Over the past year, Japan’s regulatory and reimbursement environment for medical devices has been rapidly changing. These changes illustrate the government’s ongoing commitment to healthcare innovation, effective reimbursement mechanisms, and expanded oversight under the updated Pharmaceutical and Medical Device Act (PMD Act). Collectively, these actions represent a remarkable change in how medical devices will be assessed, approved, and priced in Japan.
Improved Budget and Regulatory Capacity
The Ministry of Health, Labour and Welfare (MHLW) increased its budget for fiscal year 2025 by more than $3 billion. The increased budget is intended to advance innovative products while strengthening Japan’s regulatory system. Key expenditures include enhancing the skills and knowledge of GMP inspectors and employing a lot more reviewers at the Pharmaceuticals and Medical Devices Agency (PMDA).
The PMDA has also indicated it will take a more flexible approach to reviewing and publishing submissions made in English, which is encouraging for foreign companies entering the Japanese market. Perhaps the most striking change is the PMDA’s increased U.S. presence. Rather than having one officer in the U.S., there will now be 2 PMDA representatives in the U.S. to assist U.S. healthcare companies with their efforts to enter Japan. The PMDA office is located in downtown Washington D.C.
Reimbursement Shifts: Declining Role of Foreign Reference Pricing
Traditionally, Japan’s medical device reimbursement system consisted of three pillars: functional categories, foreign reference pricing (FRP), and cost accounting. Functional category and cost accounting remain relevant nowadays, but the prior importance placed on FRP for pricing devices has diminished.
In the past, FRP was a simple calculation based on weighted averages of prices from five key advanced medical markets – the U.S., U.K., France, Germany, and Australia. However, with the changes in the reimbursement process, the use of prices from outlier markets with higher prices, particularly the U.S. and Australia, has been diminished. Instead, FRP now closely resembles pricing behavior in Europe.
The Central Social Insurance Medical Council (Chuikyo), which is in charge of reimbursement decisions, now oftentimes uses FRP as a tool for downward price pressure, instead of a benchmark of pricing. This shift emphasizes the evolving importance of demonstrating clinical value to obtain a more favorable reimbursement.
Clinical Evidence as the Key Driver for Premium Reimbursement
Japan has placed more emphasis on clinical outcomes as the determining factor for achieving higher reimbursement prices. Innovative devices seeking premium pricing must present strong evidence of superiority in terms of efficacy and safety.
The MHLW reviewers expect manufacturers to demonstrate how a device changes inpatient management or improves patient outcomes. Quantitative and qualitative clinical endpoints should be defined early and discussed with the MHLW upfront. Surcharges under the “similar functional comparison method,” such as usefulness or improvement surcharges, depend heavily on the quality of clinical evidence. Likewise, under the “cost accounting method,” demonstrating superior safety and effectiveness for innovative devices can justify higher reimbursement, beyond baseline cost calculations.
This focus on clinical value aligns Japan more closely with global trends, emphasizing patient benefit over international price comparisons.
Revisions to the PMD Act 2025
On May 14, 2025, the Japanese government amended the Pharmaceutical and Medical Device Act (PMD Act), introducing several significant compliance obligations for Marketing Authorization Holders (MAHs).
Previously, the Act outlined the roles and responsibilities of MAHs’ key personnel but lacked enforcement mechanisms. The 2025 amendments now empower the MHLW to mandate changes in responsible personnel at the MAH if quality issues arise. While MAHs are required to appoint both a Safety Manager and a Quality Manager, they are now required to establish more comprehensive adverse event collection systems.
The amendments also address supply chain resilience by requiring MAHs to designate a Supply System Manager responsible for notifying the MHLW of disruptions. Furthermore, conditional approval pathways have been expanded: beginning in May 2026, more devices and in vitro diagnostics with strong clinical evidence but lacking alternatives may qualify for conditional registration approval.
To support long-term innovation, the revised PMD Act establishes a dedicated fund for developing treatments for pediatric and rare diseases, ensuring that underserved patient populations remain a policy priority.
Outlook
The recent reforms represent a complex change and improvement to Japan’s medical device regulations and reimbursement systems. On the one hand, an expanded budget and improved PMDA capacity indicate Japan’s commitment to innovation and support for both domestic and foreign applicants. On the other hand, the imposition of increased clinical evidence requirements and the changes made to the PMD Act show Japan’s commitment to enhancing patient safety and quality, while keeping costs within budgets.
For foreign manufacturers, success in Japan will increasingly involve strategically managing early regulatory approaches and rigorous clinical evidence, as well as carefully addressing reimbursement. With Japan moving forward, manufacturers that embrace these changes will be best positioned to bring innovative devices to one of the most sophisticated healthcare markets in the world.
Written by: Ames Gross – President and Founder, Pacific Bridge Medical (PBM)
Mr. Gross founded PBM in 1988 and has helped hundreds of medical companies with regulatory and business development issues in Asia. He is recognized nationally and internationally as a leader in the Asian medical markets. Mr. Gross has a BA degree, Phi Beta Kappa, from the University of Pennsylvania and an MBA from Columbia University.