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

2. 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 3

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

5. Japan Remains the World’s Number 2 Economy CountryGross Domestic Product Per Capita Income United States$13.8 Trilli0n$46,000 Japan$4.4 Trillion$33,800 China$3.2 Trillion$5,300 5 Source: CIA World Factbook

6. Japan Imports $5 Billion of U.S. Medical Devices 200520062007 Market Size19,17220,41619,122 Local Production 14,27715,26115,379 Exports4,2964,5954,630 Imports Overall9,1919,7508,373 Imports from the U.S. 5,3955,8505,265 6 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 7

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 8

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. 9 RiskClassApproval typeReview body Highest4ApprovalPMDA 3ApprovalPMDA 2Third-party certification or Approval Third-party review body or PMDA Lowest1Self-certificationN/A

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 10

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. 11 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. 12

13. Warm-up Question on the U.S. Commerce Department Bureau of Engraving and PrintingCensus Bureau Federal Trade Commission (FTC) Occupational Safety and Health Administration (OSHA) National Weather ServicePatent and Trademark Office 13 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 14

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. 15

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. 16

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

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 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/Regulato ry_Reform_Initiative/asset_upload_file751_12837.pdf http://www.ustr.gov/assets/World_Regions/North_Asia/Japan/Regulato ry_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/20 07/asset_upload_file751_13383.pdf http://www.ustr.gov/assets/Document_Library/Reports_Publications/20 07/asset_upload_file751_13383.pdf Japan’s Pharmaceuticals and Medical Devices Agency: http://www.pmda.go.jp/english/index.html http://www.pmda.go.jp/english/index.html Japan’s Ministry of Health, Labor and Welfare: http://www.mhlw.go.jp/english/ http://www.mhlw.go.jp/english/ 18

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 19