to-one correspondence between "institutional requirements" and "corresponding evidence," rather than just "product features."
For example, even when claiming improved operability, it is necessary to translate it into evaluable indicators such as reduced procedure time, successful procedure rate, re-treatment rate, reduced complications, and reduced burden on healthcare professionals, rather than simply stating that it is "easy to use."
11. Expression of Opinion at the Expert Organization for Medical Materials, etc.
In C1 applications, deliberations on decision drafts and price calculations are conducted by the Expert Organization for Medical Materials, etc..
Manufacturers and distributors may be given opportunities to express opinions or provide supplementary explanations as needed during the process. At this stage, it is necessary to clearly explain the product's value, the validity of similar functional categories, the applicability of additions, and the reasonableness of the price within a limited time.
Key points to prepare are as follows:
- Narrow down the most important points to assert
- Clearly state the reasons for selecting similar functional categories
- Objectively demonstrate differences from existing products
- Organize the correspondence between addition requirements and evidence
- Prepare anticipated questions and answers
- Avoid overly sales-oriented language and explain according to institutional requirements
In explanations to expert organizations, it is more important to logically demonstrate "which requirements of the system are met and why that evaluation is appropriate" rather than simply asserting "the product is excellent."
12. Responding to Foreign Average Price Adjustments
In C1 applications, attention must be paid to price adjustments based on foreign average prices.
If a foreign average price can be calculated, and the calculated value by the similar functional category comparison method or cost calculation method exceeds a certain multiple of the foreign average price, it becomes subject to price adjustment.
Under the FY2026 standards, in principle, if the calculated value exceeds 1.25 times the foreign average price, it will be adjusted to 1.25 times the foreign average price. However, for medical devices developed in response to development requests as highly medically needed, medical devices for rare diseases, pioneering medical devices, specific-use medical devices, or those that have received certain breakthrough additions or utility additions, the comparison level may be 1.5 times.
Furthermore, if Japan's calculated value is lower than the foreign price, it is not simply automatically raised. It is necessary to consider the possibility of calculation by the cost calculation method and the validity of the price based on import cost data, etc.
Therefore, for medical devices expanding overseas, it is important to consider the setting of overseas prices, the order of sales countries, exchange rates, import costs, and the explainability of domestic transfer prices in conjunction with the insurance listing strategy.
13. Utilizing Challenge Applications
If it is difficult to gather all sufficient clinical data at the time of C1 application, a "challenge application" aiming for re-evaluation based on post-market usage results may be an option.
If a challenge application is desired, a plan document regarding the data collection method and evaluation method after insurance application must be submitted at the time of submitting the insurance application request or by the date one year after the insurance application date.
In recent systems, objectivity and reliability are increasingly emphasized for data subject to evaluation in challenge applications. Comparative studies are generally required, and even if comparative studies are difficult, a research plan that reduces the risk of bias is necessary. Furthermore, the data subject to evaluation is, in principle, expected to be published in peer-reviewed journals.
Challenge applications are an effective strategy to launch innovative medical devices early while aiming for additional evaluation through post-market data. However, it requires a feasible data collection plan and evaluation indicator design, rather than mere future expectations.
14. Summary
To receive an appropriate evaluation in the C1 new function category application, it is important to design pharmaceutical approval and insurance listing as an integrated process from the early stages of development, rather than considering them separately.
Particularly important points are:
- Early identification of the difference between C1 and C2
- Clearly stating the basis for selecting similar functional categories
- Establishing a prospect for the similar functional category comparison method or cost calculation method
- Accurately organizing the requirements for breakthrough additions, utility additions, improvement additions, etc.
- Separately considering supplementary additions and economic additions
- Matching addition requirements with evidence
- Preparing overseas price and import cost data in anticipation of foreign average price adjustments
- Utilizing challenge applications as necessary
The C1 application is not merely an insurance application procedure; it is a critical strategic area that affects the market value of medical devices. By designing documentation with insurance listing in mind from before obtaining approval, it is possible to achieve appropriate evaluation at launch and early market introduction.
Our company, MK Consulting Co., Ltd., provides consulting for medical devices specializing in the gastrointestinal endoscopy field, covering the Pharmaceutical and Medical Device Act, PMDA approval, and insurance listing.
You can consult us from the early development stage regarding the possibility of C1 new function category application, selection of similar functional categories, design of claims for supplementary additions, consideration of economic additions, preparation for expressing opinions at the Expert Organization for Medical Materials, etc., response to foreign average price adjustments, and feasibility of utilizing challenge applications.
We can also respond in English. For inquiries in Chinese and Korean, we will respond using translation tools. The first consultation is free.
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