Japanese healthcare standards are among the highest in the world and the Japanese spend close to $300 billion per year on healthcare. Even though this number is far less than the $1.8 trillion spent by the United States every year, Japan’s demand for better and safer healthcare is rising as the country’s elderly population continues to increase. Subsequently, the Ministry of Health, Labor and Welfare (MHLW) has become more aware of the need to improve the country’s regulatory and safety environment for medical devices.
The MHLW is responsible for ensuring good living standards among Japanese people and for promoting the development of new health programs or innovations to improve their lives. Social security, public health, working conditions and social welfare are all regulated by the MHLW. Additionally, the MHLW oversees all health programs in Japan, including health insurance, food, drugs and medical devices. The Pharmaceutical and Food Safety Bureau within MHLW is responsible for medical device and pharmaceutical regulatory policy making.
The New Pharmaceuticals and Medical Devices Agency (PMDA)
Over the past few years, the MHLW has been undergoing major restructuring, drastically altering the regulatory requirements and procedures for registering and marketing medical devices in Japan. In April 2004, the Pharmaceuticals and Medical Devices Agency (PMDA) was established in an effort to create a more efficient and transparent medical device registration review process. The PMDA was formed by merging three already-existing organizations: (1) the Pharmaceuticals and Medical Devices Evaluation Center (PMDEC), (2) the Organization of Pharmaceutical Safety and Research (OPSR) and (3) the Japan Association for the Advancement of Medical Equipment (JAAME). Two of these three agencies (PMDEC and JAAME) were previously involved in the medical device approval process, including the review of product registration applications and clinical trial consultations. Prior to the creation of the PMDA, the application and review process for new devices could take as long as two years. Over the next several years, the PMDA intends to shorten this process, although it has not had success in doing so thus far.
The New Pharmaceutical Affairs Law and the New Marketing Authorization Holder (MAH)
One year following the implementation of the PMDA, Japan’s medical device regulatory process underwent another major change when the New Pharmaceutical Affairs Law (PAL) went into effect on April 1, 2005. Since 2002, the MHLW has been gradually introducing new changes to its PAL law; the regulatory environment for medical devices in Japan will be significantly different once all the changes have taken effect. The New PAL takes a step towards global harmonization, introducing GMP requirements based on ISO 13845 standards and Summary Technical Documentation (STED) requirements for applications for high-risk devices. However, it is important to note that MHLW has added Japan-specific requirements that vary from global standards. Additionally, the MHLW will do away with Japan’s current In-Country Caretaker (ICC) system, and a new Marketing Authorization Holder (MAH) system will take its place – a significant change impacting foreign companies planning to enter the Japanese medical market and also those currently selling their devices in Japan.
Japan MAH Replaces ICC
In the past, many foreign medical device companies without a local office in Japan chose to export their products to Japan via an ICC. An ICC acted as an “agent” for the foreign medical company and was responsible for preparing product registration documents, ensuring the safety and efficacy of products and post-marketing surveillance, among others. The ICC system allowed foreign companies to register their medical products in their own name and hold the shonin (“approval”) themselves, rather than allowing the distributor to hold the shonin.
The MHLW created the Japan MAH system under the New PAL in order to increase the quality and safety controls of medical devices by separating the responsibilities of manufacturing and product release. Under the ICC system, the foreign manufacturer produced the products and released them into the market. The MAH system will separate these two duties; the manufacturer will only be responsible for production and the MAH will be responsible for the release of products into the marketplace.
Most “independent” third party MAHs today (i.e. MAHs not currently distributors) were previously ICCs as only a simple registration process was required for a company to convert from an ICC to a MAH. This simple registration process, which only required a one-page application form, was available to ICCs until February 4, 2005. At that time, the MHLW also suggested that any company providing ICC services that was not planning to convert to a MAH, recommend a MAH to their current clients in order to provide a smoother transition into the Japan MAH system. Now, a much lengthier registration process (most likely including an inspection by the MHLW or a prefectural government) is necessary in order for a company to become an MAH, regardless of whether the company was previously an ICC.
Japan MAH Structure
A MAH consists of three Controllers, each having a specific role in overseeing the manufacturing, marketing and release of a company’s products. First, a General Manager will be responsible for supervising all MAH duties and ensuring excellent marketing, quality and safety standards of the products. Second, a Quality Assurance Controller will oversee the Good Quality Practice (GQP) of the products. He will be in charge of monitoring the shipping and receiving methods of the manufacturer, notifying the MHLW of any manufacturing or in-process control changes, establishing and ensuring release criteria for each product, and handling all necessary communication in the case of a product recall. Third, a Post-Marketing Safety Controller will be in charge of Good Vigilance Practice (GVP), monitoring product safety after the products are released into the market. If any adverse incidents or recalls occur, this Controller will be responsible for reporting this information to the MHLW.
Designating a MAH
All foreign companies selling medical devices in Japan will be required to appoint a Japan MAH. The MAH may be either a (1) distributor, (2) other third party entity or (3) the company may designate themselves as their MAH if they have an office in Japan.
The MHLW uses two terms under the New PAL: MAH and D-MAH (Designated-MAH). Any company located in Japan that is registered with the MHLW to offer marketing authorization holder services is referred to as an MAH. D-MAH is a term used by foreign companies that are exporting their products to Japan, when referring to the foreign company’s specific MAH service provider in Japan.
Designating a distributor as a Japan D-MAH helps a foreign company cut down on expenses, as a distributor will usually cover the monthly D-MAH expenses themselves, expecting the profit margins on the company’s product sales to more than cover these expenses. However, there are several disadvantages to using a distributor. First, the foreign company’s confidential information is put at risk, since the distributor must have access to pertinent information, such as details on product development and raw materials. Second, if a single company is providing both distribution and MAH services, it may be difficult or awkward to change distributors, since the distributor and MAH are part of the same company. Even if the product registration is in the name of the foreign company, this does not guarantee a “friendly” transfer of the product license. The distributor may be reluctant to hand over the license, especially if the distributor will lose profitable business.
Foreign companies who use an independent third party as a Japan D-MAH will be subject to monthly service fees by the D-MAH. However, an independent third party acting as a D-MAH (at least in theory) should help ensure the confidentiality of the foreign company’s product information more than a “hungry” distributor who may not have the same objectives. The D-MAH will hopefully have more incentive to keep a company’s information confidential in order to maintain its reputation as a trustworthy third party. Also, with the registration in the name of either the foreign company or D-MAH, it should be easier to switch distributors. It should also be noted that while there are now many MAHs in Japan, there are only a few D-MAHs.
Finally, the third option includes a company utilizing their subsidiary, branch office or representative office as their Japan D-MAH, as long as the office is located in Japan and meets the MHLW’s MAH standards. This option tends to be most attractive to large companies with substantial sales volume in Japan.
The MHLW has set specific requirements for the structure of a MAH and the number of staff required, depending on the classification of the medical device to be sold in Japan. For General Devices (previously Class I), a MAH can be established and run by one person. This person will act as all three Controllers and carry out the required duties. Controlled Devices (previously Class II) require a Japan MAH with two persons; one serves as the Quality Assurance Controller, the other as the Post-Marketing Safety Controller. One of the two Controllers will also act as the General Manager. Finally, Highly-Controlled Devices (previously Class III and IV) will require a MAH will three people, each serving as one Controller.
The MHLW has provided a general list of minimum requirements for each Controller. The General Manager must have a Bachelor’s Degree in a science or engineering field and should have at least three years of experience in a quality assurance or post-marketing safety role with a pharmaceutical or medical device company. The Quality Assurance and Post-Marketing Safety Controllers must each have a minimum of three years experience in their respective fields.
Japan MAH Services and Responsibilities
A MAH is responsible for importing products from a manufacturer, ensuring the safety and quality of these products, possibly storing the products in a Japan MAH-licensed establishment and then selling the products to sales groups or distributors. Of course, any foreign companies just now entering the Japanese medical device market will also need a MAH to assist with their product certification application for their Controlled device (previously Class II) or product approval application for their Highly-Controlled device (previously Class III and IV). General devices (previously Class I) do not require product approval or marketing notification. A MAH can prepare all the paperwork for product certification or approval, including STED documentation (required for Highly Controlled devices), instruction manuals, packaging materials, any necessary translations and also product labeling. All these services for product registration will require additional fees and from our experience speaking to MAHs in Japan, can cost a company about $20,000 to $80,000 (not including clinical studies), depending on the product and its classification.
As mentioned above, most Controlled devices (previously Class II) require third party certification through a Notified Body (NB). Controlled devices for which standards do not yet exist require approval from the PMDA like Highly-Controlled devices. The Japan MAH submits the product application to a NB, and the NB grants the certification. The NB will also conduct a follow-up audit of the MAH after granting the certification. However, in the case that the MAH does not agree with the NB’s findings and/or results of the application review, the NB certification system allows the MAH to question and verify the NB’s statement. The MAH may submit an “objection” to the MHLW. The MHLW will investigate the NB’s compliance with the standards and expectations of a third party reviewer. The NB may be requested by the MHLW to make corrections to their application findings and/or final decision.
Devices classified as Highly-Controlled devices (previously Class III and IV) require product approval from the PMDA. In this case, the MAH submits the product application, including the new requirement of STED documents, such as the product development process, raw materials, storage methods, manufacturing process information and risk analysis data. The Japan MAH will receive notice of approval from the PMDA and the PMDA will conduct inspections of the manufacturer (not the MAH).
Under the New PAL, the Quality Assurance Controller will be responsible for ensuring compliance with the new Good Manufacturing Practice (GMP) requirement, based on Japan’s own adaptation of ISO 13845:2003, as well as GQP standards. The Standard Operating Procedures (SOPs) for GQP include product storage controls, the release of products into the market, quality control at local offices, ensuring the maintenance of all quality assurance documents and reports, the handling of product recalls and audits.
Specifically, the Quality Assurance Controller will be responsible for implementing and maintaining a Quality System for the product. This involves designating persons to serve as “Top Management.” This group of managers will supervise, review and evaluate the design and manufacturing processes. They will monitor document control, provide education resources and offer training opportunities. The group will also be in charge of ensuring customer satisfaction of the product by reviewing complaints and taking preventative or corrective measures, as necessary. Ultimately, this “Top Management” group will be responsible for ensuring the safety and efficacy of the product.
Also falling under the responsibility of the Quality Assurance Controller is the creation and implementation of a design and development plan. This plan involves design verification and validation, both methods for testing product safety and efficacy. Design verification involves comparing the product’s design input with the design output, checking for inconsistencies or unexpected results. Information from regulatory groups, the manufacturer, sales groups, etc., such as original product drawings, in vivo and in vitro tests, and performance tests will be examined. Design validation verifies that the purpose and intended use of the device is met.
Finally, the Quality Assurance Controller will also make sure that the manufacturing facility meets the newGMP regulations. PMDA will be conducting GMP inspections, even of overseas facilities, prior to product approval.
Good Vigilance Practice
The Post-Marketing Safety Controller is in charge of Good Vigilance Practice (GVP). His responsibilities include post-marketing surveillance, evaluation of safety information, planning and implementing countermeasures to ensure better safety and safety assurance training for other personnel. Any adverse effects that arise must be recorded and reported to the PMDA. Moreover, the Post-Marketing Safety Controller is responsible for ensuring proper documentation and filing of all product safety information. This information should be available for the PMDA in the case of an inquiry.
The three Japan MAH controllers are responsible for deciding how and when to report adverse effects to the PMDA. While the ultimate requirements and methods for handling adverse effects are determined by the PMDA, and mostly on a case-by-case basis at this time, several general categories and timeframes have been outlined under the New PAL. (1) Death or serious illness should be reported within seven days; (2) hospitalization, physical disorders or other serious effects within 14 days; and less serious effects within 30 days. Currently, the New PAL specifies that the best action after an adverse effect occurs is for an MAH to contact the PMDA immediately in order to determine the most appropriate course of action .
Fees for an Independent Third Party MAH
Depending on a foreign company’s status in Japan, the scope of services and costs of a D-MAH will vary. However, there are two basic types of fee schedules in the marketplace today. In the first case, a Japan D-MAH will charge a flat monthly retainer for its services, around $5,000 to $8,000 per month. In the second case, a D-MAH will charge a smaller monthly retainer (approximately $3,000 to $4,000), plus a percentage of the product sales in Japan. The monthly retainer fee will generally cover the services and requirements previously mentioned in this article, such as GQP, GVP, D-MAH personnel, product storage, adverse effect reporting, etc.
In our opinion, foreign companies should develop their Japan MAH strategy based on their current or expected sales in Japan. Some companies will pay for an independent third party MAH in order to better protect their confidential information and retain more control of their product marketing. These companies will normally have sales around $500,000 to $2 million per year. On the other hand, companies with sales less than $500,000 per year in Japan would most likely see the fees of an independent MAH “eating” into their profit margins. In most cases, foreign medical device companies that have sales less than $500,000 will need to take some risk and have their distributor be their Japan MAH. If the foreign company (with sales under $500,000) does not want to put their confidential product information at risk by using a distributor as their MAH, they may ultimately decide to not enter Japan at all, or close down their existing business. Finally, foreign companies with sales over $2 million who do not currently have offices in Japan, may now choose to set up their own representative office, branch office or subsidiary, and establish their own in-house MAH. This scenario will enable the foreign company to keep their product information confidential and allow them to avoid paying the high monthly fees of an independent MAH. Of course, setting up your own office in Japan to act as a Japan MAH is not inexpensive.