The Japanese Ministry of Health, Labor and Welfare (MHLW) recently passed a new foreign reference pricing policy for medical equipment that will take effect on April 1, 2002. The decision has sparked controversy, as many U.S. observers believe the new policy violates the Market-Orient Sector-Selective (MOSS) agreement (1986) that requires Japan to allow adequate time to discuss with the United States any policy change that could seriously affect bilateral trade. The new policy is intended to help Japan budget its national healthcare system through cutting costs for medical equipment, such as pacemakers, balloon catheters, and orthopedic implants.
Historically, reimbursement prices in Japan have been much higher than those in the West. On average, a device manufacturer can sell its product in Japan for one and a half to two times the price in the U.S. Thus, the new policy will disproportionately impact U.S. manufacturers. Japan constitutes the largest foreign market for U.S. medical technologies, and pricing rule changes will potentially cost the U.S. device industry close to $500 million. U.S. device manufacturers and industry associations have been quick to criticize the proposed changes.
Several U.S. Senators and Representatives have sent letters to the Japanese Prime Minister urging him to â€œintervene and instruct MHLW and Chuikyo (the MHLWâ€™s advisory board) to withdraw foreign reference pricing and work in consultation with the U.S. Government and medical device industry to devise open and fair policies impacting medical technology reimbursement.â€ Deputy U.S. Trade Representative Jon Huntsman also addressed the issue with Japanese officials during his trip to Tokyo on January 24, 2002. However, thus far no specific progress has been announced on this issue.