Medical Equipment: How U.S. Companies Are Positioned to Get Ahead of Two Upcoming Shifts in Japan

Two upcoming shifts in Japan's healthcare sector can create opportunities for U.S. companies who can meet changing needs and work within Japan's dealer distribution system.

The first shift comes from the increase in Japan's senior population, which is expected to grow demand for artificial internal organs, such as pacemakers and artificial joints. U.S. companies currently own nearly 100% of the artificial internal organ market in Japan. The Japanese medical equipment industry has traditionally shied away from producing such high risk equipment, says Hiro Katsuse, JETRO healthcare advisor, and thus looks to the U.S. to fill the need. Although this sector is more challenging to enter due to the high risk usually associated with such products, the expected increase in demand could provide an opportunity for new entrants into the market.

The increase in senior population is also growing demand for in-home therapeutic operators, such as oxygen generators, massage devices, medical baths, and wheel chairs. This sector often requires more localization than other sectors in that equipment must be adjusted to fit the smaller sizes of living quarters in Japan and smaller physical stature of the Japanese people. However, growing demand for such equipment makes the Japanese market an attractive source of revenue.

A second shift comes from a push within the healthcare industry to provide more basic diagnostic services through local physicians than hospitals. Currently, people in Japan visit large university hospitals for nearly all ailments, including the common cold. To more efficiently use hospital resources, healthcare providers are encouraging patients to seek basic care from local physicians. This upcoming shift is expected to increase demand for diagnostic equipment, a sector in which U.S. companies have a strong lead. Japan receives 60% of its medical equipment imports from the U.S. Of those U.S. imports, 72% consist of diagnostic equipment.

"Know Before You Go" Dealer Distribution System
While some large and high-priced equipment are sold directly by manufacturers or importers to hospitals and clinics, most medical equipment in Japan are sold through a very well established distribution system comprised of a network of dealers who mediate between manufacturers/importers and hospitals/clinics.

Figure 1: Medical device distribution system, p. 72

Medical equipment manufacturers and importers in Japan customarily deliver equipment to the hospitals and clinics and provide training and maintenance services at little or no cost.

Also common for manufacturers and importers is to charge for equipment and devices once they are used. After delivering several units to hospitals and clinics, company dealers regularly take inventory to monitor usage. Multiple decision makers often exist in the purchasing process. Nurses usually handle purchases of less expensive equipment while doctors handle purchases of more expensive equipment.

Entering the Market
Many companies first start selling their products through Japanese importers. Then after gaining experience in the market and with local distribution channels, companies then establish an import and sales office in the form of a wholly owned subsidiary. Companies who do not yet have the resources to enter the market on their own often form a joint venture or other partnership with a company already in Japan. Some companies, once sales reach a desired level, then establish a manufacturing plant and/or research center. Others merge with or acquire a Japanese company to gain foothold in the market.

The following are medical equipment classifications, used by the MHLW in the Statistical Survey on Pharmaceutical Production Trend, along with some of the larger companies within those classifications.

Getting Started
As a first step, explore your company's business viability in Japan using JETRO's free services:

• Research the market
• Talk with our industry advisors
• Meet with potential Japanese partners and clients during our annual business matching programs
• Access our network to over 3,500 medical device companies in Japan 1,400 specialized distributors
• Use our free office space for up to 50 business days--a convenient and often necessary tool for registering your company in Japan

Get in front of two upcoming trends expected to increased demand for several sectors of medical equipment, presenting new opportunities for market entrants. With a market representing 15% of the global market for medical equipment, and where 60% of imports are from the U.S., Japan is a difficult market to deny for any company seeking international growth.