1. Japan Medical Device Market Overview Ian Clements Office of Japan U.S. Department of Commerce April 10, 2008

2. Main Points of this Presentation • Japan remains the world’s No. 2 medical device market. • Japan’s market is highly regulated: Product approvals are slow and expensive. • The Commerce Department helps U.S. companies overcome Japan’s regulatory problems.

3. Presentation Outline • Importance of Japan’s Market • Impact of Its Aging Society • Introduction to Japan’s Regulatory System • The Regulatory Agencies and Pharmaceutical Affairs Law • Regulatory Problems and Their Impact • Japan’s Plans to Resolve the Problems • The Commerce Department’s Work on Medical Devices in Japan • Regulatory Reform Initiative

4. Warm-up Question Who is the Prime Minister of Japan? • Junichiro Koizumi • Shinzo Abe • Kosuke Fukudome • Yasuo Fukuda

5. Japan Remains the World’s Number 2 Economy Source: CIA World Factbook

6. Japan Imports $5 Billion of U.S. Medical Devices Unit: Millions of U.S. Dollars Figures for 2006 and 2007 are estimates. Source: “Doing Business in Japan, 2008 Country Commercial Guide for U.S. Companies,” U.S. & Foreign Commercial Service and State Department.

7. Japan’s Population is Shrinking and Aging • Japan’s population is projected to fall from 127 million in 2007 to 97 million in 2047. • 1 in 5 Japanese is 65 or older today. • 1 in 4 Japanese will be 65 or older by 2015. • Population trends are straining Japan’s healthcare budget Sources: U.S. Census Bureau, The Economist, OECD

8. Two Agencies Regulate Medical Devices in Japan • Pharmaceuticals and Medical Devices Agency (PMDA), or Kiko • Reviews product applications • Isn’t a government agency • Needs more device specialists as reviewers • Ministry of Health, Labor and Welfare (MHLW) • Approves product applications • Is a government agency

9. Pharmaceutical Affairs Law (PAL) Governs Regulation of Medical Devices -- Risk-Based Regulatory System • PMDA reviews devices in highest risk categories. • Third parties can review some lower-risk devices.

10. Things You Probably Need to Sell Medical Devices in Japan • Marketing approval (hanbai shonin) • Marketing Authorization Holder, or MAH (optional) • Four licenses: • Marketing • Manufacturing • Retail • Repair

11. Regulatory Approval Delays are a Problem Average Medical Device Approval Times • European Union: 6 Months. • United States: 3 to 10 Months. • Japan: 12 to 36 Months. Source: Medical Devices and Equipment: Competitive Conditions Affecting U.S. Trade in Japan and Other Principal Foreign Markets, March 2007, U.S. International Trade Commission

12. Japan’s ‘Strategy for Innovative Medical Devices’ Japan’s April 2007 “Five-Year Strategy for Creation of Innovative Drugs and Medical Devices” includes plans to: • Increase R&D spending. • Promote start-ups. • Improve clinical trials. • Expedite reviews. • Review the reimbursement pricing system.

13. Warm-up Question on the U.S. Commerce Department Which of the following 3 agencies are units of the Commerce Department?

14. Commerce Department Helps Companies do Business in Japan International Trade Administration • U.S. Foreign and Commercial Service • Offices in Boston and 106 other U.S. cities • Offices in more than 80 countries • In Japan, offices in Tokyo, Osaka, Nagoya, Sapporo • Manufacturing and Services (MAS) • Industry specialists • Office of Health & Consumer Goods • Market Access and Compliance • Regional and compliance specialists • Office of Japan (my office) • Leads U.S. Government work on medical devices in Japan

15. U.S. Government Encourages Japan to Streamline Regulations • U.S.-Japan Regulatory Reform Initiative (since 2001) • 1986 U.S.-Japan MOSS (Market-Oriented, Sector-Selective) Agreement • U.S. Government’s October 2007 Recommendations: • Regulatory • Speed approvals of minor changes. • Reimbursement Pricing • Abolish the Foreign Average Price rule. • U.S.-Japan Report to the Leaders • Annual summary of progress on regulatory and reimbursement issues.

16. Concluding Summary • Japan, the world’s No. 2 medical device market, will be affected by demographic changes. • Japan acknowledges its cumbersome regulatory process contributes to a “device lag.” • The Commerce Department uses the Regulatory Reform Initiative and other means to help U.S. companies overcome Japan’s regulatory problems.

17. Websites of the International Trade Administration • International Trade Administration of the U.S. Department of Commerce: http://trade.gov/index.asp • Market Access & Compliance: http://trade.gov/mac/index.asp • Office of Japan: http://www.mac.doc.gov/japan/ • U.S. Commercial Service: http://trade.gov/cs/index.asp • Japan 2008 Country Commercial Guide: http://www.buyusa.gov/japan/en/ccg.html • Manufacturing & Services: http://trade.gov/mas/index.asp

18. Other Useful Websites • U.S. International Trade Commission Report: Medical Devices and Equipment: Competitive Conditions Affecting U.S. Trade in Japan and Other Principal Foreign Markets (March 2007): http://hotdocs.usitc.gov/docs/pubs/332/pub3909.pdf • U.S.-Japan Report to the Leaders (June 2007): http://www.ustr.gov/assets/World_Regions/North_Asia/Japan/Regulatory_Reform_Initiative/asset_upload_file751_12837.pdf • Annual Reform Recommendations from the U.S. Government to the Japanese Government under the Regulatory Reform Initiative (October 2007): http://www.ustr.gov/assets/Document_Library/Reports_Publications/2007/asset_upload_file751_13383.pdf • Japan’s Pharmaceuticals and Medical Devices Agency: http://www.pmda.go.jp/english/index.html • Japan’s Ministry of Health, Labor and Welfare: http://www.mhlw.go.jp/english/

19. My contact information Ian Clements International Trade Specialist Office of Japan U.S. Department of Commerce 1401 Constitution Avenue, NW Washington, DC 20230 202-482-1821 Ian_clements@ita.doc.gov