Can We Offer Advanced Medical Technologies to …mddb.apec.org/Documents/2010/LSIF/LSIF3/10_lsif3_015.pdfSession 5 Can we offer Advanced Medical Technologies to Patients in good shape

___________________________________________________________________________

2010/SOM3/LSIF/015

Can We Offer Advanced Medical Technologies to Patients in Good Shape Under Existing Regulatory

Framework?

Submitted by: Medinet Co., Ltd.

Life Sciences Innovation ForumSendai, Japan

18-19 September 2010

Session 5 Can we offer Advanced Medical Technologies to Patients in good shape under Existing Regulatory Framework?

Kunihiko SUZUKI

With business experiences with Autologous Immuno-Cell Therapy for cancer patients in Japan more than 10years, one of the pathways to provide Advanced Medical Technologies to the patients derived from scientific discoveries, technological advances and engineering development will be presented. In order to promote the benefit for the patients, regulatory framework should be designed in quite flexible ways with well-balanced risks and benefits over such Advanced Medical Technologies. In the case of Cell Therapies (in some cases of Regenerative Medicines), there are lots of unknown areas and have to be clarified – e.g.: Mechanism of Actions, Method of Evaluation and so on. Therefore, key technologies are under development and there is room for further technological innovation. Under such environment, it is quite obvious that the regulatory frameworks which were originally established for small molecular chemical compounds cannot fit to new types of medical technologies such as cell therapies and regenerative medicine. We have to find out the new regulatory framework for Cell Therapy and Regenerative Medicine, more or less.

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Can we offer Advanced Medical Technologies to Patientsi d h d E i ti R l t F k?in good shape under Existing Regulatory Framework?

An example of the pathways for Patients, who may enjoythe Benefit of Scientific Discovery,

Technological Advance and Engineering Development

18 September, 2010

Kunihiko SUZUKISenior Executive Officer

General ManagerCorporate Strategy & Planning Department

Medinet Co., Ltd.

Topics

TOPICS to be DISCUSSED

I. Experience in doing Business with Immuno-Cell Therapy for Cancer Patients

II. Goal and Objective – Patient First

III. Advanced Medical Technologies in General

IV. Regulatory Framework

©2010 All rights reserved for MEDINET Co., Ltd.

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g y

V. Conclusion

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I. Experience in doing Business with Immuno-Cell Therapy for Cancer Patients

1 Corporate Overview1. Corporate Overview

2. Business Model

3. Financial Data


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1. Corporate Overview

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Corporate Profile

PhilosophyBeyond the bound of common sense, we conscientiously turn

Creative Vision into Reality with ethos of Patient First

MissionWe create innovative technologies for building future medical care, and

continue to bring such technologies into the public in a prompt and efficient manner

N a m e ： MEDINET Co., Ltd.

H e a d O f f i c e ： Yokohama, JAPAN

Date of Foundation ： 17th October, 1995

R e p r e s e n t a t i v e ： Yoshiji KIMURA


5As of 30th June, 2010

R e p r e s e n t a t i v e ： Yoshiji KIMURA, Representative Director of the Board and CEO

P a i d i n C a p i t a l ： 2,582,161-(‘000JPY)

L i s t e d M a r k e t ： TSE Mothers; #2370

Shares Outstanding ： 632,755shares

Number of Employees ： 143

Medical Institution, Using MEDINET’s technologyContracted Medical Institutions and Allied Medical Institutions

Total: 61 institutions, including allied medical institutions

(As of 30th June, 2010)

Allied Medical Institutions:49

Contacted Medical Insituitons:7SETA Clinic, SapporoSETA Clinic, Osaka

Allied Medical Institutions:49

Allied Medical Institutions during FY2010 SETA Clinic, Tokyo

SETA Clinic, Shin-Yokohama

Tokyo University Hospital 22nd Century Medical and Research Center

National Hospital Organization, Osaka National Hospital

SETA Clinic,Fukuoka


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Accumulation of Cell Processing for Clinical Treatment

Accumulated Number of Patient Starts the Immuno-Cell Therapy at SETA Clinic

Group:11,000 Patients (Nu

(Num

ber

of C

ell P

roce

ssin

g)um

ber of Patient S

tarts the imm

uno-Cell T

Accumulated Number of Cell Processing at MEDINET:appx.89,000 times


7As of 30th June, 2010Source: SETA Clinic Group

Therapy)

2. Business Model

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Blood collection

Administration

Cycle of Immuno-Cell Therapy

Wash and harvest of

T-lymphocytes

Separation of T-lymphocytes

and plasma


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Activation of T-lymphocytes

Proliferation of

T-lymphocytes

Cell Processing for Cell Therapies with Autologous Cells

Medical institution

Medical examination

Judgment for effectivenessDecision for clinical path

Cell-processing

Critical process to be assured （Quality assurance）

InfusionCollection of materials

（Collection of blood etc.）Blood etc.

Processedcells


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Culturing and activationFinal test

before infusionTest at each process

Acceptance test

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Business Model

Regenerative or cellular medicines,

using autologous cells are not actually

Medical doctors have discretion to practice

any medical treatments

Profit-making entities are not permitted to

directly conduct

Intensive R&D is necessary to provide novel and advanced

Pharmaceutical Affairs Law

Medical Practitioners Law

MedicalCorporation Law

are not actually regulated by current

Pharmaceutical Affairs Law

any medical treatments based on their own

responsibility

directly conduct medical services

Business Model

technologies

R&DMedical Service


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Allied Medical Institutions

Medical Treatment

Immuno-Cell Therapy Total Support Service:Technology, Know-how, CPC, etc.

Cancer Patients

Contracted Medical

Institutions

Medical Institution

Patients

Immuno-Cell Therapy Total Support Service

Contracted Medical Institution（Equipped with CPC)

Contracted Medical Institution（Equipped with CPC)

Service Includes:1 Technology and Know how

Medical Alliance

Institution

Immuno-Cell


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Charge1.Technology and Know-how2.Exclusive right to use CPC and facilities

3.Quality Assurance4.Custom-Made Medical Practice Management System

5.Others

Immuno CellTherapy Total

Support Service

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3. Financial Data

Financial Highlight

(Millions of yen)


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Financial Summary

Sep. 2005(Non-consolidated)




Sep. 2009(Consolidated)

Sep. 2010(Consolidated)(Estimation)

Sales(JPY'000)

1,498,840 1,526,930 1,606,986 1,838,469 2,900,000 3,260,000

Operating Income(Loss)

(JPY'000)

-579,480 -782,535 -827,528 -704,418 293,000 330,000

Net Income (Loss)(JPY'000)

-790,541 -821,011 100,235 -1,702,837 323,000 320,000000)

Equity MethodInvestment Gain(Loss)

(JPY'000)

-29,772 -19,874 －－ -

Paid in Capital(JPY'000)

2,044,250 2,056,750 2,193,030 2,267,332 2,521,487

Common Shares-Number of SharesIssued

(Shares) 552,200 556,200 577,720 593,600 625,600

Net Assets(JPY'000)

4,560,351 3,764,377 4,088,296 2,588,745

Total Assets(JPY'000)

4,922,587 4,237,448 4,501,137 2,963,958 3,317,568

Shareholder'sEquity per Share

(Yen) 8,259 6,768 7,065 4,351 5,298.23

Net Income (Loss) Sh

(Yen) -1,432 -1,480 177 -2,889 410.77


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per Share(Yen) 1,432 1,480 177 2,889 410.77

Equity Ratio (%) 93 89 91 87 85.2Return on Equity (%) -16 -20 3 -51 8.4Cash Flow fromOperating Activities

(JPY'000)

-450,683 -641,463 -851,877 -626,416 319602

Cash Flow fromInvesting Activities

(JPY'000)

156,190 -752,692 192,059 -253,839 -587,601

Cash Flow fromFinancing Activities

(JPY'000)

-20,000 5,000 250,468 130,919 501,048

Cash andEquivalents at theEnd of Fiscal Year

(JPY'000)

3,710,431 2,321,275 1,911,926 1,162,591 1,395,316

II. Goal and Objectives – Patient First

Common Sense in Healthcare/Medical

MEDINET started its business in the area of Immuno-CellTherapy for cancer patients in 1999 with the rationale as below:-

1. Patient First

2. Needs of Improvement in Standard Therapies/of New Method for Cancer

3. Immuno-Cell Therapy with Autologous Cells (T-Cell/ Dendritic Cell)

Cancer is Life Threatening Disease Side Effect sometimes faces “Risk vs. Benefit” issue Best Supportive Care is the last resort in Standard Therapies

Innate Immunity protects human body from Cancer Relatively Lower Risk in Side Effect Efficacy – Data Analysis by Retrospective Study and further action for Randomized Controlled Trial


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4. Case-Business Model Selection by MEDINET

5. Key Issue/ Key Challenge

Treatment with Advanced Medical Technology to Patients With Medical Doctors’ Discretion under Medical Practitioners Law in Japan

Efficacy – Overall Survival, Surrogate Marker, Post-Marketing Surveillance Study Safety – Minimum Requirement Risk vs. Benefit

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III. Advanced Medical Technologies in General

1. Key Technologies are under Development Treatment/Protocol/Multidisciplinary Approach Diagnosis

Overview of Advanced Medical Technologies(in Cell Therapies/Regenerative Medicine) are as below:-

Diagnosis Cell Culturing/Tissue Engineering Cryopreservation Transportation Quality Assurance

Autologous Cell – Relatively Low Risk in Immune Response Allogeneic Cell – Ready to Use, One-to-Many Relations and Scale of Economy

2. Autologous Cell or Allogeneic Cell

3. Target Disease Cancer - Life Threatening, Non-Acute, Incurable


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Cancer Life Threatening, Non Acute, Incurable Artificial Organ – Need Further R&D, but Efficacy is obvious

4. Key Success Factor Newly Developed Technology should be reflected into Current Treatment Over regulation should be avoided, especially in Safety Assurance Test Provisional Marketing/Production Approval with PMS Study

IV. Regulatory Framework

Regulatory Framework should be designed in the light of the nature and/or character of Advanced Medical Technologies.

1. Flexibility

2. Stakeholders

3. Avoid influence from Existing Regulations

4. Risk and Benefit

Regulations should be Flexible to reflect the improvement of key technologies base, which will be developed by Academia and/or Business side

Benefit for the Patient among other Stakeholders should be emphasized

Regulations should be rebuilt without any prejudice and Avoid any influence from the existing regulations, but satisfy the patients with Advanced Medical Technologies


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4. Risk and Benefit

5. Health Insurance as Finances for Medical Treatment

Right Approaches to Risk Assessment should be carefully taken Benefit of Patients should be focused

Appropriate Budget should be allocated Financial Support Methods, by either Public sector and/or Private sector should be essential

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V. Conclusion

Technologies will be significantly improved in the area of Cell Therapy and Regenerative Medicineof Cell Therapy and Regenerative Medicine

Approval/Monitoring Process for Advanced Medical Technologies should be handled with flexible manners


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Maintain higher Quality of Life as the Ultimate Goal of parties who may concerned will be achieved

Patients can enjoy the outcome of Advanced Medical Technologies to obtain better Health

This presentation was created for the purpose of providing information that will helpinvestors make informed decisions It was not created to solicit investors to buy or sellinvestors make informed decisions. It was not created to solicit investors to buy or sellMEDINET’s share. The final decision and responsibility for investments rests solely with theuser of this presentation and its content. Furthermore, opinions, forecasts and othercontent found on this presentation are based on assumptions and beliefs of MEDINET atthe time of preparation. While every effort is made to ensure the accuracy of informationdescribed on this presentation, MEDINET assumes no responsibility, whatsoever, for anylosses resulting from the use of this presentation or its description.

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R l t R f i C ll Th i

Appendix 1

Regulatory Reform in Cell Therapies

with Autologous Cells in JAPAN

Specific Points in Cell Therapies with using Autologous Cells

Cell TherapiesConventionalMedical Services pMedical Services

Medical Institutions

Pharma.


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Medical Institutions

Corporate

Prescription Drug Pharmacy

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Blood collection

Administration

Cycle of Immuno-Cell Therapy

Wash and harvest of

T-lymphocytes

Separation of T-lymphocytes

and plasma


23

Activation of T-lymphocytes

Proliferation of

T-lymphocytes

Cell Processing for Cell Therapies with Autologous Cells

Medical institution

Medical examination

Judgment for effectivenessDecision for clinical path

Cell-processing

Critical process to be assured （Quality assurance）

InfusionCollection of materials

（Collection of blood etc.）Blood etc.

Processedcells


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Culturing and activationFinal test

before infusionTest at each process

Acceptance test

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Medical Doctors cannot manage Cell Processing & Quality Assurance Technologies

Human resource- Recruitment- Organization structure

- Education and t i i

Material resource- Medium、Device etc.

- Acceptance test- Stock

t

Maintenance

-Validation Calibration

Equipment, Software

- Safety Cabinet- Incubator- Storage- FACS, PCR- Centrifuge- Computerized centralsystem

- Process management system

training program management -Validation, Calibration

for machinery-Dairy inspection,Maintenance overfacility and

equipments-Environmental measurement, Facility inspection

-CleaningUtility- Electricity, Water, Gas,Heat source


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Heat source

Quality assurance system（GMP / ISO9001/voluntary guideline）

Internal/External examination, Document management, Standard Operating Procedure (SOP), Record, Traceability,

Rectification system, Risk management, R&D, Process management,Regulation correspondence

Cell Processing of Autologous Cells is a part ofMedical Treatment

Comparisons of Drugs and Autologous Cell Therapy

Drugs Autologous Cell Therapy

Direction of Producing and Processing

Corporate Medical Doctor

Attribute of An Object General Public Only Patient

Homogeneity of Raw Material Yes No

Homogeneity ofProcessing Goods Yes No

ProprietorCorporate

(to be traded for money )Patient

(not to be traded for money )

Prescription Yes No


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Autologous Cell Therapy is not defined as a part of drugs but is defied as a part of medical treatments

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Current Regulation on Processing of Autologous Cells

Although cell-processing is defined as a part of medical practice under current regulation, skills and management of cell-processing is beyond

doctor’s technical competency

Medical Corporation Law Pharmaceutical Affairs Law

Medical Practice Pharmaceuticals


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As a part of medical practice under current regulation：Each medical institutionsindividually set voluntary standards.（Uncontrolled safety standards for cell-processing. Fears for imprudent performance of cell-processing）

As a part of manufacturing business：Despite autologous cells, manufacturing of the cells will be applied forPharmaceutical Affairs Law.(since current regulation is not appropriate and/or covered for cell-processing of autologous cells, growth of the cell-processing market is hindered by current regulation. )

Self Regulation on Cell Processing of Autologous Immuno-Cells for Clinical Use

Medical institutions, where immuno-cell therapy will be conducted, establish voluntary guideline for cell processing and culturing of immuno-cell therapy.

（October, 2007）

『Voluntary Guideline on Buildings and Facilities for Immuno-Cell Therapy 』

Established by；Five specialty clinics for Cancer Immuno-Cell Therapy

■SETA Clinic Group, (Medical Corporation KOSHIKAI)■SEREN Clinic■Hakusan-Dori Clinic (Medical Corporation RINSEIKAI)

Partnered Corporations

■MEDINET Co., Ltd.（Organizer）■Tella, Inc.■Lymphotec Inc.■J. B. Therapeutics, Inc.■Lymphocyte-bank Co., Ltd.

『Voluntary Guideline on Quality Management System for Immuno-Cell Therapy 』


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■Bio-Thera. Clinic (Medical Corporation BIO-THERA. KAI)■Higashitoin Clinic

Assure Safety and Quality of Immuno-cell Therapy for Patients

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Standard for Safety & Quality Assurance on Immuno-Cell Processing and voluntary Association for Immuno-Cell Therapy 1

・Total number of medical institutions, which perform immuno-cell therapy, is 254＊

medical institutions. It is uncertain that all of the medical institutions set effective and/or efficient voluntary standards for safety and quality control. (There is no control over such standards for cell-processing of immuno-cells )・We organize a consortium for 5 specialty clinics for cancer immuno-cell therapy and partnered bio venture in order to standardize guidelines of Buildings, Facilities p g g ,and quality management for immuno-cell therapy.

Member of the Consortium of Immuno-Cell Therapy Specialty Clinics and other medical institutions

Allied network for Member of theConsortium of Immuno-CellTherapy Specialty Clinics

138 institutionsApproved medical institutions bythe Advanced Medical Evaluation

Total No. of MedicalInstitutions for

performing immuno-cell


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＊Note） Original survey of MEDINET by Sep.15th, 2008, Source: Internet, HP, report published by Yano Research Institute Ltd on Sep. 2006, and other sources. The report of Yano Research Institute Ltd is written 123 medical institutions as a total number of the medical institutions.

the Advanced Medical EvaluationSystem (University Hospitals)

15 instituitonsOther medical institutions

101 institutions

therapies254 institutions

・Five specialty clinics for Cancer Immuno-Cell Therapy established voluntary guideline for cell processing and culturing of immuno-cell therapy and released the report on public after reporting to Health Policy Bureau, Ministry of Health, Labour and Welfare (MHLW) （October, 2007)

There are any instructions and comments on this guideline from MHLW.・Now, the voluntary guideline is revised in response to the development of

Standard for Safety & Quality Assurance on Immuno-Cell Processing and voluntary Association for Immuno-Cell Therapy 2

, y g p pscientific technology and accumulated experience on operating the guideline.


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Regulatory Reform of Life-Science Sector

Cabinet Approval


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Regulatory Reform of Life-Science Sector – Medical and Engineering Tie-ups

②Regulatory reform of Medical and Engineering Tie-ups (segmentation of Cell Engineers’ and Doctors’ duties

First Guideline for clinical research using human stem cell which also includes a guideline for cell First, Guideline for clinical research using human stem cell, which also includes a guideline for cell processing and culturing of autologous cell therapy, should be revised to allow engineers to process and culture cells without witnesses of doctors under clinical investigation. (measures in 2009)(ⅢMedicalcare②a)

Second, it should be comprehensively announced that the current medical practitioners law allows a medical institution to use patient’s cell harvested by other medical institutions for the patient’s treatment. The conditions also should be clearly stated on the medical practitioners law.(measures in 2009)(ⅢMedicalcare②b)

In addition, in order to build a institutional framework for regenerative medicine and cell therapy, a working group should be organized by government, industry and academia and develop a new institutional framework. Without sticking to former institutional framework, the new institutional


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g ,framework should consider differences of allogeneic cell and autologous cell as well as differences of use such as skin, cornea , cartilage, and immuno-cell etc. Such a intuitional framework enables contiguous transition from clinical research to practical applications. (will be concluded in 2010)(ⅢMedicalcare②c)

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Regulatory Reform of Life-Science Sector – Utilization of Highly Advanced Medical Treatment Evaluation System

③Utilization of Highly Advanced Medical Treatment Evaluation System

This Highly Advanced Medical Treatment Evaluation System just carried out and cannot be This Highly Advanced Medical Treatment Evaluation System just carried out and cannot be evaluated at this moment. However, the evaluation system should be strengthened in response to a number of preliminary consultations and applications for the future satiation. Evaluating unauthorized new advanced drug/treatment or medical device under Medical Corporation Law secures ample time in order to ensure safety and efficacy as well as ethical issues. However, more immediate evaluation is required as much as a highly-advanced medical treatment (max. 3month-investigation) based on Agreement of the joint provision of treatments covered by the National Health Insurance and of treatments uncovered by such insurance. (will be carried After 2009)(ⅢMedicalcare③a)

The current system limits applications submitted by only medical institutions which own more than 20 beds. However, in order to more effective application of this system, it should be required that this system also accepts applications of clinics which own less than 19 beds if h l h d l b (


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these clinics cooperate with medical institutions met by a given criteria. (measures in 2009) )(ⅢMedicalcare ③B)

「Regulatory Reform of Life-Science Sector」was approved by Cabinet on March 31, 2009

●Regulatory Reform of Life-Science Sector

Japanese Ministry of Health, Labor, and Welfare officially accounted “The conditions that a medical institution uses patient’s cell harvested by other medical institutions for the patient’s treatment” on March, 2010(No.0330-2)

Key Point of the announcement

Regulatory reform of Medical and Engineering Tie-ups (segmentation of Cell Engineers’ and Doctors’ duties

Second, it should be comprehensively announced that the current medical practitioners law allows a medical institution to use patient’s cell harvested by other medical institutions for the patient’s treatment. The conditions also should be clearly stated on the medical practitioners law.

(measures in 2009)(ⅢMedicalcare②b)

In addition, in order to build a institutional framework for regenerative medicine and cell therapy, a working group should be organized by government industry and academia and develop a

Ministry of Health, Labor, and Welfare officially accounted “The conditions that a medical institution uses patient’s cell harvested by other medical institutions for the patient’s treatment” on March, 2010(No.0330-2)


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organized by government, industry and academia and develop a new institutional framework. Without sticking to former institutional framework, the new institutional framework should consider differences of allogeneic cell and autologous cell as well as differences of use such as skin, cornea , cartilage, and immuno-cell etc. Such a intuitional framework enables contiguous transition from clinical research to practical applications.

(will be concluded in 2010)(ⅢMedicalcare②c)

In 2010, a working group is discussing a new institutional framework for regenerative medicine and cell therapy.

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Medical Institution

CPC

Existing Situation – Each Medical Institution should keep own Cell Processing Center

CPC

Medical Institution

CPC

Medical Institution

CPC


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JPY 200 – 500 million investment for a Cell Processing Center and Running Cost of JPY 20 – 60 million annually

Most of 60+ Cell Processing Centers in Japan are not in operation due to lack of Human Resources and Financial reasons

Regulatory Reform of Life Science Sector (FY2009 Action Plan III-2-b)

ClinicHospital

Medical Institutions with Cell Processing Center in compliance

with appropriate Standard of

Partnership

Hospital

AppropriateSafety Standard

Clinic


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Safety

Corporate

Supportive Services

*Conditions for Collaborative Treatment

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Regulatory Reform of Life Science Sector (FY2009 Action Plan III-2-c)

Medical S i

Medical Related Laws

Processing of Autologous CellsTreatment Treatment

Cell ProcessingBusiness

Clinic

Cell Processing Outsource

Cell Processing

Services

Hospital

ServicesOutsourcing

combined with Covered and Uncovered Health Insurance

Treatment combined with Covered and Uncovered Health Insurance

Cell Processing Outsource

Cell Processing

Services


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Patient will be benefitted by “Cell Processing Business” which enables outsourcing of Cell Processing by Medical Institutions

Regulatory Approval – Safety and Quality Assurance

Se ces

N ti l H lth S t

Appendix 2

National Healthcare System

in JAPAN

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National Healthcare System in Japan Part - A

National Healthcare Insurance System is established in order for all the citizens and residents of Japan to benefit healthcares equally nationwide.

Under this policy, all registered citizens and residents of Japan must register for one of the healthcare insurances which meets their occupations or status.

Types of National Healthcare Insurance

Types Managed by Explanation

Government-Managed Employee’s Health Insurance

Government Work-place based insurance for salaried workers in companies and factories, managed by the Government

National Health Insurance

Municipalities Municipality based insurance for self-employed and non-employed people

Association-Managed Employees’ Health

Health Insurance Associations

Work-place based insurance for salaried workers in companies and


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Employees Health Insurance

Associations salaried workers in companies and factories, managed by each insurance association

Mutual Aid Association Mutual Aid Associations

Work-place based insurance for public services workers

Others Depends on the insurance

Seaman’s insurance, etc.

National Healthcare System in Japan Part – B

Mixture of Covered and Uncovered Medical Treatments

MHLW scrutinizes medical treatments and medicines in terms of their safety, efficacy and prevalence, and determines whether they are covered or uncovered by the National Healthcare Insurance.

Treatment Covered by the Insurance

Treatment Uncovered by the Insurance

Mixture of Covered and Uncovered Treatment

If the insured receives medical treatments both covered and uncovered by the insurance at the very same time, he/she has to pay not only full charges for the uncovered treatments but also full charges for covered treatments.

The insured has to pay 30% of the medical treatments and services charges if only health insurance treatments are practiced to him/her; the rest of the charge is covered by the insurance.

The insured has to pay full charges of the medical treatments if he/she chooses to receive treatment uncovered by the insurance.

Uncovered Treatment

Covered Treatment Uncovered Treatment

Uncovered Treatment

Covered Treatment


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Covered by the

Insurance(70%)

Self-Pay Burden (30%)

Self-PayBurden(100%)

Medical Service Fee

500,000(JPY)

Self-PayBurden(100%)

Self-Pay Burden

Amountthe Insuredhas to pay:

500,000 × 30% = 150,000 (JPY)

500,000 × 100% = 500,000 (JPY)

(500,000 × 100%) ＋ (500,000 × 100%) = 1,000,000 (JPY)

(100%)