Selling American Medical Equipment in Japan

Prestowitz Clyde V. Jr. , Trading Places: How We Allowed Japan to Take the Lead (New York, NY: Basic Books, 1988).

See, Johnson C. , MITI and the Japanese Miracle: The Growth of Industrial Policy, 1925–1975 (Stanford, CA: Stanford University Press, 1982); Ozaki Robert S. , “How Japanese Industrial Policy Works,” in Johnson Chalmers , ed., The Industrial Debate (San Francisco, CA: ICS Press, 1984), pp. 47–70; Abegglen J.C. Stalk G. Jr. , Kaisha, the Japanese Corporation (New York, NY: Basic Books, 1985).

It is difficult to measure medical equipment sales precisely, because the firms that compose the medical equipment sector produce thousands of items. In turn, the goods are sold to homes and individuals. No completely accurate record exists. However, reasonable estimates are possible. The aggregate figures we report are drawn from five Standard Industrial Classification (SIC) categories of the United States Department of Commerce Census of Manufacturers and the international trade equivalents of those categories. The SIC categories include SIC 3693, X-ray and Electromedical Apparatus; SIC 3841, Surgical and Medical Instruments; SIC 3842, Surgical Appliances and Supplies; SIC 3843, Dental Equipment and Supplies; and SIC 3851, Ophthalmic Goods. These five categories are generally agreed to be the most accurate record of trends in the medical equipment manufacturing sector. See, Poprik M. , “The Medical Device Industry: An Updated Profile and Approach to Creating an Industry Inventory System,” Consumer Safety Staff, Office of Planning and Evaluation, Food and Drug Administration, U.S. GPR, Washington, D.C., 1976; Office of Technology Assessment, “Commercial Biotechnology: An International Analysis,” Washington, D.C. 1984; Office of Technology Assessment, “Federal Policies and the Medical Devices Industry,” Washington, D.C., 1984. We have drawn domestic shipment figures from the Census of Manufactures for 1954–1982 (U.S. Department of Commerce, Bureau of the Census, “Census of Manufactures,” issued 1956–1985) and the 1987 Industrial Outlook (U.S. Department of Commerce, January 1987). We have used comparable trade data from Bureau of Census and Department of Commerce sources (Bureau of the Census, 1957–1985; Bureau of the Census, 1965–1984; Department of Commerce, 1987; International Trade Adminstration, 1987). When possible, we have compared several sources of trade figures. In most cases, they are similar. Sometimes, though, there have been significant differences. For example, Japanese trade figures show a more gradual increase of early 1980s American exports to Japan than American records report. At least two reasons underlie the differences: Goods are sometimes reported in different categories or in different years. In some cases, we have taken the average of the differing figures; in others, we have chosen that which appears most accurate. In all cases, we have been conservative in our selection of the shipment figures on which we base our analyses. Although the calculations are estimates, and must therefore be interpreted cautiously, we believe that they portray medical equipment sales trends accurately.

Pacific Projects, Ltd., “IMR Survey: The Medical Equipment and Health Care Services Market in Japan,” Tokyo, 1987; Pacific Projects, Ltd., “Survey of Japanese Markets for Medical Equipment,” Volume 1, Tokyo, 1979.

U.S. and Japan MOSS Negotiating Teams, Report on Medical Equipment and Pharmaceutical Market-Oriented, Sector-Selective (MOSS) Discussions (Washington, D.C.: U.S. Government Printing Office, 1986).

Pacific Projects, op. cit., 1979.

The United States has a long history of drug and device regulation. For discussion of the history of drug regulation, see Temin P. , Taking Your Medicine: Drug Regulation in the United States (Cambridge, MA: Harvard University Press, 1980). For background on the Medical Device Amendments of 1976, the law that expanded FDA's regulatory reach over medical equipment, see Foote S.B. , “Coexistence, Conflict, Cooperation: Public Policies Toward Medical Devices,” Journal of Health Politics, Policy and Law, 11/3 (1986):501–523, Foote S.B. , “From Crutches to CT Scans: Business-Government Relations and Medical Product Innovation,” in Post J.E. , ed., Research in Corporate Social Policy and Performance, Vol. 6 (Greenwich, CT: JAI Press, 1986); Foote S.B. , “Loops and Loopholes: Hazardous Devices Regulation Under the 1976 Medical Device Amendments to the Food, Drug, and Cosmetics Act,” Ecology Law Quarterly, 7 (1978):101–135.

Bucci V. A. , “Japanese Import Restrictions on Medical Devices—An Overview of Recent Statutory Changes,” Food Drug Cosmetic Law Journal, 39 (1984):405–410.

Minnis J.E. , “Medical Device Approval Requirements in Japan,” Medical Device & Diagnostic Industry (March 1986), pp.58–63.

Piscatelli M.H. , “American-Japanese Trade Impasse: The Regulation of Medical Device Imports Into Japan,” Syracuse Journal of International Law and Commerce, 12/1 (1985):157–169.

U.S. & Japan MOSS Negotiating Teams, op. cit.

Ichikawa K. , “Outlook for the Medical Equipment Industry Bleak in the Short Run; Brighter in the Long Run,” Business Japan (June 1985), p. 71.

U.S. & Japan MOSS Negotiating Teams, op. cit.

Bucci , op. cit.

Lasagna L. , “On Reducing Waste in Foreign Clinical Trials and Postregulation Experience,” Clinical Pharmacology & Therapeutics, 40/4 (1986):369–372.

U.S. & Japan MOSS Negotiating Teams, op. cit.

Mitchell W. Foote S.B. , “Staying the Course: Comparative Stability of American and Japanese Firms in International Medical Equipment Markets,” unpublished working paper, University of California, Berkeley, Haas School of Business, 1988; Mitchell W. Foote S.B. , “Institutions versus Prices: Stable Buying Patterns in Japanese Medical Equipment Markets,” unpublished working paper, University of California, Berkeley, Haas School of Business.

Steslicke J. , Doctors in Politics: The Political Life of the Japan Medical Association, Praeger Special Studies in International Politics and Government (New York, NY: Praeger Publishers, 1973).

Hashimoto M. , “Health Services in Japan,” in Raffel M. W. , ed., Comparative Health Systems (University Park, PA: The Pennsylvania State University Press, 1984).

Pacific Projects, op. cit., 1987.

Niki R. , “The Wide Distribution of CT Scanners in Japan,” Social Science Medicine, 21/10 (1985): 1131–1137: Diagnostic Imaging, Business Briefs, 8/9 (September 1986):61.

Pacific Projects, op. cit., 1987; “Drug Manufacturers Seek Greater Pricing Flexibility,” Japan Economic Journal, 30 (May 1987):21.

Diagnostic Imaging, Business Briefs, 9/6 (June 1987):52.

Pacific Projects, op. cit., 1986.

U.S. Department of Commerce, International Trade Administration, “U.S. Imports of Medical Equipment 1983–1986, C.I.F. Values,” unpublished report, 1987.

Japanese companies sometimes make similar mistakes. When Toshiba first entered the American ultrasound market in the 1960s, for example, it offered the same equipment that it sold in Japan. The scanning assemblies were too small for the larger North American body and the units didn't sell well. Toshiba, though, eventually introduced an American line of revised scanners that it now markets successfully.

Pacific Projects, op. cit., 1987.

Rappa M.A. , “Capital Financing Strategies of the Japanese Semiconductor Industry,” California Management Review, 27/2 (Winter 1985):85–99.

We must note, though, that several of the companies with which we spoke do not follow this practice and, in fact, view the Japanese market as a highly competitive one.

To verify the contention that Japanese firms are more stable than their American counterparts, we took two samples of medical equipment companies (the analysis is described in more detail in Mitchell & Foote, op. cit., 1988.) The first sample was of Japanese and American firms that sold medical equipment in a neutral territory, Europe, during 1966–1968. The second sample was of American firms that were doing business, either directly or through distributors, in Japan in 1978 and Japanese companies that were selling in the United States in the same year. We then determined the cross-national comparative number of companies in our samples that were still in existence in 1986. From the 1978 sample, all 20 Japanese firms were still in existence in 1986, while 24 of the 50 American companies had either closed or merged with another. The difference in stability is statistically significant.

Abegglen Stalk , op. cit.

The preface for buying from stable companies is not unique to Japanese buyers. Firms with a reputation for stability, such as General Electric, have benefited in the American CAT scan market, where buyers remember being stuck with unserviceable machines when companies like Varian Associates and G.D. Searle Inc. left the market in the late 1970s. Diagnostic Imaging, Business Briefs, 7/8 (August 1985):39.

Pacific Projects, op. cit., 1987

Teece D.J. , “The Market of Know-How and the Efficient International Transfer of Technology,” Annals of the American Political Science Association, 48 (1981):81–96.

Pacific Projects, op. cit., 1979.

U.S. Department of Commerce, “Export Market Digest: U.S. Biomedical Equipment in Japan,” March 1973.

The increase in direct Japanese participation by American firms is notable; it pales, however, when compared with the level of Japanese direct participation in the American medical equipment market. Japanese medical equipment companies began to take a direct presence in the United States in the late 1960s, when firms such as JEOL. Ltd. set up North American offices. By 1978, about fifteen Japanese firms had established American locales; by 1986, the number had grown to over forty. Hale Adeline B. Hale Arthur B. , The Medical and Healthcare Marketplace Guide, 3rd U.S. Edition (Miami, FL: International Bio-Medical Information Service, Inc., 1978); Hale Adeline B. Hale Arthur B. , The Medical and Healthcare Marketplace Guide, 1st U.S. Edition (Miami, FL: International Bio-Medical Information Service, Inc., 1978). Most of these are distribution offices. Recently, however, several Japanese firms have begun to manufacture and assemble medical equipment in the United States. Pacific Projects, op. cit., 1987; U.S. Department of Commerce, International Trade Administration, “U.S. Imports of Medical Equipment 1986–86, C.I.F. Values,” unpublished report, 1987; Medical Device Register, Volume 2—International (Stamford, CT: Directory Systems, Inc., 1987)

Murphy K.E. , “Winning Strategies for Successful Entry into the Japanese Health-Care Market,” Medical Device & Diagnostic Industry (March 1987), pp. 39–46.