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Curt Jennewine, Asia MedPartners
When Zimmer Biomet launched its Mobi-C Cervical Disc in Japan in 2018, executives first described it to us as “A big deal.” Mobi-C is expected to drive Zimmer Biomet Spine’s Asia Pacific strategy, and Japanese launch was the first milestone. The novelty of technology combined with the complexity of Japan’s Pharmaceuticals and Medical Device Agency’s (PMDA) clinical data requirements meant a years-long process for regulatory approval. Zimmer Biomet even used clinical data collected from its U.S. FDA Investigational Device Exemption study to speed PMDA approval.
Rebecca Whitney, General Manager of Zimmer Biomet Spine, stressed to us the importance of data not only to the regulators, but to Japanese surgeons. Orthopaedic surgeons want technology backed by clinical proof. “There’s a high level of sophistication when it comes to quality and the clinical data behind a product,” she said of surgeon expectation.
Now that Mobi-C is on the market in Japan, Zimmer Biomet is selling the device in the three largest orthopaedic markets in the world, including the U.S. and Europe.
“As we look at where we want to grow and improve our positions, it’s two things: focusing on high-growth segments within the U.S. and global expansion. I firmly believe that you can innovate in multiple ways, and one of those ways is to bring existing products into new markets,” Whitney said.
***
The Japanese orthopaedic segment is attractive for multiple reasons: an estimated market of more than $2 billion, growing in the low-single digits; more than 35 million people over the age of 65; established regulatory pathways and strong reimbursement and pricing.
Upon reviewing recent strategic announcements about doing business in Japan, we sought a deeper understanding of orthopaedic market dynamics in the region. For this insight, we spoke with Curt Jennewine, President of Asia MedPartners and a seasoned orthopaedic executive in Japan and China.
One of Mr. Jennewine’s comments that stood out to us is that companies often treat the Japanese market as an afterthought—after they’re established in the U.S. and Europe, they’ll decide what it takes to enter Japan. By waiting until later to consider Japanese market entry requirements, companies may have to redo testing development and clinical studies. He suggests that manufacturers discuss entry into Japan, whether it be company market entry or new product entry, in the same conversation with the U.S. and Europe strategies. As the market shifts in the U.S. to value-based care and as hospitals consolidate vendors, and as the European Union implements the stricter Medical Device Regulation, the country may look more attractive.
Setting market forces in the U.S. and Europe aside, Mr. Jennewine points to advantages of getting into Japan sooner rather than later:
- Large market: almost the size of Europe without the complexity of working in multiple countries.
- Attractive pricing: Japan’s single-payor system means that competitors generally price products the same, at levels higher than in Europe.
- Fewer competitors than in the U.S. and Europe.
- Surgeons still make product purchasing decisions.
Bearing these factors in mind, here are highlights of our conversation with Mr. Jennewine.
Can you describe the current competitive landscape between domestic and international orthopaedic manufacturers in Japan?
Mr. Jennewine: The same big players exist in Japan and the U.S., although their market positions differ. For example, a dominant player in the U.S. might be a number three or four player in Japan.
With midsized players, you see quite a few differences. Although some midsized U.S. and European companies can be found, many are not there. Instead, domestic Japanese companies—Kyocera, Teijin Nakashima Medical, Japan MDM, for example—occupy this segment of the market. Using the spine market as an example, the big four multi-national companies make up about 75% of the market, while the remaining 25% consists of Japanese companies and a few mid-tier U.S. and European companies.
Smaller U.S. and European companies are pretty much non-existent, and overall there are fewer players in the market than in the U.S. and Europe.
Is there room for medium and smaller companies in Japan?
Mr. Jennewine: Midsized companies that are not yet there, absolutely. Smaller companies, as well. Because Japan doesn’t have tenders or GPOs, there is a unique opportunity for smaller companies to potentially partner with a manufacturer or distributor that doesn’t have a full-line product—maybe they’re carrying products for a midsized company that has gaps in its portfolio, or maybe they’re a Japanese company that hasn’t fully fleshed out their product line. A smaller U.S. company with an innovative technology has the opportunity to be a gap filler or door opener to innovative technology for that partner in Japan. In the U.S. you need to be acquired to gain access to a large sales channel, but in Japan you can do it through a partnership.
What are the primary hurdles—regulatory, economic—for orthopaedic manufacturers that are new to the Japanese market?
Mr. Jennewine: From a regulatory standpoint, for most U.S. companies, it’s a lack of understanding or confidence. The actual regulatory hurdles are not high in terms of cost or process, but many U.S. companies have convinced themselves that it’s more difficult or time-consuming to get in than it actually is. One difference from other markets is that you have to have a Marketing Authorization Holder (MAH) to represent you in Japan if you don’t have an on-the-ground presence. Most companies have their distribution partner serve as their MAH.
From a clinical/development standpoint, many new entrants to Japan 1) don’t start thinking about Japan until a few years after getting their business started in the U.S. and Europe, and 2) don’t understand the differences between Japanese testing and clinical requirements from those in the U.S. So they often fail to do testing as part of the development process that is later needed for their submission, or they don’t include the appropriate end-points or patient types in their clinical and then need to do a second clinical prior to submission.
From an economic standpoint, there are a limited number of potential distributor partners for entrants, which makes finding a strong distributor challenging. In addition, Japanese distributors are looking for the most differentiated, value-added technologies they can find. Although reimbursement is great in general, there may be some situations in which Japanese reimbursement is much lower than in other markets or even non-existent. This can make it difficult to introduce some products into the market. Also, price segmentation is not really an option in Japan, as every product in the same category receives the same level of reimbursement. As a result, customers generally pay the same price for every product, regardless of its manufacturer.
What are the primary hurdles for orthopaedic manufacturers that are already established in Japan?
Mr. Jennewine: The regulatory hurdles are the same as those for new entrants.
Culturally, companies need to be patient. Things will take longer, and you’ll need to provide a lot more detail than in other markets.
From an economic standpoint, once a company reaches a certain size, growing share can sometimes be difficult. Some doctors spread their business out evenly. They may choose to work with three sales reps whose products and service they like, and then provide an equal share of the business to each.
Another issue that some established players face is the transition from a distribution-based business to a direct one. Companies that did not plan for this upfront may find their distributor reluctant to transfer the registration. Entrants can easily avoid this issue by negotiating how this will play out in their original contract with their distributor.
What were some of the key changes to Japan’s medical device regulations in the last five years? What do you expect in the coming five years?
Mr. Jennewine: I’ve seen some big changes when it comes to regulatory approval times. The PMDA has had a cooperative relationship with FDA for many years and has worked on harmonizing their review process. This has resulted in much shorter review times for Class 1 and some Class 2 products, and an entirely new process for Regenerative products that significantly shortens time-to-market.
Medical Device Single Audit Program (MDSAP) is another attempt at harmonization in terms of quality audits, not only between the U.S. and Japan but with other countries as well. That being said, it appears that the jury is still out with regard to how well that program is working.
Economically there is continued pricing pressure. Years ago people felt that this would drive consolidation in the distribution channel, as Japan has another layer of distribution that many countries don’t have, but this consolidation never really occurred. I don’t see price declines driving meaningful consolidation in the midterm horizon, as the dealers play an important role in the hospital that neither hospitals nor distributors are willing to take on themselves.
What market forces should orthopaedic companies be aware of in 2019? Any advice on how they should respond?
Mr. Jennewine: It’s really the same core market forces that you see here in the U.S.—the need to drive down cost and the need to innovate and create value, with the exception that the product decision-making shift we’ve seen in the U.S. from physicians to hospital purchasing has not happened to nearly the same extent in Japan.
Another unique characteristic that’s as true about Japan in 2019 as it’s ever been is the belief that products designed for U.S. patients are often not appropriate for Japanese patients—the sizes are too large, the shapes don’t fit the slightly different shapes of Japanese bodies and most U.S. graphic user interfaces are seen as not user-friendly. These issues can be addressed by either keeping Japanese patients in mind in the development process or by offering patient-specific technology.
What questions should device companies be asking themselves, as they do business in Japan?
Mr. Jennewine: The companies that have commercial products and are not yet in Japan should be asking themselves why they aren’t there. This is the number two or three orthopaedic market globally, depending on the segment, and they should prioritize getting into Japan earlier.
The foreign device companies that are doing business in Japan should be asking themselves if they’re really listening to and responding to the needs of the Japanese market, or whether they are approaching inconvenient feedback from the market as “Japanese doctors don’t understand; our distributor isn’t doing a good job in having Japanese customers understand why they need to do it our way” instead of understanding the feedback as what it truly is—an opportunity to improve.
***
Many of the strategic announcements that we tracked on the Japanese market in the past year were from smaller companies signing distribution and development agreements with Asian companies. These included the following three expansions by European companies:
- Implanet and L&K Biomed finalized agreements for cross-distribution of spinal products in the U.S. and Asia/Oceania. L&K will distribute JAZZ devices alongside its own products in Japan.
- Safe Orthopaedics entered into an exclusive commercialization and distribution agreement in Japan with KiSCO, developer of spinal and trauma devices. Terms include a milestone payment in cash upon the receipt of approval for Safe Orthopaedics’ SteriSpine products on the Japanese market, which is expected in 2019. Safe Ortho has also received a capital infusion from KiSCO.
- Medartis, a midsized Swiss company with an established presence in Japan, opened its own subsidiary to sell lower extremity products while maintaining its long-term Japanese distributor for upper extremity sales. CEO Willi Miesch told us that the company plans to make significant investments in “high-potential health markets.”
When Zimmer Biomet launched its Mobi-C Cervical Disc in Japan in 2018, executives first described it to us as “A big deal.” Mobi-C is expected to drive Zimmer Biomet Spine’s Asia Pacific strategy, and Japanese launch was the first milestone. The novelty of technology combined with the complexity of Japan’s Pharmaceuticals and Medical Device...
Curt Jennewine, Asia MedPartners
When Zimmer Biomet launched its Mobi-C Cervical Disc in Japan in 2018, executives first described it to us as “A big deal.” Mobi-C is expected to drive Zimmer Biomet Spine’s Asia Pacific strategy, and Japanese launch was the first milestone. The novelty of technology combined with the complexity of Japan’s Pharmaceuticals and Medical Device Agency’s (PMDA) clinical data requirements meant a years-long process for regulatory approval. Zimmer Biomet even used clinical data collected from its U.S. FDA Investigational Device Exemption study to speed PMDA approval.
Rebecca Whitney, General Manager of Zimmer Biomet Spine, stressed to us the importance of data not only to the regulators, but to Japanese surgeons. Orthopaedic surgeons want technology backed by clinical proof. “There’s a high level of sophistication when it comes to quality and the clinical data behind a product,” she said of surgeon expectation.
Now that Mobi-C is on the market in Japan, Zimmer Biomet is selling the device in the three largest orthopaedic markets in the world, including the U.S. and Europe.
“As we look at where we want to grow and improve our positions, it’s two things: focusing on high-growth segments within the U.S. and global expansion. I firmly believe that you can innovate in multiple ways, and one of those ways is to bring existing products into new markets,” Whitney said.
***
The Japanese orthopaedic segment is attractive for multiple reasons: an estimated market of more than $2 billion, growing in the low-single digits; more than 35 million people over the age of 65; established regulatory pathways and strong reimbursement and pricing.
Upon reviewing recent strategic announcements about doing business in Japan, we sought a deeper understanding of orthopaedic market dynamics in the region. For this insight, we spoke with Curt Jennewine, President of Asia MedPartners and a seasoned orthopaedic executive in Japan and China.
One of Mr. Jennewine’s comments that stood out to us is that companies often treat the Japanese market as an afterthought—after they’re established in the U.S. and Europe, they’ll decide what it takes to enter Japan. By waiting until later to consider Japanese market entry requirements, companies may have to redo testing development and clinical studies. He suggests that manufacturers discuss entry into Japan, whether it be company market entry or new product entry, in the same conversation with the U.S. and Europe strategies. As the market shifts in the U.S. to value-based care and as hospitals consolidate vendors, and as the European Union implements the stricter Medical Device Regulation, the country may look more attractive.
Setting market forces in the U.S. and Europe aside, Mr. Jennewine points to advantages of getting into Japan sooner rather than later:
- Large market: almost the size of Europe without the complexity of working in multiple countries.
- Attractive pricing: Japan’s single-payor system means that competitors generally price products the same, at levels higher than in Europe.
- Fewer competitors than in the U.S. and Europe.
- Surgeons still make product purchasing decisions.
Bearing these factors in mind, here are highlights of our conversation with Mr. Jennewine.
Can you describe the current competitive landscape between domestic and international orthopaedic manufacturers in Japan?
Mr. Jennewine: The same big players exist in Japan and the U.S., although their market positions differ. For example, a dominant player in the U.S. might be a number three or four player in Japan.
With midsized players, you see quite a few differences. Although some midsized U.S. and European companies can be found, many are not there. Instead, domestic Japanese companies—Kyocera, Teijin Nakashima Medical, Japan MDM, for example—occupy this segment of the market. Using the spine market as an example, the big four multi-national companies make up about 75% of the market, while the remaining 25% consists of Japanese companies and a few mid-tier U.S. and European companies.
Smaller U.S. and European companies are pretty much non-existent, and overall there are fewer players in the market than in the U.S. and Europe.
Is there room for medium and smaller companies in Japan?
Mr. Jennewine: Midsized companies that are not yet there, absolutely. Smaller companies, as well. Because Japan doesn’t have tenders or GPOs, there is a unique opportunity for smaller companies to potentially partner with a manufacturer or distributor that doesn’t have a full-line product—maybe they’re carrying products for a midsized company that has gaps in its portfolio, or maybe they’re a Japanese company that hasn’t fully fleshed out their product line. A smaller U.S. company with an innovative technology has the opportunity to be a gap filler or door opener to innovative technology for that partner in Japan. In the U.S. you need to be acquired to gain access to a large sales channel, but in Japan you can do it through a partnership.
What are the primary hurdles—regulatory, economic—for orthopaedic manufacturers that are new to the Japanese market?
Mr. Jennewine: From a regulatory standpoint, for most U.S. companies, it’s a lack of understanding or confidence. The actual regulatory hurdles are not high in terms of cost or process, but many U.S. companies have convinced themselves that it’s more difficult or time-consuming to get in than it actually is. One difference from other markets is that you have to have a Marketing Authorization Holder (MAH) to represent you in Japan if you don’t have an on-the-ground presence. Most companies have their distribution partner serve as their MAH.
From a clinical/development standpoint, many new entrants to Japan 1) don’t start thinking about Japan until a few years after getting their business started in the U.S. and Europe, and 2) don’t understand the differences between Japanese testing and clinical requirements from those in the U.S. So they often fail to do testing as part of the development process that is later needed for their submission, or they don’t include the appropriate end-points or patient types in their clinical and then need to do a second clinical prior to submission.
From an economic standpoint, there are a limited number of potential distributor partners for entrants, which makes finding a strong distributor challenging. In addition, Japanese distributors are looking for the most differentiated, value-added technologies they can find. Although reimbursement is great in general, there may be some situations in which Japanese reimbursement is much lower than in other markets or even non-existent. This can make it difficult to introduce some products into the market. Also, price segmentation is not really an option in Japan, as every product in the same category receives the same level of reimbursement. As a result, customers generally pay the same price for every product, regardless of its manufacturer.
What are the primary hurdles for orthopaedic manufacturers that are already established in Japan?
Mr. Jennewine: The regulatory hurdles are the same as those for new entrants.
Culturally, companies need to be patient. Things will take longer, and you’ll need to provide a lot more detail than in other markets.
From an economic standpoint, once a company reaches a certain size, growing share can sometimes be difficult. Some doctors spread their business out evenly. They may choose to work with three sales reps whose products and service they like, and then provide an equal share of the business to each.
Another issue that some established players face is the transition from a distribution-based business to a direct one. Companies that did not plan for this upfront may find their distributor reluctant to transfer the registration. Entrants can easily avoid this issue by negotiating how this will play out in their original contract with their distributor.
What were some of the key changes to Japan’s medical device regulations in the last five years? What do you expect in the coming five years?
Mr. Jennewine: I’ve seen some big changes when it comes to regulatory approval times. The PMDA has had a cooperative relationship with FDA for many years and has worked on harmonizing their review process. This has resulted in much shorter review times for Class 1 and some Class 2 products, and an entirely new process for Regenerative products that significantly shortens time-to-market.
Medical Device Single Audit Program (MDSAP) is another attempt at harmonization in terms of quality audits, not only between the U.S. and Japan but with other countries as well. That being said, it appears that the jury is still out with regard to how well that program is working.
Economically there is continued pricing pressure. Years ago people felt that this would drive consolidation in the distribution channel, as Japan has another layer of distribution that many countries don’t have, but this consolidation never really occurred. I don’t see price declines driving meaningful consolidation in the midterm horizon, as the dealers play an important role in the hospital that neither hospitals nor distributors are willing to take on themselves.
What market forces should orthopaedic companies be aware of in 2019? Any advice on how they should respond?
Mr. Jennewine: It’s really the same core market forces that you see here in the U.S.—the need to drive down cost and the need to innovate and create value, with the exception that the product decision-making shift we’ve seen in the U.S. from physicians to hospital purchasing has not happened to nearly the same extent in Japan.
Another unique characteristic that’s as true about Japan in 2019 as it’s ever been is the belief that products designed for U.S. patients are often not appropriate for Japanese patients—the sizes are too large, the shapes don’t fit the slightly different shapes of Japanese bodies and most U.S. graphic user interfaces are seen as not user-friendly. These issues can be addressed by either keeping Japanese patients in mind in the development process or by offering patient-specific technology.
What questions should device companies be asking themselves, as they do business in Japan?
Mr. Jennewine: The companies that have commercial products and are not yet in Japan should be asking themselves why they aren’t there. This is the number two or three orthopaedic market globally, depending on the segment, and they should prioritize getting into Japan earlier.
The foreign device companies that are doing business in Japan should be asking themselves if they’re really listening to and responding to the needs of the Japanese market, or whether they are approaching inconvenient feedback from the market as “Japanese doctors don’t understand; our distributor isn’t doing a good job in having Japanese customers understand why they need to do it our way” instead of understanding the feedback as what it truly is—an opportunity to improve.
***
Many of the strategic announcements that we tracked on the Japanese market in the past year were from smaller companies signing distribution and development agreements with Asian companies. These included the following three expansions by European companies:
- Implanet and L&K Biomed finalized agreements for cross-distribution of spinal products in the U.S. and Asia/Oceania. L&K will distribute JAZZ devices alongside its own products in Japan.
- Safe Orthopaedics entered into an exclusive commercialization and distribution agreement in Japan with KiSCO, developer of spinal and trauma devices. Terms include a milestone payment in cash upon the receipt of approval for Safe Orthopaedics’ SteriSpine products on the Japanese market, which is expected in 2019. Safe Ortho has also received a capital infusion from KiSCO.
- Medartis, a midsized Swiss company with an established presence in Japan, opened its own subsidiary to sell lower extremity products while maintaining its long-term Japanese distributor for upper extremity sales. CEO Willi Miesch told us that the company plans to make significant investments in “high-potential health markets.”
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Carolyn LaWell is ORTHOWORLD's Chief Content Officer. She joined ORTHOWORLD in 2012 to oversee its editorial and industry education. She previously served in editor roles at B2B magazines and newspapers.
