U.S. Device Firms Slowed by Japanese Approval Process

NEWS TRENDS

U.S. medical device and equipment firms may be hampered by regulatory approval times for new devices in Japan, according to a U.S. International Trade Commission (ITC) report.

The commission found that average regulatory approval times in Japan were longer than those in other principal global markets. Because the United States is the world leader in innovative medical technologies, its firms could be disproportionately affected by Japan's lengthy approval process.

The report found that even though the Japanese approval system has the same process for domestic and imported medical devices, companies that specialize in innovative products are more adversely affected by the regulatory delays. These delays can be particularly problematic because innovative medical products can have life cycles as short as 18 months. Another factor is that Japan scrutinizes such products more rigorously than less-advanced technologies, but its process is not predictable, so it may be difficult for sponsors to get a sense of when a decision will come.

U.S. medical device firms are the leading developers and exporters of high-technology medical devices. Recent data indicate that there has been a gradual decline in the number of products submitted by U.S. firms for approval in Japan (see Table I).

In 2005, the Japanese government made changes to its Pharmaceutical Affairs Law—the statute governing medical device approval—in an attempt to shorten product approval times and improve efficiency. There was some success in shortening approval times, but the report states that there are still significant hurdles.

Also, the report concluded that device firms prefer the European Union (EU) medical device approval system to the systems in the United States and Japan because of its shorter approval time. However, the report states that although medical device regulation in the United States remains tightly controlled, the process has become more predictable and review times have steadily declined.

Japan continued to run a trade deficit in medical devices while the EU and the United States maintained a trade surplus. These three entities account for about 90% of global production and consumption of medical devices. However, the report revealed that the U.S. medical device trade surplus declined steadily—from $5.9 billion in 2001 down to $957 million in 2004—before climbing back to almost $2 billion in 2005. ITC attributes the decline to uninterrupted growth in U.S. demand and the continued use of foreign outsourcing by U.S. companies.

The ITC report provides an overview of the global market for medical devices and equipment, including production, consumption, and trade. It also compares the U.S. medical device industry with those in the EU and Japan. Trade practices, regulatory issues, and government and private expenditures on medical research are all highlighted with respect to their implications for the U.S. medical device market.

The 180-page report, titled Medical Devices and Equipment: Competitive Conditions Affecting U.S. Trade in Japan and Other Principal Foreign Markets, is available on ITC's Web site at http://hotdocs.usitc.gov/docs/pubs/332/pub3909.pdf.

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