U.S. and Japan sign breakthrough medical device agreement

August 30, 2000

Japan is finally lifting its long-standing barriers to foreign imports, a move that could mean hundreds of millions of dollars more each year in sales to that country.U.S. trade officials have been negotiating for three years to change Japan's pricing

Japan is finally lifting its long-standing barriers to foreign imports, a move that could mean hundreds of millions of dollars more each year in sales to that country.

U.S. trade officials have been negotiating for three years to change Japan's pricing policies for medical devices and pharmaceuticals. Talks are also progressing with the Japanese Ministry of Health and Welfare (MHW) about more progressive reimbursement for advanced imaging machines, according to a Department of Commerce official who asked not to be named.

"The Japanese are receptive," he said. "There is a dialogue of details taking place between the industry and the MHW."

Japan has long limited acceptance of foreign clinical data for product approvals, which has imposed time and resource constraints on foreign firms by requiring them to duplicate their clinical trials in Japan. The agreement that went into effect July 22 says the two Japanese agencies responsible for product reviews will accept studies from abroad and will not require local clinical trials for medical devices.

Previously, new technology could be introduced into the Japanese market only on April 1 every two years. Thus, a new device that could have been sold on April 2 might have to wait two years for approval. Government approval of reimbursement for improved versions of existing medical technology might take months, or even years. Given the pace of technological advances, products could well be obsolete before they were allowed into the market.

U.S. companies supply approximately 25% of the $23.4 billion in medical technologies used annually by Japan, according to AdvaMed (the Advanced Medical Technology Association, formerly the Health Industry Manufacturers' Association). In comparison, U.S. companies hold a 40% to 50% market share in other foreign countries.

"The measures achieved under this initiative . . . will translate into substantial gains for U.S. firms doing business in Japan," said U.S. Trade Representative Charlene Barshefsky in a statement issued following the agreement. "Meaningful deregulation will support continued recovery of the Japanese economy, and Japanese consumers will benefit from lower prices, greater choice, and more innovative products."

Until now, the private sector Japan Association for the Advancement of Medical Equipment (JAAME) and the Pharmaceutical and Medical Device Examination Center (PMDEC) of the MHW were responsible for product reviews. The JAAME tested for product equivalency while the PMDEC conducted safety evaluations.

Under categories designated by the MHW in April, "me-too" products, which account for 90% of applications made each year, will be reviewed by the JAAME, while the rest will go directly to the PMDEC for review. Me-too products are those that are similar or identical to products already in the marketplace.

According to a U.S. Trade Representative fact sheet, Japan has agreed to "implement a transparent and speedy process for creating new medical device pricing categories and provide appropriate interim prices for new devices (within four months) while their final prices are being implemented."

Under the new system, improved—not brand-new—products could go on the market within as little as four months with a provisional price. If a company is looking for a higher price on its improved product, it will be provisionally priced at the same level as the device it would replace. The permanent price will likely be higher.

Most of the medical device and pharmaceutical agreements were reached during deregulation talks in March (SCAN, 3/29/00), but the overall agreement was held up because of telecom talks.

"Trade talks and agreements such as these come as a package deal," said Paul Barry, associate vice president of global strategy and analysis for AdvaMed.

The G8 summit talks in July in Okinawa finalized telecom agreements and the interim status reports that included medical devices. Details remain to be worked out before the agreement takes effect in October.

"Most things are on track," Barry said. "They are putting into place a pre-application process so you can discuss it before making a formal application; they can tell you if you are on track. So no product should make it to the provisional pricing system that doesn't deserve to. This way, it shouldn't be a problem to establish a final price, and the permanent price should be higher than the provisional price."