Last Updated: October 2019
Current Market Trends
GDP: USD $4.87 trillion (2017)
Currency: Yen (JPY/¥)
Japan's market for medical devices and materials continues to be among the world's largest. According to the latest official figures from the Ministry of Health, Labour and Welfare (MHLW) Annual Pharmaceutical Production Statistics, the Japanese market for medical devices and materials in 2018 was approximately $29.3 billion (USD 1 = Yen 110.40), up approximately 6.9% from 2017 in yen terms. The market remains heavily dependent on imports, especially sophisticated medical devices. The demand for advanced medical technologies is expected to increase as Japan has a fast-aging demographic profile, with relatively prosperous seniors holding increasing expectations for improved quality of life in their later years. BMI Research has estimated that Japan's medical device market will exhibit a CAGR of 4.5% in yen terms from 2018 to 2023.
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Over the last decade, reduction in regulatory approval timelines, increased predictability in pricing mechanisms, as well as incentives for innovation have allowed international medical device and pharmaceutical and companies to bring their products to market in Japan more quickly. U.S. companies, however, have expressed serious concerns about several developments which collectively create downward pricing pressure on medical devices and innovative pharmaceuticals. First, there are concerns regarding recent policy changes to the Price Maintenance Premium (PMP), a mechanism designed to accelerate the introduction of innovative pharmaceutical products to the Japanese market. Several PMP calculation factors, such as the number of local clinical trials and product launches, appear to favor Japanese companies wishing to qualify for the premium. PMP system reimbursement outcomes suggest that U.S. companies, especially small- and medium-sized enterprises, are at a disadvantage in the current system compared to Japanese companies. Secondly, Japan’s implementation of Cost-Effectiveness Assessment (CEA), a health technology assessment system, may add uncertainty for companies selling highly innovative and high-impact drugs and medical devices.
In addition, U.S. stakeholders are concerned that Japan’s proposed move from the current biennial price revision to an annual price revision will create significant downward pressure on prices for innovative medical devices and pharmaceuticals, undermining investment planning for capital-intensive product developments in Japan. For medical devices, these pressures could be exacerbated by use of Foreign Average Pricing (FAP), in combination with tools such as the R-Zone calculation (involving medical device discounts to hospitals).
A Japanese company that intends to market a U.S. medical device needs to receive a “license for manufacturing/marketing business” (seizo hanbai gyo kyoka). The company holding this license is called a “Marketing Authorization Holder” (MAH). An MAH must be physically located in Japan. The MAH must obtain marketing approval (hanbai shonin) for each product. A U.S. manufacturer intending to manufacture medical devices in the United States and export them to Japan is required to be registered by the Pharmaceutical and Medical Device Agency (PMDA) as a “Registered Foreign Manufacturer” in the same way that a Japanese manufacturer is registered. Typically, an MAH can make a registration application on behalf of a U.S. manufacturer. A U.S. manufacturer that lacks a Japanese subsidiary can receive and maintain the marketing approval under its own name. However, the U.S. firm will need to designate an MAH when applying for product approval. This Designated MAH (D-MAH) will have to assume the same responsibilities as an MAH. A D-MAH can be a regulatory consulting company or an importer/distributor that holds an MAH license. When a regulatory consultant is designated as an MAH, a U.S. company will need to have a Japanese distribution partner since a regulatory consulting company will not act as a distributor. If a U.S. firm has a subsidiary in Japan, that subsidiary can become an MAH and then obtain the marketing approval for each product. If a U.S. firm does not have a subsidiary in Japan, the company has three options to consider in order to conduct business in Japan:
1. The U.S. firm can ask their importer/distributor to obtain the marketing approval under the name of the importer/distributor. In this case, the importer/distributor will have complete control of the U.S. firm’s products when the products are marketed in Japan.
2. The U.S. firm can obtain the marketing approval under their own name by designating their importer/distributor as a D-MAH.
3. The U.S. firm can obtain the marketing approval under their own name via a neutral third party such as regulatory consulting firms that have a “license for manufacturing/marketing business” by designating them as a D-MAH.
The Japanese market for medical devices is large and established at $29.3 billion in 2018. The market remains heavily dependent on imports, especially sophisticated medical devices such as pacemakers, PTCA catheters and orthopedic implants. A number of U.S. companies have substantial production capacity in Japan. As such, the total market share of U.S.-origin medical devices in Japan would be significantly higher than suggested by official statistics. According to the American Medical Devices and Diagnostics Manufacturers’ Association (AMDD), a trade association of Japanese operations of U.S. medical devices and diagnostics companies, the total sales of its member companies reached yen 1.8 trillion ($ 14.9 billion) in 2015, which represented 67% of the Japanese medical device market (including IVDs) in terms of sales.
The major product categories comprising Japan’s domestic medical device production include: diagnostic imaging equipment, therapeutic and surgical equipment, bio phenomena measuring and monitoring systems, home therapeutic equipment, dialyzers, and endoscopes. Japanese medical device companies maintain high market share in these product segments. Top Japanese medical device companies, in terms of sales, include Terumo, NIPRO, Olympus Medical Systems, Hitachi Medico, Nihon Koden, and Fukuda Denshi. U.S. medical device companies produce a wide variety of medical devices, but they are especially strong in sophisticated segments of the medical market such as pacemakers, advanced interventional cardiology products, orthopedic implants, laser surgical equipment, and advanced diagnostic imaging equipment. Most major U.S. and foreign medical device firms have either a Japan office or a Japanese partner. As such, new-to-market U.S. companies will face strong competition not only from Japanese companies but also from American and multinational firms already in the market.
Given Japan's aging population and the increasing number of patients with chronic and lifestyle diseases, medical devices that alleviate pain, complement lost functions, and improve quality of life should show steady growth in demand. Also, in-home care devices, technologies and health IT-related products are expected to grow as the number of people in out-patient care increases. Artificial intelligence (AI)-assisted medical devices such as diagnostic imaging or treatment support will see increased market opportunities. Due to stronger consumer health concerns, other promising growth areas include self-care and preventive care medical devices and products.
Japan’s medical device classification system is based on the Japanese Medical Device Nomenclature (JMDN) codes which are different from U.S. and European classifications. Review processes for medical devices differ depending on the classification. Medical devices are classified by risk level into four classes (Class 1, Class 2, Class 3 and Class 4). Class 1 (lowest risk) is defined as general medical devices; Class 2 (relatively low risk) is defined as controlled medical devices; Class 3 (relatively high risk) and Class 4 (highest risk) are defined as specifically controlled devices. General medical devices can be marketed by submitting a notification to the Pharmaceutical and Medical Device Agency (PMDA). Controlled medical devices, with established certification standards, can be reviewed by third-party certification bodies. Controlled medical devices without certification standards and specifically controlled devices must be reviewed by PMDA and approved by MHLW.
In order to effectively market most medical devices in Japan, the products must be listed in Japan's reimbursement system. The reimbursement rate, or price, granted to a given medical device by the MHLW is effective under all insurance schemes, whether public, private or employer based. There are eight product reimbursement classifications. For further details regarding the medical device reimbursement system in Japan, please see an article titled “Reimbursement pricing for new medical devices in Japan: Is the evaluation of innovation appropriate?” written by M. Tamura, S. Nakano and T. Sugahara for the International Journal of Health Planning and Management at https://onlinelibrary.wiley.com/doi/full/10.1002/hpm.2719.
While the market for U.S. medical equipment in Japan remains strong, U.S. firms face challenges with pricing and reimbursement due to the Government of Japan’s (GOJ) efforts to contain overall healthcare costs as a result of Japan’s aging population. In June 2016, Japan decided to postpone, for the second time, the scheduled consumption tax hike in April 2017 (from 8% to 10%) to October 2019. When the tax hike was planned in April 2017, the Ministry of Finance was demanding that reimbursement prices be trimmed based on market prices by carrying out an irregular price revision, which would have led to de facto annual revisions (the scheduled biennial price revisions occur in even-numbered fiscal years). The decision helped the industry avert three consecutive years of price revisions in 2016-2018; however, it has created a more challenging financial environment as it generated additional revenues to fund healthcare expenditure. In June 2018, GOJ approved the 2018 Basic Policy on Economic and Fiscal Management and Reform, known as “honebuto.” This year’s honebuto again underscored the need to contain social welfare spending. Although no numerical targets were included, the honebuto specifically called for additional modifications to the reimbursement pricing mechanism.
Procurement & Tenders
In order to participate in Government procurements, the seller must usually be qualified based on their history of operations, financial status, etc. For further information about the GOJ’s procurement, please see the Ministry of Foreign Affair’s website at http://www.mofa.go.jp/policy/economy/procurement/index.html. Also, the Japan External Trade Organization (JETRO) provides the Japanese Government Procurement Database System on their website at https://www.jetro.go.jp/en/database/procurement/.
1. Can we file a product approval application to PMDA in a language other than Japanese?
No, PMDA requires all forms related to the product approval application to be submitted in Japanese.
2. Can we submit foreign clinical data for a product approval in Japan?
Yes, PMDA often accepts foreign clinical data of medical devices for a product approval. For further information, please see the following notifications:
3. Can we own a product approval status under our own name?
Yes, a U.S. manufacturer that lacks a Japanese subsidiary can receive and maintain the marketing approval under its own name. However, the U.S. firm will need to designate an in-country licensed Marketing Authorization Holder (MAH) when applying for product approval.
Yen 42,138 billion (2016)
... as percent of GDP
... of which spent on inpatient services
... of which spent on pharmaceuticals
... of which spent on outpatient services
Hospitals, Procedures, Healthcare Professionals
Number of hospitals
…Private and others
Number of hospital beds
... available beds per capita
1,227.2 beds/100,000 people
...of which in general hospitals
...of which in general clinics
...of which general surgeons
...of which general internists
...of which pediatricians
126,168,156 (July 2018 est.)
Life expectancy men/women
Male: 81.09 years
Female: 87.26 years (2017)
1.9 deaths/1,000 live births (2017)
Percent of population older than 65
28.0% (Jan. 2018)
10.8 deaths/1,000 population (2017)
...caused by [highest disease burden]
...caused by [second highest]
Prevalence of [fastest growing disease burden]
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Position: Senior Commercial Specialist
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