The Japanese medical device market is the second largest single country market in the world. Estimates on the exact market size range from US$18-US$23 billion, with U.S. exports to Japan accounting for about two-thirds of Japan’s medical device import market and about 25-30% of the total medical device market.
Several factors will drive the Japanese medical device market’s future growth. The first is Japan’s rapidly aging population. In 1950, 4.9% of Japanese were over the age of 65. In 2000, that figure had grown to 17.2%, and by 2050, it is expected to reach 32.3%. In fact, Japan’s elderly population as a percentage of the total population is already the largest of any nation except Italy. This means that even without economic recovery, medical device manufacturers, especially those with products used for the care of the elderly population, can expect to see steady growth in the demand for their products in the Japanese market.
A second factor that is likely to affect Japan’s medical device market is a growing awareness, by both the government and the general public, of the need to contain and reduce overall healthcare costs. The various Japanese national healthcare insurance programs (in which over 90% of the population is enrolled) are constantly running in the red. There is a realization that, with the younger population dwindling ( Japan’s youth have traditionally served as the tax revenue source for all social welfare and healthcare programs, including the healthcare insurance program), the exorbitant costs associated with the current system are simply unsustainable.
To help address this problem, the Japanese government plans to implement a DRG reimbursement program in Japan’s hospitals within the next 3 to 4 years. The program, presently undergoing testing at roughly a dozen hospital sites, will drastically alter reimbursement practices in Japan. Once the new DRG reimbursement rates are set, it will become extremely attractive for hospitals to drastically reduce costs, increasing the amount of the DRG reimbursement that will remain for use by the hospital. (At present, there is little if any incentive for hospitals to consider cost effectiveness). Once the DRG reimbursement program is in place, device manufacturers whose products provide considerable cost savings will begin to see increased demand for their products.
U.S. firms dominate in categories such as pacemakers, advanced interventional cardiology products such as stents, artificial joints and implants, and other advanced device categories. Foreign companies with MRI, CT, or image reading software also see high demand for their products.
The Japanese government, through the Ministry of Health, Labour, and Welfare (MHLW), regulates all medical devices, whether manufactured in Japan or imported. In Japan, the term “medical device” is used for any instrument, apparatus, or material as designated by the Japanese government that is used in diagnosing, treating, and/or preventing diseases in humans or animals and which can be used to affect the structure of functions of humans or animals.
The Pharmaceutical Affairs Law (PAL) is the primary governing law for medical devices in Japan. Established in 1943, the law was expanded to apply to medical devices (and cosmetics) in 1948. It thoroughly covers all details of registration for medical devices. Medical devices must undergo thorough safety examinations and demonstrate medical efficacy before they are granted approval, or “shonin,” to be sold in Japan. Further PAL regulations spell out in minute detail requirements for companies that manufacture or import medical devices for sale in Japan, ranging from building and structural standards to personnel education and work experience. In short, the Japanese environment is very restrictive, very conservative, and highly regulated.
For new medical devices for which there are no equivalent products already approved in Japan, clinical trials are required. This rule also applies to previously approved products to which improvements or modifications are made which could potentially improve the efficacy or expand the scope of the product. Clinical trials must be conducted under strict Good Clinical Practice (GCP) standards, and must be followed by standard Post Marketing Assessment (PMA) reporting and a follow-up program. As a general guideline, a typical clinical trial requires a minimum of two clinical trial sites with at least 30 test subjects at each location, but this is subject to the interpretation of the examiner, who often vaguely states “enough trials should be conducted to ensure the safety and efficacy of the product.”
Standards and Guidelines for GCP/Clinical Trials in Japan
On the surface, Japanese GCP guidelines seem fairly standard and straightforward. Basic duties and requirements for the medical institution(s) at which trials are held, the physicians involved, the Institutional Review Board, and the Trial’s Sponsor are very similar, if not identical, to U.S. standards. Informed consent and other rights of the patients, record retention, and other routine issues are also addressed in a familiar manner.
Perhaps the biggest difference between the U.S. and Japanese systems is the role of the Chief Investigator. When Clinical Trials are conducted in Japan, the Chief Investigator is the physician responsible for supervising the entire course of the trial, including supervising any other physicians that may be involved. The Japanese Chief Investigator also has a role when clinical trials are conducted outside of Japan. Even if foreign clinical data has been accepted on a preliminary basis by the MHLW, the final hurdle is to get a Japanese doctor — the “Chief Investigator” — to sign off. Once such a doctor has issued a final opinion expressing compliance and efficacy of the product, that doctor becomes “responsible” for the clinical data. It must be stressed that only a Japanese doctor in Japancan fill the role of “Chief Investigator” — Japanese doctors practicing in the U.S. are not acceptable for this purpose.
The most important thing to understand with regard to Japanese clinical trials is that the regulations governing clinical trials and GCP standards remain open to interpretation — few things are set in stone. The exact number of test subjects and trial sites is subject to the interpretation of the examining officer of the MHLW and varies with product and examiner. Decisions on a company’s clinical trials can vary widely, depending on which MHLW examiner you speak to, his or her mood, and other subjective factors. Different examiners may “recommend” vastly different numbers of case studies for exactly the same product. Similarly, after giving a preliminary opinion, the same examiner may arrive at a completely different conclusion days later, and he or she may decide more studies are needed, even if no new information is presented. Most frustratingly, a company can never (or at least should never) say to a MHLW examiner, “but you said…last week,” because the examiner will likely respond: (1) “you must have misunderstood what I said;” or (2) “you didn’t explain it properly the last time;” or (3) “maybe we better review the entire issue from scratch…”
The MHLW’s reluctance to take a firm stand can be at least partially attributed to Japan’s tainted blood scandal of the early 1990s.
The incident involved (then) MHLW officials (at the time, the agency was known as the Ministry of Health and Welfare — MHW) and a Japanese doctor who, as the Chief Investigator, was instrumental in delaying the introduction of sterilized blood plasma products, allowing a Japanese company to sell their inventory of untreated products. Close to 1,000 Japanese hemophiliacs contracted HIV in a scandal that enveloped the MHLW in disgrace. As a result, MHLW bureaucrats have become even more sensitive to making firm commitments (approval applications were difficult even before the scandal), and they tend to try to focus responsibility on the applicant, rather than the Ministry, as much as possible.
In sum, it takes skill and diplomacy to work with the bureaucracy of the MHLW, and it can be incredibly difficult to get a MHLW official to commit to anything. Moreover, the MHLW does not produce official guidelines for clinical trials. If pressed, officials will point you in the direction of the PAL and related documents and rulings. However, these documents are generally only available (at least officially) in Japanese, never address the intricacies of a trial, and as with any legal document, everything in these documents is subject to interpretation — and the MHLW’s interpretation is the only one that really matters.
Acceptance of Foreign Clinical Data
Until relatively recently, foreign clinical data was not acceptable in Japan at all. This changed in 1986, when the U.S. and Japan negotiated and signed what is commonly referred to as the “MOSS” (Market-Oriented, Sector-Selective) agreement. Before the MOSS, MHLW required that all clinical testing of medical devices (and pharmaceuticals) be done in Japan on Japanese subjects. For foreign firms, this requirement meant costly duplication of clinical trials and delayed the introduction of new products into the Japanese market.
After the MOSS agreement was signed, foreign clinical test data was officially accepted in Japan, except when immunological and ethnic differences between Japanese and non-Japanese subjects made local trials necessary. Since then, the percentage of foreign clinical test data found to be acceptable has increased gradually each year, but still less than 20% of those who apply are accepted. Although scientific reasons for requiring local testing can be justified, there are instances where non-scientific motives are believed to play a role, possibly in order to provide domestic manufacturers an opportunity to “catch-up.” Although very difficult to prove, it is believed that such practices, while rare, do sometimes occur in the medical device industry.
Given the MHLW’s power, it is often pointless to argue with such a situation. A better strategy is to include Japanese patients in your clinical trials from the beginning. An even better approach would be to define what the Japanese GCP requirements are for the clinical trials to be conducted and to obtain a preliminary ruling that the planned clinical trial test protocols are acceptable. The safest option, of course, would be to conduct a limited number of clinical trials in Japan. With the Japanese medical community involved, the MHLW would be hard-pressed to ignore such clinical test data.
With MHLW officials holding so much power over the medical device approval process, what can a foreign (non-Japanese) medical device regulatory professional do to help get his or her companies’ product(s) on the market as soon as possible? Careful planning and foresight is key. First, determine if clinical trials are needed in Japan. If so, try to determine if the MHLW will accept foreign clinical data for your product. This information can be gathered through informal discussions with MHLW officials (keeping in mind that nothing you are told at this stage will be official). If foreign clinical test data will likely not be acceptable for your product in Japan, it may be possible to adjust your planned U.S. or European clinical trial protocols to take into account MHLW’s feedback and Japan GCP requirements. By incorporating this into your trials, you can potentially save a lot of time and money when you are ready to make your shonin applications to enter Japan.
Japan is a country where doctors and bureaucrats are very powerful and influential, and change is difficult and often excruciatingly slow. The regulatory regime is extremely complex and rules are often vague, imprecise, and unclear, leaving ample room for interpretation. That said, the Japanese are realizing that their regulatory system hampers both their access to cutting-edge technologies and the potential to improve the level of care provided. The reform-minded Koizumi government recently issued reports indicating that, if its (economy-wide) deregulation plans are fully implemented, GDP growth will increase by 0.9 percent annually — a significant amount in a mature, otherwise slow-growing economy. Of course, whether or not these plans will result in any real changes, particularly with respect to medical device regulations, remains to be seen. For now, the regulatory environment, particularly with regards to regulations on Good Clinical Practice for trials on medical devices, remains a formidable but not insurmountable challenge if approached properly. The key is to thoroughly study the regulations, converse regularly with the MHLW, and work with parties knowledgeable in the local market.