In 1995, the Japanese spent $290 billon, or about 7% of their national income, on healthcare. In return for this investment, Japan boasts the world’s longest life-spans and universal health insurance.
It has recently become easier for foreign medical companies to penetrate Japan’s medical market. When Japan entered the harmonized system in 1988, all tariffs and quotas on medical products were eliminated. Despite this, imported medical products, like all imported products in Japan, are still subject to a 3% value-added consumption tax levied on CIF (cost, insurance and freight) value. While the registration procedures and approval process to import medical products to Japan is still complex, specific changes have recently improved the process.
Japan’s Ministry of Health and Welfare (MHW) was founded in 1938, with the stated goal “to improve and promote social welfare, social security and public health.” The MHW’s primary function has been to enhance the health level of the Japanese public and improve the regulation of Japan’s medical products. Since its creation, the MHW has performed tasks similar to the American FDA and has implemented most of Japan’s medical regulations.
In the last year, the MHW has been victimized by two scandals—the HIV-tainted blood problems that resulted in more than 400 deaths, and the nursing home bribery case. Because of these scandals, the MHW is now going through a process of reorganization.
One result of this reorganization is the phasing out of the Pharmaceutical Affairs Bureau (PAB) to be replaced with the “Pharmaceutical Safety Bureau” (temporary name). This will change the focus of the organization to safety and efficiency in product approval and post market surveillance of drugs, cosmetics and medical devices. This reorganization will also result in an increase in the size of the MHW’s pharmaceutical examination staff. By 1999, the staff will be increased threefold, from 60 to more than 200 examiners, thereby upgrading the ministry’s examination system to Western standards. This planned increase should result in shortened approval process for medical devices.
Qualification for Import
A medical product is technically qualified to be imported to Japan when a firm has completed its registration requirements and obtained the approval (Shonin) and licensing (Kyoka). Due to the fact that the Shonin and Kyoka systems are based on the Pharmaceutical Affairs Law, it is assumed that government inspection of medical equipment is stringent, and the medical equipment is therefore safe. Upon a product being registered, and receiving MHW approval, the Health Insurance Bureau of the MHW determines reimbursement, and the medical product is placed in one of three categories: technical fee, Special Treatment Materials (STMs) and Highly Advanced Medical Technology Systems (HAMTS).
When a foreign medical company does not want to set up an office in Japan, and instead decides to export its products using a Japanese distributor to sell them, the manufacturer must make a decision about how to register its products. The manufacturer has two choices—allow the distributor to register the company’s products indirectly under the distributor’s name or register the product directly in its own name with the help of an In-Country Caretaker (ICC). An ICC is necessary because the Japanese government requires foreign medical manufacturers to maintain a physical presence in Japan during the entire time the product is marketed in Japan.
If the foreign manufacturer chooses to indirectly register its products in its distributor’s name, the manufacturer is not usually responsible for payment of all the registration fees and is not accountable for handling ongoing safety responsibilities. Registering a product indirectly in the distributor’s name does, however, cause some problems. Changing distributors in indirect registration is a difficulty and costly process. If the distributor is no longer suitable to a foreign manufacturer, yet will not relinquish control over the Shonin (registration), the manufacturer may have to begin the Shonin process all over again with a new distributor.
With direct registration, foreign medical manufacturer can easily change distributors and may even appoint multiple distributors from day one. When the ICC and foreign manufacturer agree on an initial plan of action and sign a contract, both parties begin preparing the necessary documents. The ICC is responsible for classifying a product, reporting adverse reactions, submitting information correctly translated into Japanese, providing other required information and, in most cases, consulting with the pharmaceutical section of MHW and the local prefecture.
The time required by an ICC to prepare the documents varies from about four months for a new, unique medical device (plus about one year of clinical trials), to two months for a commodity-like “me-too” device and one to two months for a modification of a product that has already been approved by the MHW. Once the application has been submitted, the Japanese MHW takes at least six months for a new device to complete its review. The process can be lengthened if the MHW has additional questions or requests.
With new medical devices whose structure, usage and indications are different from those of existing approved devices, the Central Pharmaceutical Affairs Council (CPAC, an advisory council of the MHW) reviews each case and determines their appropriateness for manufacture or importation. The CPAC, after reviewing the product, makes a recommendation to the MHW, which then makes the final registration decision. The approval process generally takes about 20 months from start to finish, but may be slowed by questions or requests made after the CPAC’s review process.
Since July 1, 1995, the examination and approval of “me-too” medical devices have been the responsibility of the Japanese Association for the Advancement of Medical equipment (JAAME). JAAME gives de facto approval and a formal recommendation to the MHW, which “officially” approves a product. This process was started in an effort to speed up the MHW’s examination and review time of “me-too” products.
Other key evolving regulatory issues in Japan include the following:
- Price Controls – Medical Products: The MHW will launch an investigation into the reasons for the price differentiation between imported and domestic equipment. Efforts will be made to promote transparent price formation in line with market principles through free competition among vendors.
- Price Controls – Drugs: In Japan, physicians prescribe and sell drugs to their patients. When they resell the drugs, they often do so with high markups from their cost at wholesale prices. The MHW is conducting tests to solve this problem.
- Reimbursement System: Japan’s current medical product reimbursement system encourages products that reduce costs and do not contain advanced technology. Since these high technology products have long clinical trials and no defined schedule as to when reimbursement will be approved, producers of these products are then discouraged from bringing them to Japan.
- Registration Process: Under the pressure described both from inside and outside Japan, Japanese medical products regulations are evolving every day. Just recently, with MHW’s new organization, the MHW has changed the registration process for new drugs. According to one MHW official, in a short time this will lead to a change in the registration process for medical devices as well.