Working with the KFDA and HIRA: Obtaining Medical Device ...The government agency for reimbursement approvals in the public healthcare insurance in Korea. MOHW oversees HIRA

Working with the KFDA and HIRA:

Obtaining Medical Device Approval and

Reimbursement in Korea

July 17, 2009

SouthKorea

Copyright © 2009 Synex Consulting, Ltd. All rights reserved. This content is protected byRepublic of Korea and International copyright laws and may not be copied, reprinted,published, translated, resold, hosted, or otherwise distributed by any means without explicitpermission. Disclaimer: the information contained in this report is the opinion of SynexConsulting, Ltd. It is provided for general information purposes only, and does not constituteprofessional advice. We believe the contents to be true and accurate at the date of writing butcan give no assurances or warranties regarding the accuracy, currency, or applicability of anyof the contents in relation to specific situations and particular circumstances.

Korea In-Country Caretaker (ICC) Service

Synex Consulting, Ltd.Seoul, Korea

Young Kim2002 – present

PresidentSynex Consulting, Ltd.Seoul, Korea

1988 – 2001Senior Commercial SpecialistHealthcare IndustriesAmerican Embassy/U.S. Department of Commerce Seoul, Korea

2

[email protected]

Contents

Country Overview

Regulatory Approval Process

Reimbursement Approval Process

Take Home Messages

3

Geography

Located in the Northeastern part of Asia

Land Space: 98,480 sq km, slightly larger than the state of Indiana-Extends about 300 km from east to west -About 500km from the northern end to the southern end

Capital City: Seoul

SouthKorea

4Copyright © Synex 2009, All Rights Reserved

Healthcare Market Indicators

Year Remarks

Population Millions 48.4 2007 Rank around the 22nd

largest in the World

Elderly population 65+ Millions % of population

4.89.9

20072007

Average life expectancy at birth Years 78.6 2005 USA 77.8 in 2005

Median age Years 35.0 2005

Gross Domestic Production (GDP) US$ billions 992 2007 Rank around the 13th

largest in the World

GDP per capita US$ 20,240 2007

Health expenditure per capita US$ 1,318 2005 OECD Average US$2,759

Health expenditure as % of GDP % 6.0 2005 OECD Average US$2,759

Acute care beds per 1000 Population 7.9 2005 USA 3.2 in 2005

Physicians per 1000 population 1.6 2005 USA 2.4 in 2005

Source: OECD Health Data 2007, The World in 2007


Major Markets

The five largest cities represent about 60% of the total hospital beds of the country

Seoul and Kyonggi (38%)Pusan (9%)Daegu (5%)Kwangju (4%)Daijeon (4%)

The Seoul and Kyonggi area (called ‘Seoul Metropolitan Area) represent about 60% of the imported high technology medical device market.


Performances of Major Device Firms

Source: Financial Supervisory Service

No Firm Revenue in 2008(Million USD) Comments

1 Johnson & Johnson Medical Korea 173.3

2 GE Medical System Korea 107.2

3 Philips Korea 81.2

4 Johnson & Johnson Korea 77.8

5 Gambro Korea 66.6

6 Medtronic Korea 64.1 Revenue of the time from May 2007 to April 2008

7 Tyco healthcare Korea 56.8 Revenue of the time from Oct. 2007 to Sep. 2008

8 Boston Scientific Korea 55.7

- Siemens Korea - Major company/Not available in public notice

- Stryker Korea -Major company/Not available in public notice


Product Approval Process

Glossary

KFDA: Korea Food & Drug AdministrationThe Korean equivalent to the U.S. FDA. MOHW oversees the KFDA.

HIRA: Health Insurance Review and Assessment Service

The government agency for reimbursement approvals in the public healthcare insurance in Korea. MOHW oversees HIRA.

MOHW: Ministry of Health and WelfareThe government agency responsible for overall policy directions on regulatory and reimbursement of medical devices.

MOHW

KFDA HIRA

Regulatory Affairs

Reimbursement Affairs


KFDA

Responsible for the public safety of food, drugs, medical devices and radiological health.Founded in 1996.Began regulating medical devices in 1997. With 1,500 employees, it is headquartered in Seoul and district offices in six large cities.

Five CentersFood SafetyDrug SafetyBiologics and Herbal DrugsMedical DevicesHazard Prevention Policy

Medical Device Safety Centers have about 100 employees.


Organization

Medical Device Safety Policy DivisionMakes all regulations, requirements and procedures;

Therapeutic Device Division

Bureau of Medical Device Safety

Medical Supplies Division

Medical Device Review Office

Diagnostic Device DivisionMedical Device Surveillance Division

Monitor devices in market, adverse event reporting, misleading claims, consumer safety issues.

Medical Device Quality Division Audit GMP compliance on device manufacturers


Device Firms Need Licenses at Three Levels

Level License When you apply Current Designations

Validity

I Product License For each and every product code

About 2,000classifications

Permanent

II KGMP Certification (Manufacturer); or

Good Import Practice (GIP) Certification (Importer)

For each of 39 device groups

39 groups 3 years

III Device Business License

For each of the five business types

5 Business Types:Manufacturer

ImporterDistributorRepairer

Rental Business

Permanent


Device Classifications

Four classes based on potential risk to human healthAbout 2,000 new classifications implemented in July 2009

Class Risk Levels Device Examples

I Low Risk Surgical instruments

II Low-Moderate Risk Hypodermic needles

III High-Moderate Risk Orthopedic implants

IV High Risk Implantable defibrillator


Pre-conditions for Applicant

Applications must be prepared in Korean.Either manufacturer or importer can make applications.

Legal entityBusiness registrationOffice spaceWarehouse spaceQuality system manager Foreign manufacturers cannot submit applications to KFDA directly.You can either allow your distributors in Korea to apply for approval or hire a third-party license holder.


Pre-Market Requirements

Certificate of Product Notification

Technical File

Type Test

Class I Class II, III, IV

Certificate of Product Approval

Each and every product code must be notified or

approved by KFDA prior to the first shipment to

Korea

Validity: Permanent (like a 510k)


Approval Process

Class I NotificationSubmit applications to a KFDA District Office Each model or code number must be submittedKFDA has 10 working days to i) accept, ii) ask for supplementary information or iii) refuse. In general, firms plan 2-3 months from preparation to notification

Manufacturersor Importers

General lead timeincluding company preparation:

1-2 months

KFDA District Offices

Firm submits a completed Form 5

KFDA issues a certificate of product notification.


Pre-market Regulatory ProcessClass II, III, IV Approvals

Submit applications to KFDA head office Each model or code number must be submitted for pre-market approvalsReview time

510k-type application: 55 working daysPMA-type application: 70 working days

In general, firms plan 6-9 months to complete for a product basically same as a previously approved product, 9-12 months for a new-to-market device

Technical File (Form 7)The KFDA reviews a technical dossier

Type TestA KFDA-registered third-party lab

physically tests samples

Certificate of Product ApprovalFirms submit to the KFDA headquarters

a copy of approved technical filesand a certificate of compliance

to type types


Two Types of Technical Files

General technical file: 510K-type dossierFor devices basically same as previously approved products

The KFDA does not require clinical study reports mostly but may require at its discretion

Safety and Effectiveness Review (SER) technical file: PMA-type dossiers

New indications, new developmentsPMA-type dossierClinical study reports are essential

Local clinical studies are not requiredStudies done in other countries but published in academic journals are acceptable


Pre-conditions for Imported Devices

Devices made outside of Korea must have been approved in the country of legal manufacturer prior to approval in Korea

A certificate must be issued by the responsible government agency of the country of manufacture

Certificate to Foreign Government (CFG) issued by the U.S. FDA for U.S. products Must be an original certificate Notarization is not necessary

A valid certificate issued for the last two years

KFDA is taking steps to eliminate this requirement, so Korean importers can apply for product approval without certificate of product approval in the country of manufacture

It is expected to be implemented later 2009.


Unit of Application

One technical file results in one product license

Medical supplies or disposablesBundling criteria

Different sizes, colors within a product classification and a brand name but materials must be sameDifferent brand names within the same product category, the same manufacturing process, the same structure and the materials

When you have new codes later on, you can amend your existing product licenses to add new codes

Durable equipmentOne application for each modelAmendment to product license means replacing the previously approved product with the new product, so the product license for the old product is invalidated.


Amendment to Technical File

Disposables or implantablesTo add new sizes or code numbers to a previously approved technical file

Must be of the same classification with the previously approved productsMust be using the same materials with those products covered under the previously approved technical file

Turnaround time1-2 months, if additional testing is not required. 3-5 months, if additional testing is necessary.

21

Need for Local Clinical Study

Local clinical study is not necessary, if foreign clinical data is strong enough to demonstrate the safety and effectiveness

KFDA accepts foreign clinical reports under certain conditions:

Clinical study reports published on a medical journal listed on the Science Citation Index (SCI) or other recognized journalsClinical reports that have been reviewed by a government for approval in the country of manufacture

An official letter from a foreign government stating such acceptance must be submitted together or other supportive documents.

Other reliable reports


Technical File Review Fees

Charging Organizations

Types of Applications FeesKorean Won US$

KFDA Class I Notification 500 0.40Review a general technical file for those devices basically same as existing devices

20,000 23.-

Review a SER technical file, e.g., for New Device)

30,000 15.-

Issue a Certificate of Product License 10,000 8.-Clinical study authorization - -

*Exchange rate US$:Korean Won=1:1300

*KFDA is evaluating a user fee system for medical device approval but implementation is highly uncertain due to controversies.


Type Test

Physical testingLocal testing conducted by a third-party lab registered with KFDA. Test labs carry out testing on samples submitted by companiesLabs determines the number of samples they need and issues a certificate of an approval of test samples for customs clearance.

Acceptance of Foreign Test ReportThe KFDA-registered labs reviews foreign test reports and accepts them in place of local testing in case test reports meet certain requirements.

Thirteen labs are registered with the KFDA as a regulatory test lab for medical devices. Type test takes 1-3 months depending on the nature of a test.


Costs of Type Tests

Fees vary depending on test itemsFull local testing (general)

Durable or electric equipment US$3,000-4,000Disposables or implantables US$7,000-10,000

Review foreign test reports US$640Importers can reduce costs of type tests by submitting acceptable foreign test reports

*Exchange rate US$1:Korean won=1:1,300


Major Criteria for Accepting Foreign Test Reports in place of Local Testing - 1

KFDA-authorized test labs determine foreign test reported accepted in place of local testing.

Electrical Test ReportsTests must be carried out to IEC standardsReports must be written in a CB scheme formReports must be certified by a CBTL (National Certification Body Testing Lab)

Biological Test ReportsTests must be carried out according to ISO, ASTM or other international standardsTests must be carried out according to GLP standards

Physico-chemical Test ReportsTest reports issued by ISO 17025-certified labs


Major Criteria for Accepting Foreign Test Reports in place of Local Testing - 2

Performance Test ReportsTest reports issued by ISO 17025-certified labs are always accepted.Foreign test reports accepted in case the same tests cannot be repeated in KoreaIn case of test reports issued by manufacturers, the following information should be submitted:

A full description of test protocols, acceptance criteria, etc.Raw data may be required on a case-by-case basisSignature by lab technicians and supervisorsNotarization by a notary public

Information accepted by the government for approval in the country of manufacture for approval only when submitted with a certificate of such fact by the government


Certificate of Product Approval

Two type of product licensesManufacture licenseImport license

Paperwork process to receive a certificate of product approval from the KFDA

RequirementsA copy of approved technical fileA copy of approved type test (KFDA target to eliminate in 2009) A list of facilities (KFDA target to eliminate in 2009)Free sale certificate issued by a government of the country of the legal manufacture (KFDA target to eliminate in 2009)


Post-market Requirements

TrackingThe KFDA Commissioner has the right to designate devices for tracking within the following two criteria:

Devices implanted into the human body for more than one yearLife-sustaining devices used outside medical institutions

Devices currently designated for tracking:Implantable pacemakersElectrodes for implantable pacemakersArtificial heart valvesImplantable defibrillatorsImplantable infusion pumpsArtificial VentilatorsExternal pacemakersBreast implants


Voluntary Recall- Adverse Event Reporting

Parties required for reporting:ManufacturersDistributorsRepairersRental firmsHospitalsVeterinary clinics

Reportable eventsVoluntary recallsDevice-related death or serious adverse events Information on potential adverse events


Reporting Time WindowDeath or life-threatening adverse events

Initial report within 7 daysAdditional follow-up report for detailed information within 8 days

Events extending the length of hospital stay, disability or reduction of function that cannot be recovered, adverse reactions causing congenital deformity or abnormality

Report within 15 days

Voluntary recallReport within 30 days

Adverse Event Reporting


Clinical Trials –Recent Policy Initiative

Background

As of May 2009, a total of 64 university hospitals qualified by KFDA as medical device clinical trial centers.

64 Medical Device Clinical Trial Centers Qualified by KFDA

A new government policy to encourage foreign device firms to do clinical studies in KoreaKFDA requires hospitals and medical doctors to comply with GCP for patient protection and quality studies.


Device Clinical Studies Approved by KFDA

Year Filed Approved Success Rate(%)2001 17 3 182002 30 9 332003 23 9 392004 25 13 522005 18 8 442006 33 14 422007 31 14 452008 41 25 612009 15 11 73Total 226 101 45

(May 18, 2009)


Opportunities Advantages to conducting device research in Korea:

Quality investigators, mostly U.S. trained. Patients are very open to clinical studiesCost is reasonableBroad experience in global pharmaceutical studiesKFDA and other government agencies are supportive


New Initiatives in 2009

Elimination of CFG for Approvals

PresentForeign-made devices should be approved in the country of legal manufacturer before they can be approved by KFDA. E.g., devices distributed by U.S. firms (legal manufacturer) but no notification or approval in the U.S., they cannot be approved by KFDA since it is not approved to market in the U.S.

Later 2009KFDA will eliminate such requirement for submission of CFG or Free Sale Certificate (FSC) of the country of the legal manufacturer for KFDA approval.E.g., those U.S. devices with CE mark only but no 510(k) can be approved by KFDA.


Streamline Review Process

PresentTwo step process

KFDA reviews technical files, and third-party labs review and determine acceptance of foreign test reports to exempt local testing.

Later 2009KFDA reviews more foreign test reports during the process of reviewing technical dossier.Firms can complete both review of technical dossier and test reports in one-step.


KFDA Audit on Foreign Manufacturers

PresentNo authority for KFDA to inspect foreign facilities.In 2009, the agency recruited firms that will receive KFDA GMP audits voluntarily for pilot programs.Firms are responsible for travel costs of KFDA auditors.

Later 2009The agency plans to make a GMP inspection a requirement beginning 2011.


Reimbursement Approval

National Health Insurance (NHI)

Compulsory public health insurance covering the entire population

The sole national insurer in Korea operated by the central government All income-earning citizens must contribute certain percentages of incomes.All hospitals and clinics must be reimbursed by the NHI reimbursement plan.Patients co-pay 20-50 percent of the published amount of fees for covered services or products

Patients pay full costs for uncovered services or products


Three Agencies

Ministry of Health and Welfare (MOHW)Decides reimbursement policies and guidelinesAnnounces reimbursement coverage decisions and prices

Health Insurance Review Agency (HIRA)Accepts and reviews applications for reimbursement approvals submitted by device suppliers

Recommends reimbursement/non-reimbursementRecommends prices, in case of reimbursement recommended

Clears reimbursement claims submitted by hospitals or pharmacies

National Health Insurance Corporation (NHIC)Collects premiumsPays hospitals or pharmacies


Needs for Reimbursement Approval

Device suppliers submit applications to HIRA for devices reimbursed as product fees, e.g.,

StentPacemaker

Firms are supposed to submit an application for approval within 30 days of KFDA approval

No need to apply for devices for which costs of devices are deemed included in service fees, e.g.,

SyringesMRICT


Compile ApplicationApplications must be prepared in Korean.Form 16

Information on applicant (importer, distributor)Approved indications or effectivenessMajor materials and content levelsPacking units, propose price, expected annual sales, etc.

Supportive DocumentsA copy of the KFDA product licenseRationales of the proposed priceMaterials on cost-effectiveness (including comparative analysis and strengths and weaknesses with competitors’ products)Status of uses inside or outside of Korea (year of first application in the market, names of medical institutions, number of cases)Explanations of components, user manualsAcademic research reports or other relevant information


EvaluationStep 1: Comparator Selection

HIRA chooses from the current NHI reimbursement list a sub-category where similar products are already listed (comparative products)

Step 2: Compare Features and BenefitsThe agency compares the features and benefits of the proposed products to a comparative product(s).

Step 3: Recommend prices


Pricing RulesBasically same device with existing devices

10% reductionSame price with lowest price

Significantly improved devicesSame price with highest price

Innovative devicesNew categoryValue appraisal


Pricing Rules

New Medical Devices

Same purpose of use with pre-existing devices

Different purpose of use from pre-existing devices

Price up to 90% of the price of the highest-price in the category

Significant improvement

Same price of the highest-price product among its category

Insignificant improvement

Lowest price among similar products

In case of a substantial improvement, its price may exceed the rate of the most similar product

One product in the category

Two or more Products in the category

Equivalent materials, shapes or sizes

Price based on manufacturing costs (or FOB), clinical outcome and economic effects

Different materials, shapes or sizes

Value appraisal


Month 0 Month 1 Month 2-3 Month 4 Month 5 - 6

HIRAMedical DeviceManagement Department

Technical Review

MOHWHealth Insurance

Benefits Planning TeamPolicy Review

Medical Device Expert Committee

Health Insurance Deliberation and Arbitration

Committee

Submit for recommendations

Apply RecommendationsDrugManufacturer/

Importer

①

②

③

④

⑤

Provide recommendations

Submit for a final approval Final approval

Official Announcement

Reimbursement Approval Process

Turnaround time: 5-6 months


HIRA Medical Device Expert Committee

Organizations Number of SeatsNational Health Insurance Corporation (Insurer)

2

Health Insurance Review Agency (HIRA) 1Ministry of Health and Welfare (MOHW) 1Korea Food & Drug Administration (KFDA) 1Korea Medical Association 1Korea Hospital Association 1

Korea Dental Association 1Korea Dental Materials Association 1Consumer Groups 2

Academia 2Korea Medical Device Industry Association 1

Total 14 seats


What is important for better pricingEmphasize costs rather than qualityImproved benefits to patients are the most important, e.g.,

Clinical outcomeLess invasivenessReduced time for surgery or recoveryReduced stay in hospitalReduced costs of drugs or other devices

HIRA does not recognize improvements in surgical conveniences Proposed reimbursement prices should not exceed 1.78 times FOB price

Submit a copy of customs clearance document to support an import price


Devices for a new purpose of use, with new materials or concepts of design:

Appraise the value of the product and add a new technology premium on the top of the price same as the highest-price product in the sub-categoryOnly a few products have been approved for 10-30 percent premiums since the introduction of this new regulation in March 2006.Only a few devices obtained a premium pricing through the value appraisal process.

New Devices


Value Appraisal FormAppraisal Criteria

Specific Appraisal Items Major Elements to Consider

ImprovementLevel

1 2 3 4 5

Clinical Usefulness

Therapeutic Effects

- Is this product offering an improvement in therapeutic outcomes? (Safety/accuracy/level of invasiveness, improvement in materials, improvement in shapes, etc.) - Is this product reducing complications and adverse events or infection rates?- Is this product reducing recurrence, re-intervention? etc.

Improved quality of life (including convenience to patients)

- Is this product improving a normal life, such as improvement in the level of maintaining an independent life?-Is this product increasing benefits to patients such as reduction of discomfort by improving the level of anatomical conformity? etc. (including improvements in sizes or shapes of products

Cost-Effectiveness

Reduction in medicines or other therapeutic materials

-Is this product offering extended durability such as through expanded longevity of implants?-Is this product reducing costs for medicine and other treatment supplies?

Reduction in operating time or treatment period

-Is this product reducing the length of hospital stay?-Is this product reducing a period of treatments?-Is this product reducing a period of operating time by

making operations easier?


Official Announcement of Reimbursement Approvals

MOHW publishes an official announcement electronically at its homepage every monthBegin effective from the first day of the following month.The official announcements include the following information:

Upon a non-reimbursement decision, firms are legally allowed to sell at market prices


Challenges

Regulations are designed to disadvantage late comers that are better products

To have an approval for the same price with the existing products, firms must demonstrate improvements in clinical outcomes through, e.g., clinical reports

Clinical reports for most of the devices are very limited

No incentives for firms to launch latest products


New Initiatives 2009

Grades Range of Exchange Rates (Won) Adjustment Rates (%)

-2 500 won or higher – less than 700 won -8

-1 700 won or higher – less than 900 won -4

0 (Base Grade) 900 won or higher – less than 1,100 won 0

1 1,100 won or higher – less than 1,300 won 4




Exchange Rate Adjustment System

New policy introduced on April 1, 2009Price adjustment every six months reflecting an average exchange rate for the previous six months


Improvement of Pricing RegulationsPresent

New products get lower prices, unless they submit evidence of incremental benefits over existing devices, e.g., clinical papers.

Later 2009HIRA/MOHW is considering to loosen its criteria for approving a new device at the same price with existing products by accepting, e.g., the following information in place of clinical papers.

Bench Test ReportUnpublished clinical data Case reportsMaterials explaining about benefits of the product

The agency is also considering to revise its regulation, so they can increase prices of new products offering improved clinical outcomes by 50% over prices of similar products.


Re-evaluation of Reimbursement Prices

PresentNo such system exist to re-evaluate reimbursement prices of already listed products.

Later 2009MOHW/HIRA is expected to come up with a draft regulation to introduce a new system called ‘Re-evaluation of medical device reimbursement prices’. HIRA is considering dividing 13,000 devices into three batches. Each batch goes through price re-evaluation triennially. HIRA is considering ‘group pricing’ for a new criteria for re-evaluating reimbursement prices.


Health Technology Assessment (HTA) - 1

BackgroundMOHW implemented a new system called Health Technology Assessment (HTA) in August 2008. HIRA accepts applications from companies of hospitals for HTA. It takes one year to carry out a systematic review on the new technology and announces whether it is a safe and effective technology. New technologies can proceed to a reimbursement or non-reimbursement approval only after HIRA recognizes it as a safe and effective technology.

ProblemsIt delays market access of new health technology by one year.Medical devices have few clinical papers, so have been rejected in many cases. HIRA prohibits hospitals from treating patients with those rejected devices. 60Copyright © Synex 2009, All Rights Reserved

Pending ConsiderationHIRA is considering streamlining its HTA process for new technologies involving medical devicesHIRA/MOHW is expected to announce potential changes soon.

Health Technology Assessment (HTA) - 2

61

Take-Home Messages

Take Home Messages - 1Korea has a large potential for further growth in the healthcare market

Its healthcare spending has outgrown that of developed countries in recent years Strong economic growths have continued in recent years

GNP per capita approaches US$20,000Population is aging rapidly

Senior population of 65 years or older increasing 4.4 million in 2005 to 5.4 million by 2010

Early birds get more worms (Act now!)Purchase decisions are highly depend on relationships with individualsYou need time to establish relationships with regulatory authorities and clients


Take Home Messages - 2Language and cultural barriers are substantial

Applications must be written in KoreanInformation crucial to business in regulation is undocumented in many cases but exists and plays critically, e.g., case precedent.Direct communication with responsible officials in English is not feasible.

Well-written application is most importantExperienced regulatory affairs professionalsReasonable access to KFDA or HIRA reviewers or third party organizations for pre-consultations and in-process feedback


Take Home Messages - 3Regulatory procedures are fragmented

Close communication with responsible officials and client for each and every step is essential

KFDA and third-party organizations for approvalHIRA and MOHW for reimbursement

Device distributors are mostly small and medium-sized firms and have no real experts in-house.

You need experienced regulatory professionals and distributors, who can guide you wisely


Questions?


Thank you!


Synex Consulting Ltd.10th Floor Daejong Building

143-48 Samsung-dong, Kangnam-guSeoul 135-601, Korea

www.synex.co.krPhone 82-2-6202-3300

Fax 82-2-6202-3380

http://www.synex.co.kr/