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1. General Medical Indicators (1)
Population 127 million
GDP (01) $4,333 billion
Healthcare Exp. (00) $278 billion
HCE % of GDP (00) 7.9%
# of Hospitals (00) 9,266
# of Clinics (00) 92,824
# of Dental Clinics (00) 63,361
Total # of Beds (00) 1.65 million

2. General Medical Indicators (2)
Total # of Surgeries approx. 5 million
Average Hospital Stay (00) 39.1 (24.8 for ordinary
hospital)
Life Expectation (00) male: 77.64 female: 84.62
Insurance Coverage 100%
Concept of Operation not for profit
Medical Device Market (00) $18 billion
Pharmaceutical Market (00) $60 billion

3. Japan’s Healthcare System (1)
Major Characteristics
Universal Healthcare Coverage (achieved in 1961) -
health insurance covering the entire population
Free Access - patients can freely choose doctors, clinics,
hospitals
Low Co-payment Rate - patient can receive necessary
medical care for a small fee (patient are required to pay
anywhere 10 and 30% of treatment fee)
Fee-For-Service - reimbursed based on point system

4. Japan’s Healthcare System (2)
Rapidly Changing Healthcare Environment
Changes in the disease pattern - acute vs. chronic
Aging Society and lower birthrate - the elderly will make up
a significant percentage of the total population
Increasing Healthcare Expenditure - Japan’s spending on
medical care continues to increase as Japan becomes a aging
society
Stagnant Economy - imbalance between the increase of
healthcare expenditure and the economic growth will
increase further

5. Rate of Projected Population - over 65
30
25
Japan
Percentage
20 USA
France
15
Germany
10 UK
Sweden
5
0
2000 2005 2010 2015 2020 2025
Year

6. National Healthcare Expenditure
Medical Expenditure
% Medical Expenditure for the Aged (over 70)
400,000 50
39.1 37.2
100 million yen
34.7 35.7 36.7 37.3 40
Percentage
300,000 28.8
30
200,000 17.5
20
100,000 10
0 0
1980 1990 1995 1996 1997 1998 1999 2000
Year
Source: Ministry of Health, Labor and Welfare (MHLW)

7. Healthcare Reform?
• Past efforts included:
- cut reimbursement rates (biannually since 1965)
- established a separate insurance system for elderly (1984)
- raised co-payment for the elderly (1997)
- raised co-payment for ordinary salaried workers (1997)
- established a new long-term care insurance system (2000)
• Recent efforts (2002) included
- cut reimbursement rates
* first time cut on doctor’s technical fee
* introduction of foreign reference price on medical devices
- raised co-payment for the elderly
- raised co-payment for ordinary salaried workers

8. Japan Medical Device Market
$US Bill
20
20 18
18
15
16 14
14 12
12
10
8
5
6
4
2
0
USA Japan UK France Germany Korea

9. Medical Device Trade Balances
Between U.S. and Japan
$US Million
CY 1998 CY 1999 CY 2000
Production 11,507 13,051 13,761
Import 6,370 7,319 7,603
- from U.S. 4,045 4,870 4,941
Export 2,499 3,202 3,362
- to U.S. 800 968 949
Total Market 15,379 17,169 18,002
U.S. Trade Surplus 3,245 3,902 3,992
U.S. Share of Import 63.5% 67.0% 65.0%
U.S. Share of Market 26.3% 27.0% 27.5%
F/X (1 US$/Yen) 131 114 108
Source: Ministry of Health, Labor and Welfare (MHLW)

10. Japan Medical Device Imports
Medical Device Imports in 2000
United States Germany Netherl Ireland Others
20%
4%
5%
7% 64%
Source: Ministry of Health, Labor and Welfare (MHLW)

11. Competitive Products （Japan vs U.S.）
Japan
• Imaging Diagnostic equipment
• Therapeutic and Surgical Equipment
• Biophenomena Measuring and Monitoring Systems
• Home Therapeutic Equipment
• Others (Dialyzers, Endoscopes, Hemodialysis Apparatus, etc.)
U.S.
• Pacemakers
• Advanced Interventional Cardiology Products such as stents
• Orthopedic Implants
• Laser Surgical Equipment
• Cardiac Valve Prothesis
• Others (MRI, CT, etc.)

12. U.S. Medical Device Firms in Japan
• 3M Healthcare • General Electric (GE)
• Allergan • Guidant
• Bausch & Lomb • Johnson & Johnson
• Baxter • Kodak
• Boston Scientific • Medtronic
• Edwards Lifesciences • St. Jude Medical
American Chamber of Commerce in Japan (ACCJ), Medial
Device Subcommittee has 46 member firms

13. Medical Device Regulation System
Japanese Law
Pharmaceutical Affairs Law (PAL) ----- enforced by the
Ministry of Health, Labor and Welfare (MHLW).
Necessary Governmental Authorizations
• Manufacturing (or import) approval (quot;Shoninquot;) which
guarantees the safety and efficacy of the device. (approx.
2,500-3,000 submissions per year)
• Manufacturing ( or import) license (quot;Kyokaquot;) of a device,
which the Japanese manufacturer and importer hold. (in 2002:
manufacturing license - 2,709 / import license - 1,282)
• Reimbursement listing approval

14. How to Register Your Products
Ask Your Importer to Apply Use In-country Care Taker
Pros Pros
• Simple • Option to work with multiple
importers who may have
• Less expensive different strenghts
• No direct involvement with the • No reapplication for shonin upon
Japanese authorities change of importer
• The ability to focus fully on
marketing your product
Cons Cons
• The manufacturer often is • Expensive
limited to one importer
• Change of importer forces the
manufacturer to reapply for
shonin from the beginning
• Dependency on the importer
increases

15. Application Categories
(1) Devices which do not require approval
(2) “Me-too Devices” which are equivalent to already-
approved devices in Japan (Time Clock: 4 months)
(3) “Improved Devices” which do not have new
characteristics as much as the devices to be reexamined but
are not substantially equivalent to already-approved
devices in Japan (Time Clock: 12 months)
(4) “New Devices” which are different in use, function or
technology from already-approved devices in Japan
(Time Clock: 12 months)

16. Risk Categories of Medical Devices
Categories Categories of medical Approval Clinical Trial
devices according to risk
Medical devices that are believed to pose
extremely little risk to the human body even if
Class I they fail -----
Examples: In vitro diagnostic devices, steel
supplies, x-ray film, dental prosthetic supplies
Not necessary
Medical devices that are believed to pose
relatively little risk to the human body even if
they fail
Class II Examples: MRI, electromanometers, In principle, not necessary
electronic endoscopes, digestive catheters,
ultrasonic diagnostic equipment, and dental
alloys
Medical devices that are believed to pose
relatively high risk to the human body if they
Class III fail Sometimes, necessary
Examples: dialyzers, artificial bones, Necessary
respirators, and balloon catheters
Medical devices that are highly invasive upon
the patient and may directly endanger the
Class IV patient's life if they fail In principle, necessary
Examples: pacemakers, artificial heart
valves, and stents
Note: The products shown as examples are classified according to international categories. Minister of Health, Labor and Welfare has the
final authority to classify products according to definitions under the law.

17. Submission to Prefecural Government
Evaluation and Licensing Div., MHLW
Pharmaceuticals and Medical Devices Evaluation Center (PMDEC)
New Device Improved Device Me-too Device
Evaluation by PMDEC Evaluation by JAAME
Presentation Presentation
Equivalency Investigation
Expert Discussion Expert Discussion
Pharmaceuticals and Medical Devices Evaluation Center (PMDEC)
Evaluation and Licensing Div., MHLW
PAFCS
Evaluation and Licensing Div., MHLW
Prefecural Government
Approval

18. Pharmaceutical Affairs Law Revision
- Key Points
(1) review of the approval system and enhancement of past marketing
safety measures
* Introduction of a classification system corresponding to the risk of
medical devices
- three categories by risk to the human body (extremely low, low and high)
* A third party certification system for low risk medical devices
(2) review of the safety measures regarding medical devices; and
(3) enhancement of safety measures for biological products

19. Pharmaceutical Affairs Law Revision
- Revision Schedule
July 2002 Pharmaceutical Affairs Law Amendment (PAL)
passed the Diet
Fall 2002 Bill on new Administrative Agency to be submitted to
extraordinary session of the Diet
April 2003 Revised PAL on biological products to be enacted
April 2004 New Independent Administrative Corporation to be
established
April 2005 Full enforcement of revised PAL

20. Review of Categories and Safety
Measures Concerning Medical Devices
Current
Pharmaceutical Revision plan
Current status and Affairs Law
International review plan Distribution
Distribution
categories Categories of medical regulations
regulations
devices according to risk Risk Primary
Manufacturing
distribution
regulations
regulations
Distributor's notification
Extremely low
Notification for
is not required
Medical devices that are believed to distribution
Class I pose extremely little risk to the human is not necessary Approval for
body even if they fail marketing
authorization is not
Approval of required
manufacturing is
Distributor's Notification
not necessary is required*
Medical devices that are believed to Imple-
Class II pose relatively little risk to the human Low mentation
body even if they fail of third-party
certification
Notification system
system
for distribution
Medical devices that are believed to Implementation
pose relatively high risk to the human of license
Class III body if they fail system for
distribution
Medical devices that are highly Minister's High
invasive upon the patient and may approval for
Class IV directly endanger the patient's life if manufacturing Minister's
they fail
approval for marketing
authorization

21. New Independent Administrative Agency
Current System Proposed New System
Drug Medical Device Drug and Medical Device
Manufacturers Manufacturers Manufacturers
Inquiry, instruction Inquiry, instruction Inquiry, instruction
Application Application
and answer and answer and answer
OPSR PMDEC JAAME New Independent
Drug’s equivalency Administrative Institution
investigation.
Clinical trial Review of drugs Medical devices’
consultation. and medical equivalency Review of drugs and medical
Reliability devices investigation devices (including clinical trial
inspections. GCP, consultation and inspections)
GLP and GPMSP
inspections
Report of review results
Report of review results Consultation Consultation
MHLW Council MHLW Council
Recommendation Recommendation
Approval
Approval
Certification by a third party for low-risk
medical devices

22. Medical Device Reimbursement
A1 Covered under technical fee: Product reimbursement is included in the
technical fee. Products are usually a low-end, inexpensive nature such
as sutures and other supplies.
A2 Covered under technical fee: Product itself gives technical fees. A2
products include high-end and expensive diagnostic equipment such as
MRI, CT, etc.
B Existing products (single use products): There is an existing technical
fee and also existing device category.
C1 New products (single use products) used with current existing
technology: There is an existing technical fee, but no existing device
category.
C2 New products with no existing technology: This category is for
breakthrough technologies.

23. Seriously, Japan is a tough market
• Cost contamination pressure
• Over-regulation
• High-costs of doing business
• Protectionism
• Unique and complex market culture
• Competitive Japanese firms

24. Approaching the Market
• Trade Shows
- Modern Hospital Show
- Hospex
- Japan Dental Show
- and more
• Academic Conference and
Exhibition
• Healthcare Consultants
• The U.S. Commercial Service
Programs

25. Market Information in English
• Our market research reports
http://www.usatrade.gov
• Japan External Trade Organization's (JETRO)
http://www.jetro.go.jp
• Japan Pharmaceutical Manufacturers Association
(JPMA)
http://www.jpma.or.jp
• Ministry of Health, Labor and Welfare (MHLW)
http://www.mhlw.go.jp/english/index.html
• Japan Association for the Advancement of Medical
Equipment (JAAME)
http://www.jaame.or.jp/english/index.html