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REPORT ON THE U.S.-JAPAN

MARKET-ORIENTED, SECTOR-SELECTIVE DISCUSSIONS

ON MEDICAL EQUIPMENT AND PHARMACEUTICALS

What were these discussions and what did they do?

Who benefits from the agreement that was reached?

How can this agreement help my company?

Can the U.S. Government help me if I have a problem?

How can I get more information?

What were these discussions and what did they do?

In these discussions, Japan and the United States reached an agreement that gives American exporters of pharmaceutical products and medical devices greater access to Japan's health-care market. This agreement is commonly known as the "MOSS", because the approach that was adopted by the negotiators was called "Market-Oriented, Sector-Selective".

The MOSS agreement was signed on January 9, 1986. It has served since then as the basis for ongoing bilateral discussions to improve market access for American exporters. It has no expiration date.

Who benefits from the agreement that was reached?

Any American company interested in exporting medical devices and pharmaceuticals to Japan can benefit from the MOSS agreement. It has already helped many U.S. exporters and has been instrumental in the trade surplus in these products that the U.S. enjoys with Japan.

How can this agreement help my company?

The specific issues addressed by the MOSS negotiators -- and the solutions they arrived at -- can be grouped under the following headings:

A. Testing and Clinical Test Data

Before the MOSS, Japan's Ministry of Health and Welfare (MHW) required that all clinical testing of pharmaceuticals and medical devices be done in Japan on resident Japanese citizens. For U.S. exporters, this requirement meant costly duplication of clinical testing already done elsewhere. It also delayed the introduction of new products into the Japanese market. Thanks to the MOSS agreement, foreign test data is now accepted, except in cases where immunological and ethnic differences exist between Japanese and non-Japanese.

B. Approval and Licensing Procedures

To bring a new pharmaceutical product or medical device to market in Japan, a producer (whether foreign or domestic) must obtain an approval called a shonin from the Ministry of Health and Welfare (MHW). To obtain a shonin, documentation, including the results of clinical tests, must be submitted to the MHW to show that the new product meets Japan's efficacy and safety requirements. A domestic or foreign producer must also obtain a license to manufacture or import from the MHW, called a kyoka, which is normally issued simultaneously with the shonin.

Before the MOSS, the MHW had no standard processing periods for new approvals, causing uncertainties and costly delays. The MOSS agreement established the following standard processing periods:

New Drugs Eighteen Months

Generic Drugs Two Years

Over-the-Counter Drugs Ten Months

In-Vitro Diagnostics Six Months

Quasi-Drugs* Six Months

Medical Devices One Year

Generic Devices Four Months

Cosmetics Three Months

*Quasi-drugs are a classification of over-the-counter products, such as contact lens disinfectant solutions, that require Japanese Ministry of Health and Welfare approval.

The MOSS also relaxed costly documentation and regulatory impediments that Japan had placed on firms wishing to change the country of manufacture of already approved products, or to make minor modifications of approved products, or to change the addresses of importers in Japan.

C. The National Health Insurance Reimbursement System

After obtaining a shonin and kyoka, the manufacturer or importer of a new pharmaceutical product or medical device can apply for a price listing for reimbursement under the National Health Insurance scheme that covers virtually all of Japan's population. Before the MOSS, the Ministry of Health and Welfare's price listings were infrequent and irregular. The criteria used in setting them were unclear. The MOSS negotiators agreed that price listings would be provided quarterly. They also agreed that the formulas used for calculating new drug prices would be made public, and that foreign as well as domestic industry representatives would have the opportunity to express their views if these prices were to be changed.

D. Transparency

The MOSS negotiators agreed on several formal steps to increase the transparency of Japan's regulatory system. The Japanese side agreed, for example, that the "common instructions" of the Central Pharmaceutical Affairs Council (CPAC) would be made public, and that meetings would be held to explain them. Applicants for new drug approvals would have the opportunity to ask questions and comment on the Council's instructions.

The MOSS discussions established an ongoing process for helping American exporters gain greater access to Japan's health-care market. Recent agreements in these regular bilateral discussions have included:

1) shortening the new drug application approval process from 18 to 12 months by April 2000;

2) expanding the acceptance of foreign clinical data in the approval of medical devices and pharmaceuticals. A major step was Japan's incorporation of the guidelines adopted by the International Council on Harmonization (ICH) for handling ethnic-based factors in clinical test trials;

3) improving the reimbursement system for medical devices by developing new reimbursement categories; and

4) improving the transparency of Japan's health care policy decision-making process by allowing foreign pharmaceutical and medical device manufacturers meaningful opportunities to state their opinions in relevant councils on an equal basis with Japanese manufacturers, and by providing them, on request, with opportunities to exchange views with MHW officials at all levels.

Can the U.S. Government help me if I have a problem?

Yes. If your company is encountering difficulties in exporting pharmaceuticals or medical devices to Japan, contact the Trade Compliance Center at the U.S. Department of Commerce. This office can help you understand your rights under the MOSS agreement, and can activate the U.S. Government to make official inquiries with Japanese authorities to help you resolve your export problem. The regular U.S.-Japan consultations that monitor progress under the MOSS agreement can also be used to discuss specific trade complaints.

How can I get more information?

The complete text of the Report on the MOSS Discussions is available from the Office of Trade Agreements Negotiations and Compliance's web site.

If you have questions about the MOSS Agreement or how to use it, you can e-mail the Office of Trade Agreements Negotiations and Compliance (TANC) , which will forward your message to the Commerce Department's Designated Monitoring Officer for this Agreement. You can also contact the Designated Monitoring Officer at the following address:

Designated Monitoring Officer - MOSS Agreement

Office of East Asia and APEC

U.S. Department of Commerce

14th Street & Constitution Avenue, N.W.

Washington, D.C. 20230

Tel: (202) 482-1147

The Designated Monitoring Officer can also provide you with useful trade leads and contacts.

Business counseling questions can also be answered by the U.S. Department of Commerce's Trade Information Center at 1-800-USA-TRADE.

You can obtain additional information on doing business in Japan by visiting the following International Trade Administration web sites:

The U.S. Commercial Service, American Embassy, Tokyo

The American Embassy in Tokyo helps U.S. companies enter the Japanese market and increase their sales there

Japan's Ministry of Health and Welfare (offsite link) also has a web site that contains current information on regulatory requirements for exporting pharmaceuticals and medical devices to Japan.