of the Medical Equipment Industry in Japan
of Market Access-
Institute of International Studies
Advisor: Professor Keith Bovetti
paper was researched and written to fulfill the M.A. project requirement for
completing the Monterey Institute of International Studies’ Master of Arts in
Commercial Diplomacy. It was not commissioned by any government or other
organization. The views and analysis presented are those of the student alone.
Names of people, corporations, businesses and governments are used only as
examples in fictitious sample correspondence, statements, etc. in order to
depict a realistic, albeit fictional, scenario.
This does not represent any knowledge of these examples, nor does it in
any way represent an endorsement by an individual, corporation, business or
more information about the Commercial Diplomacy program and the M.A. project
requirement, please visit www.commercialdiplomacy.org.
This project was completed to fulfill the M.A. project
requirement of the Monterey Institute of International Studies’ Master’s in
Commercial Diplomacy program. For the purposes of the project, I assume the
fictitious role of independent consultant to a ficticious industry association,
the Japan Medical Equipment Association (JMEA). JMEA is a trade association that
represents over 15 other medical associations that specialize in everything from
medical equipment manufacturing to distribution.
The project first describes current problems in Japan’s
medical equipment market—problems such as unnecessary bureaucratic procedures
that slow approval of new products, complex distribution systems that add to the
cost of health care, and the health insurance reimbursement system, which
effectively negates cost competition for medical equipment. The project also
provides economic, commercial, political and legal analyses of each of these
problems. Finally, it offers
recommendations for improving access to Japan’s medical equipment market, as
well as a strategy for how JMEA can implement these recommendations.
I would like to thank all my professors and friends who
helped me in completing this project. I am especially grateful to Mr. Kimura,
Mr. Nagao and Mr. Ishii who took time to meet with me in Japan.
American Chamber of Commerce of Japan
Central Pharmaceutical Affairs
Commerce Service in Japan
European Business Community of Japan
Economic Planning Agency of Japan
U.S Food and Drug Administration
GATS General Agreement on Trade in Services
General Agreement on Tariffs and Trade
Global Harmonization Task Force
Health Industry Manufacturers Association
International Standards Organization
International Trade Administration of the U.S. Department of Commerce
Japan Association for the Advancement of Medical Equipment
Japan External Trade Organization
Japan Medical Equipment Association
Japanese Industrial Standards
Japan Medical Association
MHW Ministry of Heath and Welfare of Japan
MITI Ministry of International Trade and Industry of Japan
MOSS Market-Oriented Sector-Selective
PMDEC Pharmaceutical and Medical Devices Evaluation Center
PMDSB Pharmaceutical and Medical Devices Safety Bureau
USTR Office of the United States Trade Representative
WTO World Trade Organization
It is extremely difficult to introduce new, cost-effective
medical equipment products into the Japanese market. There are four main reasons
for this difficulty:
Japan’s Pharmaceutical Affairs Law is redundant and cumbersome and
makes timely approval of new medical equipment impossible. Currently, Japan’s
approval process is longer than that of any other major developed country.
This is particularly troublesome in an era when technology changes rapidly
and, therefore, product life-cycles are increasingly short.
Complex distribution channels impede newcomers’ entry to the market and raise the price of medical
equipment by 15-25 percent. By
simplifying the distribution system, the industry could lower prices and
potentially increase its annual sales by over US$ 849 million—more than five
The Ministry of Health and Welfare’s (MHW’s) reimbursement system
negates price competition so there is no incentive for hospitals to purchase
more cost-effective products.
MHW has been too cautious in approving new products, especially
high-risk products. Its reluctance to approve products that are already in use
in other countries causes a significant opportunity loss for the medical
industry, as well as patients who could benefit from the new equipment.
these problems is important not only for the medical equipment industry, but
also for the Japanese government. Reducing the cost of health care will be
crucial to the government’s efforts to reduce its budget deficit and pull
Japan out of its prolonged recession. Reducing costs is all the more important
because Japan’s population is aging and, accordingly, demanding more and
better health care.
forces are also putting pressure on the government to deregulate the medical
sector. Foreign medical equipment suppliers are lured to Japan because its
medical equipment market is the second largest in the world, but they face the
same non-trade barriers to market access that Japanese companies do. Since 1986,
Japan and the United States have conducted bilateral negotiations regarding
deregulation of Japan’s medical system. Although some progress was made in the
so called “MOSS talks,” the United States is still asking for further
deregulation; it surely will raise this issue at the G-8 summit this July (a
meeting at which Japan is eager to succeed as host country).
is time for Japan to start taking action to reduce obstacles to increased
business in the medical equipment market. The Japan Medical Equipment
Association (JMEA) can and should help jump-start this process by putting
pressure on the government to act quickly. On behalf of its member companies,
JMEA should take the following actions.
reform of the distribution channel system.
reform of the reimbursement system.
MHW to change its policies regarding approval of new medical equipment.
to change the Pharmaceutical Affairs Law in order to:
stop redundant examination of “me-too”
products conducted by both JAAME and PMDEC; and
increase the number of items that do not require MHW approval before being
put on the market.
to increase the number of JAAME and PMDEC personnel who review new and “me-too”
JMEA’s short run domestic strategy should include
research on the impact of current regulations on JMEA member companies. It
should also include coalition building, legislative and media strategies. In
order to gain support of foreign companies, JMEA can work with the Japanese
subsidiaries of foreign companies in order to avoid undertaking a comprehensive
and costly strategy abroad.
long-run strategy is very similar to the short-run strategy. However the
long-run strategy includes a public awareness campaign designed to support
reform of the entire health care system. The long-run strategy also calls for
efforts to persuade medical equipment distributors, most of which are JMEA
members, to embrace reform of the distribution system.
Cooperation with MITI will be important to achieving the
latter objective. JMEA should also use its relationship with MITI to explore
measures for boosting the international competitiveness of the Japanese medical
industry, which will likely lose business when, after deregulation, it is
exposed to increased international competition.
MHW and MITI
Council on Health Insurance
The Advisory Council on Social Security
Business Associations in Japan
The International Institutions