Telemedicine and the NHI System

Mar 2

How to solve Japan’s innovation bottleneck in healthcare

The medical industry is one of the hardest to disrupt. In some ways, that’s a good thing. Lives are literally at stake, so there’s a good argument to be made for being conservative and taking things slowly. But looking at the National Health Insurance (NHI) system in Japan—and the health systems of all developed nations—it becomes obvious that not only can improvements be made, but that they must be made.

A while back, I had a chance to talk to Kenichi Ishii, the founder of Next Innovation, an Osaka-based telemedicine startup. Their long-term strategy involves increasing the use and acceptance of telemedicine in Japan and selling prescription drugs over the internet. The need for such a service has been particularly highlighted over the past year as we have grappled with the logistics of a rather analog system during the pandemic.

Cultural Challenge

Among Japan’s aging population there is a real shortage of doctors and nurses. Given this, one might expect telemedicine to be much more common in Japan, but it’s not. Why is that? One reason that Ishii cited is the difficulty in persuading older people to change their behavior. So, shifting to methods of care that involve online communications—especially video sessions— requires overcoming a level of resistance.

“[The model] highlights how inefficient some parts of Japan’s healthcare industry are and how badly innovation is needed."

We’ve started seeing some progress, especially as the pandemic has made in-person clinic visits more difficult and less appealing, due to the risk of exposure to the coronavirus. It’s one silver lining of the current crisis. But the cultural aspects that must be overcome for telemedicine to take hold—and for startups in the field to succeed—go beyond discomfort with technology.

Ishii confirmed something that I had long heard, that many older Japanese people actually enjoy visiting the hospital, since it is seen as a place to meet and chat with friends. He said this is true for more than half of hospital outpatients. A possible solution, he suggests, is a combination of hospital visits and telemedicine. You go to the hospital to talk to a doctor and get a diagnosis. Once the doctor has outlined a treatment plan, subsequent consultations are conducted via telemedicine and prescriptions are filled remotely. This continues as long as you take the same medications each month.

Formula for Success

A key reason Next Innovation has been able to succeed is that they can cut the price of medications for the patient by 70 percent. It makes the cost roughly equal to the NHI system’s 30-percent copay. That’s very im- portant for the startup because their consultations are not covered by the NHI system.

Given that they are able to do this using some basic technology and a streamlined workflow, I wondered why we don’t see more medical startups in Japan? Ishii explained that, because of how the NHI system is struc- tured, it is essentially as if the government were the sole customer. Seventy percent is a high barrier, and those who must work within the system find great dif- ficulty in navigating the rules and regulations to create profitable and sustainable business models.

I asked Ishii what he felt the Ministry of Health, Labour and Welfare could do to promote medical innovation and startups in Japan. The starting point, he said, is to always think of the patient first rather than the doctor. But what I learned from Ishii’s view is that, from the Japanese business side, some see the first step as thinking how to get money from the doctors or hospitals, because Japan has a very good insurance system. Next, they think how to provide care or treatment to the patient.

Nurturing Innovation

One of the most important aspects of Ishii’s story is how very difficultit is for a startup to build aviable business model in medicine. Next Innovation has had to operate completely outside the NHI system, and that has meant they have had to provide their services for 70 percent less than the going rate. And they have. While this says a lot about the ingenuity of Ishii and his team, it also highlights how inefficient some parts of Japan’s healthcare industry are and how badly innovation is needed