Insights and Opportunities
Overview: The Japanese market for medical equipment is one of the few sectors where the U.S. has consistently enjoyed a sizeable trade surplus with Japan. In 2007, the Japanese market for medical devices and materials was just over $18 billion. Total imports were estimated to be approximately 50% of the market. U.S. products represented around a 56% share of the import market and accounted for approximately 27% of Japan's total medical equipment market, valued at approximately $5 billion.
While the market for U.S. medical equipment in Japan remains strong, U.S. firms have been facing considerable challenges in both pricing and regulatory matters. Due to Japan’s medical devices regulatory approval processes, which are heavily regulated under the Pharmaceutical Affairs Law (PAL), innovative U.S. medical devices are frequently introduced elsewhere in the world years before they are available in Japan.
However, the Japanese authorities have recognized that Japan suffers from a medical device “lag”, which prevents timely patient access to innovative and life-saving products. In December 2008, Japan issued the “Action Programs for Speedy Review of Medical Devices” that included specific actions and goals to expedite product approval processes such as increasing the number of reviewers from 35 to 104, and completing standard reviews in fourteen months and priority reviews in ten months by April 2014, among other items. These measures are expected to improve and speed up Japan’s regulatory approvals system.
With regard to pricing, Japan will continue to take measures to contain overall healthcare costs as its population ages, including using the Foreign Average Price (FAP) rule to narrow foreign price differentials. Japan tightened enforcement of the Foreign Average Pricing (FAP) rule at the National Health Insurance (NHI) price revision which went into effect in April 2008. As a result, Japan reduced reimbursement prices for new devices to 1.7 times the average price of devices in the U.S., Britain, France, and Germany from the current 2.0. At the next revision (April 2010), Japan is expected to further reduce the FAP ratio to 1.5.
Best Products/Services: Given Japan's aging population, with an increasing number of patients with chronic, life-style diseases (such as diabetes), medical devices to treat age related diseases should show steady growth in demand. Devices that show promise include equipment to assist biofunctions, such as pacemakers, cardiac valve prosthesis and orthopedic implants. Due to a lack of local manufacturers in these areas, such products will continue to be promising for U.S. firms in the foreseeable future. Other areas of projected strong demand include advanced diagnostic imaging equipment such as high-end MRI, CT/PET, PET, and digital radiography. Favorable changes in the reimbursement system and political climate may spur new growth in advanced diagnostic imaging technologies. New leading edge medical devices will also have good market prospects.