General Medical Indicators (1)

Population 127 million

GDP (01) $4,333 billion

Healthcare Exp. (00) $278 billion

HCE % of GDP (00) 7.9%

# of Hospitals (00) 9,266

# of Clinics (00) 92,824

# of Dental Clinics (00) 63,361

Total # of Beds (00) 1.65 million

General Medical Indicators (2)

Total # of Surgeries approx. 5 million

Average Hospital Stay (00) 39.1 (24.8 for ordinary

hospital)

Life Expectation (00) male: 77.64 female: 84.62

Insurance Coverage 100%

Concept of Operation not for profit

Medical Device Market (00) $18 billion

Pharmaceutical Market (00) $60 billion

Japan’s Healthcare System (1)

Major Characteristics

Universal Healthcare Coverage (achieved in 1961) - health insurance covering the entire population

Free Access - patients can freely choose doctors, clinics, hospitals

Low Co-payment Rate - patient can receive necessary medical care for a small fee (patient are required to pay anywhere 10 and 30% of treatment fee)

Fee-For-Service - reimbursed based on point system

Japan’s Healthcare System (2)

Rapidly Changing Healthcare Environment

Changes in the disease pattern - acute vs. chronic

Aging Society and lower birthrate - the elderly will make upa significant percentage of the total population

Increasing Healthcare Expenditure - Japan’s spending onmedical care continues to increase as Japan becomes a agingsociety

Stagnant Economy - imbalance between the increase ofhealthcare expenditure and the economic growth willincrease further

Rate of Projected Population - over 65

0

5

10

15

20

25

30

2000 2005 2010 2015 2020 2025Year

Percentage

JapanUSAFranceGermanyUKSweden

National Healthcare Expenditure

Source: Ministry of Health, Labor and Welfare (MHLW)

17.5

28.834.735.7 36.7 37.3 39.1 37.2

0

100,000

200,000

300,000

400,000

19801990199519961997199819992000Year

100

milli

on y

en

01020304050

Per

cent

age

Medical Expenditure% Medical Expenditure for the Aged (over 70)

Healthcare Reform?

• Past efforts included:- cut reimbursement rates (biannually since 1965)- established a separate insurance system for elderly (1984)- raised co-payment for the elderly (1997)- raised co-payment for ordinary salaried workers (1997)- established a new long-term care insurance system (2000)

• Recent efforts (2002) included- cut reimbursement rates * first time cut on doctor’s technical fee * introduction of foreign reference price on medical devices- raised co-payment for the elderly- raised co-payment for ordinary salaried workers

Japan Medical Device Market

20

18

1514

12

5

02468

101214161820

USA J apan UK France Germany Korea

$US Bill

Medical Device Trade BalancesBetween U.S. and Japan

CY 1998 CY 1999 CY 2000Production 11,507 13,051 13,761Import 6,370 7,319 7,603- from U.S. 4,045 4,870 4,941Export 2,499 3,202 3,362- to U.S. 800 968 949Total Market 15,379 17,169 18,002U.S. Trade Surplus 3,245 3,902 3,992U.S. Share of Import 63.5% 67.0% 65.0%U.S. Share of Market 26.3% 27.0% 27.5%F/X (1 US$/Yen) 131 114 108

$US Million

Source: Ministry of Health, Labor and Welfare (MHLW)

Japan Medical Device Imports

Medical Device Imports in 2000

64%7%5%

4%

20%

United States Germany Netherl a n dIreland Others

Source: Ministry of Health, Labor and Welfare (MHLW)

Competitive Products （ Japan vs U.S. ）

• Imaging Diagnostic equipment• Therapeutic and Surgical Equipment• Biophenomena Measuring and Monitoring Systems• Home Therapeutic Equipment• Others (Dialyzers, Endoscopes, Hemodialysis Apparatus, etc.)

• Pacemakers

• Advanced Interventional Cardiology Products such as stents

• Orthopedic Implants

• Laser Surgical Equipment

• Cardiac Valve Prothesis

• Others (MRI, CT, etc.)

Japan

U.S.

U.S. Medical Device Firms in Japan

• 3M Healthcare• Allergan • Bausch & Lomb• Baxter• Boston Scientific• Edwards Lifesciences

• General Electric (GE)• Guidant• Johnson & Johnson• Kodak• Medtronic• St. Jude Medical

American Chamber of Commerce in Japan (ACCJ), Medial Device Subcommittee has 46 member firms

Medical Device Regulation System

Japanese Law

Pharmaceutical Affairs Law (PAL) ----- enforced by the Ministry of Health, Labor and Welfare (MHLW).

Necessary Governmental Authorizations

• Manufacturing (or import) approval ("Shonin") which guarantees the safety and efficacy of the device. (approx. 2,500-3,000 submissions per year)

• Manufacturing ( or import) license ("Kyoka") of a device, which the Japanese manufacturer and importer hold. (in 2002: manufacturing license - 2,709 / import license - 1,282)

• Reimbursement listing approval

How to Register Your Products

Pros• Simple• Less expensive• No direct involvement with the Japa

nese authorities

Cons• The manufacturer often is limited to

one importer

• Change of importer forces the manufacturer to reapply for shonin from the beginning

• Dependency on the importer increases

Pros• Option to work with multiple im

porters who may have different strenghts

• No reapplication for shonin upon change of importer

• The ability to focus fully on marketing your product

Cons• Expensive

Ask Your Importer to Apply Use In-country Care Taker

Application Categories

(1) Devices which do not require approval

(2) “Me-too Devices” which are equivalent to already-approved devices in Japan (Time Clock: 4 months)

(3) “Improved Devices” which do not have new characteristics as much as the devices to be reexamined but are not substantially equivalent to already-approved devices in Japan (Time Clock: 12 months)

(4) “New Devices” which are different in use, function or technology from already-approved devices in Japan (Time Clock: 12 months)

Risk Categories of Medical Devices

Categories Categories of medicaldevices according to risk

Approval Clinical Trial

Class I

Medical devices that are believed to poseextremely little risk to the human body even ifthey fail

Examples: In vitro diagnostic devices, steelsupplies, x-ray film, dental prosthetic supplies

-----

Not necessary

Class II

Medical devices that are believed to poserelatively little risk to the human body even ifthey fail

Examples: MRI, electromanometers,electronic endoscopes, digestive catheters,ultrasonic diagnostic equipment, and dentalalloys

In principle, not necessary

Class III

Medical devices that are believed to poserelatively high risk to the human body if theyfail

Examples: dialyzers, artificial bones,respirators, and balloon catheters

Sometimes, necessary

Class IV

Medical devices that are highly invasive uponthe patient and may directly endanger thepatient's life if they fail

Examples: pacemakers, artificial heartvalves, and stents

Necessary

In principle, necessary

Note: The products shown as examples are classified according to international categories. Minister of Health, Labor and Welfare has thefinal authority to classify products according to definitions under the law.

New Device

Submission to Prefecural Government

Evaluation and Licensing Div., MHLW

Pharmaceuticals and Medical Devices Evaluation Center (PMDEC)

Me-too DeviceImproved Device

Evaluation by PMDEC Evaluation by JAAME

PresentationPresentation

Expert Discussion Expert Discussion

Pharmaceuticals and Medical Devices Evaluation Center (PMDEC)

Equivalency Investigation

Evaluation and Licensing Div., MHLW

PAFCS

Evaluation and Licensing Div., MHLW

Prefecural Government

Approval

Pharmaceutical Affairs Law Revision - Key Points

(1) review of the approval system and enhancement of past marketing safety measures

* Introduction of a classification system corresponding to the risk of medical devices

- three categories by risk to the human body (extremely low, low and high)

* A third party certification system for low risk medical devices

(2) review of the safety measures regarding medical devices; and

(3) enhancement of safety measures for biological products

Pharmaceutical Affairs Law Revision - Revision Schedule

July 2002 Pharmaceutical Affairs Law Amendment (PAL)passed the Diet

Fall 2002 Bill on new Administrative Agency to be submitted toextraordinary session of the Diet

April 2003 Revised PAL on biological products to be enacted

April 2004 New Independent Administrative Corporation to beestablished

April 2005 Full enforcement of revised PAL

Review of Categories and Safety Measures Concerning Medical Devices

CurrentPharmaceutical

Affairs LawRevision plan

Internationalcategories

Current status andreview plan

Categories of medicaldevices according to risk

Distributionregulations

Manufacturingregulations

Risk

Distributionregulations

Primarydistributionregulations

Class IMedical devices that are believed topose extremely little risk to the humanbody even if they fail

Ext

rem

ely

low

Distributor's notificationis not required

Approval formarketingauthorization is notrequired

Notification fordistribution

is not necessary

Approval ofmanufacturing isnot necessary

Class IIMedical devices that are believed topose relatively little risk to the humanbody even if they fail

Low

Distributor's Notificationis required*

Imple-mentationof third-partycertificationsystem

Class III

Medical devices that are believed topose relatively high risk to the humanbody if they fail

Class IV

Medical devices that are highlyinvasive upon the patient and maydirectly endanger the patient's life ifthey fail

Notification systemfor distribution

Minister'sapproval formanufacturing

High

Implementationof license

system fordistribution

Minister'sapproval for marketingauthorization

New Independent Administrative Agency

Drug Manufacturers

Medical Device Manufacturers

JAAME

Medical devices’ equivalency investigation

PMDEC

Review of drugs and medical devices

OPSRDrug’s equivalency investigation. Clinical trial consultation. Reliability inspections. GCP, GLP and GPMSP inspections

MHLW Council

Report of review results Consultation

Recommendation

Inquiry, instructionand answer

Inquiry, instructionand answer

Application

Approval

Current System Proposed New System

Drug and Medical DeviceManufacturers

New Independent Administrative Institution

Review of drugs and medical devices (including clinical trial consultation and inspections)

MHLW CouncilConsultation

Recommendation

Report of review results

Application Inquiry, instructionand answer

Approval

Certification by a third party for low-risk medical devices

Medical Device Reimbursement

A1 Covered under technical fee: Product reimbursement is included in thetechnical fee. Products are usually a low-end, inexpensive nature suchas sutures and other supplies.

A2 Covered under technical fee: Product itself gives technical fees. A2products include high-end and expensive diagnostic equipment such asMRI, CT, etc.

B Existing products (single use products): There is an existing technicalfee and also existing device category.

C1 New products (single use products) used with current existingtechnology: There is an existing technical fee, but no existing devicecategory.

C2 New products with no existing technology: This category is forbreakthrough technologies.

Seriously, Japan is a tough market

• Cost contamination pressure

• Over-regulation

• High-costs of doing business

• Protectionism

• Unique and complex market culture

• Competitive Japanese firms

Approaching the Market

• Trade Shows- Modern Hospital Show- Hospex- Japan Dental Show- and more

• Academic Conference and Exhibition

• Healthcare Consultants• The U.S. Commercial Service

Programs

Market Information in English

• Our market research reports http://www.usatrade.gov

• Japan External Trade Organization's (JETRO)http://www.jetro.go.jp

• Japan Pharmaceutical Manufacturers Association (JPMA)http://www.jpma.or.jp

• Ministry of Health, Labor and Welfare (MHLW)http://www.mhlw.go.jp/english/index.html

• Japan Association for the Advancement of Medical Equipment (JAAME) http://www.jaame.or.jp/english/index.html