Archives for November 2017

“If you have a novel technology, come! If you have a me-too product, stay home, said Kirk Zeller, who facilitates launches in Japan and other international markets, at his 10x Medical Device Conference talk in May.

Kirk briefly touched upon subjects that usually make for an hour-long presentation. Click to hear about the Japanese regulatory climate, changes in procedures to commercialize, and what you should know about doing business with distributors in Japan.

Kirk Zeller: My name is Kirk Zeller and I learned a number of years ago when I used to get up in front of people and talk about Japan, I would often times get looks in the audience and I’d see people looking at their program and looking up again and thinking, what the heck could this guy possibly know about Japan?

So I … so these days I like to start off the talk with what would I know about Japan. Growing up in the 1980s, almost every day all I heard on the radio — when I was working in the fields and the tractor and in trucks — was Japan’s taking over the world. It’s impossible to sell American products in Japan.

I couldn’t deal with that. Like, it can’t be impossible to sell American products in Japan. I’m going to go to Japan. I’m going to figure out how to do that. So I chose the university I went to based on one that had multiple exchange programs to Japan and I ended up spending most of my undergraduate study in Japan.

And then I felt like I want to take it a step further so I joined a Japanese medical device company as a heart valve sales rep, which I thought: Oh my god, this is this is like the greatest thing ever – straight out of university I’m a heart valve sales rep.

What I didn’t realize was it was a monolith with heart. Anybody who knows the heart valve field will know that even 20 years ago a mono-leaflet heart valve was considered outdated technology.

So I got what seemed like this great job running around Japan trying to sell heart valves … it was it was the greatest experience of my career because everything after that was very easy. So I went on and had the opportunity to launch a lot of products in Japan, spent the first part of my career working in Japan gradually having learned the business …

I progressed into doing a lot of business development transactions for the medical device sector between the U.S. and Japan and so I looked at probably launching 50 plus different product portfolios in Japan so this was really kind of developed into my area of expertise. Twenty-some years ago the second university I to Japan, I met this gentleman David Smith.

Out of university, he and I joined the same medical device company. He proceeded to spend the rest of his career in Japan launching medical devices and we always kind of talked about starting a company together … you know to help companies wanting to launch in Japan and Asia and finally, we did that.

So I think most people when they think about the Japanese medical device market particularly in previous years they think about this … in a black box … impossible to understand how do you crack that market? Heard horror stories from all their friends who really struggled to get things moving in Japan.

Things have changed. So there’s been a lot of positive developments. What you’ve probably heard about in the past was that it takes forever to get approval in Japan. That’s true. It still takes a long time, but it takes a lot less time.

So they’ve done a couple really big things. One is they’ve in a 10-year period they bought … they more than tripled the reviewers the review that submissions in Japan. Another big thing they did is they switched the reviewing from the p.m. … the pharmaceutical medical devices agency many of the things are now reviewed by third-party. So these two things helped speed up the time to market of medical devices in Japan.

Additionally, a lot more products these days are being approved with without doing a clinical study in Japan 10, 15, 20 years ago is a foregone conclusion that if you’re an implantable medical device you’re going to have to do a clinical study in Japan. There are a lot of cases now where companies have been able to successfully get around that I’m working on three of them right now. We’re working to negotiate to not have to do a clinical study in Japan based, on data from the United States study.

And there are more advocacy groups advocating for change in Japan. The U.S. is driven some of this change through some of the pressure that we put on Japan to make changes and also there are a lot more resources than there used to be. When I was first working in Japan there weren’t the number of consultancies like ours that focused on market access, the regulatory or reimbursement firms a lot of there … A lot of resources out there that didn’t exist so these are very positive development to make it a little bit easier and achievable to get into the Japanese market.

Additionally, as a big one Prime Minister Abe is very keen on fostering the development of a medical device industry in Japan and, at the same time, in making some reforms to the Japanese healthcare.

So Japan does take a while to get the market but why do you want to go to Japan well you know most of us probably a lot of us in this room you know work in medical device companies probably a lot here in California if you have a really great cutting-edge technology particularly that’s already got an insurance category can be a great market. The U.S. does really well. U.S. companies do really well in Japan. We dominate the space for particularly advanced medical devices.

It’s still the second largest market in the world. Sometimes people refer to China as being the second largest and certainly from a total market opportunity it is definitely the second largest, from an achievable, attainable, right now today, can you penetrate the market perspective, Japan is still the second largest. As I mentioned the current administration is really keen on making some changes.

A big thing that makes Japan attractive right now is the size of the aging population. So Japan … The U.S. has about 2.3 to 2.5 times as many people as Japan depending on statistics you look at. However, the number of people over 65 in Japan and in the U.S. is nearly identical. That’s how big the aging population in Japan is.

So there’s still a lot of growth in a lot of areas that is driven by the aging population orthopedics, etc. Another aspect people often don’t think about but you get into Japan start developing Japan the data there is very good. Anybody who’s done clinical studies in Japan knows you don’t lose patients. You know to follow-up. Those patients are very compliant. They do what the doctor says so it is a great place to gather data.

A quick overview of healthcare in Japan. Basically, there is no private insurance market in Japan. There’s essentially one payer. If you have, for example, an implantable device, where there’s already an insurance category, and your device is way better than everybody else’s, it’s a great market. There’s a set price for certain implantables, doesn’t matter who you are, there’s a set price for that implantable. So the physician essentially can pick whatever device they feel best. Little to no negotiation on price because the price is set.

So another challenge you often face with Japan is, it is kind of understanding the market. And a lot of times people be in negotiations with a potential Japanese distributor and they’ll be saying things like: “We never need a better margin.” And you’ll be saying things like: “But that’s the margin we’re giving our European distributors.” Legitimately it’s an expensive place to do business.

So you have a country, that in theory, it’s the size, roughly the size of California. Roughly the size of this state, with about half the U.S. population packed into that little state; with the greatest public transport system in the world. We would not logically conclude that, it’s the perfect place for a few, very efficient, very specialized hospitals doing a high volume of cases.

This is not the case at all. We have a large number of hospitals in Japan, each doing a small number of cases. I remember when I was doing a lot of in-service for heart valves, I’d look at the statistics before I go into a case and see there was a physician who would do one or two cases a year. Yes, they still did one or two cases a year.

So it makes an expensive place to do business, particularly, if you’re in the … and many devices the expectation is if you put stock on the inventory or, you put inventory on the shelves of all these hospitals, at your, or if you’re not direct, at your distributor’s expense. So legitimately they do have a huge amount invested in inventory and there’s an expectation by a lot of the hospitals that you’ll have a local sales office so many of these large distributors, in a country the size of California, will have 20-25 sales offices, staffed with people, inventory in the shelves. So it is definitely an expensive place to do business.

Then, you don’t just have your national distributor that distributes directly to the hospital, all the products are flowing through a sub-distributor, in almost every. This is … they act as the billing consolidator, sometimes they help out surgery. They’re part of the system they’re not going away. There are lots of American companies that thought we don’t need those, let’s just get rid of them. They’re not going away. It’s part of the system, a part of the way it works.

So the ingredients to success in Japan, ordinarily when I do this talk it’s usually an hour-long talk and I spend a lot of time talking about regulatory and reimbursement. This is generally the pitfall. It’s generally where companies go in ill advice make some kind of muck up and struggle it to get to market or never get to market.

But we’re on a very limited schedule today, so I’m going to focus on the sales aspect of it. So assuming you got approval, you got a commercially viable reimbursement, what is it going to take to succeed and selling products in Japan?

Well, as I mentioned earlier if you’re … a lot of class of device, there’s a product-specific reimbursement. So if you are kind of fallen to me too category, may be weak on me too, probably not going to be a great market for you. They’re not competing on price and that’s your only way of driving share in a lot of other markets, probably not going to be a great market for you.

Some medical consumables that don’t have specific reimbursement that is covered out of the procedure fee this may not be the case. But for implantable devices you better hope you have the best device and if you do you will probably be rewarded handsomely.

You need a motivated and capable distributor. So you need a distributor that you know that it has relationships with those call points, exhibits at all the meetings, whatever the meetings are specific to your technology. But they also need to be motivated. Again going back to the comment about margins you need to make sure that they are duly motivated to get out there and sell and will make an investment in selling your product in Japan.

And you need to you need effective market development initiatives. So what a lot of companies do is they think: we’ll sign that distribution agreement and we’ll wait for the orders to come in. They’ll have to place that big initial stocking order, wait for that to come in, and well, you know, we’ll give them some tools, maybe do a couple webex’s and we’ll wait for them to start selling products and the wire transfers to come in.

Well if you’re a company here in California, the odds are you’ve got a cutting-edge technology it’s probably not just another me too or next generation, whatever. It’s probably something that when you first look at it you’re like, “What is this?” And those kinds of technologies, if you just leave it up to the distributor, they’re not likely to do very well.

You really need to be there, side-by-side, working with them to develop the market and to raise awareness among the different physician groups that may be stakeholders in whatever your product is. And you need a market specific plan, cutting and pasting your U.S. plan and assuming it’s going to work in Japan usually doesn’t do it.

But the biggest thing of all is, mindshare, so as I look back 20 close to 25 years of seeing products and launched in Japan being involved with product launches in Japan this is assuming gets through regulatory and reimbursement this is one of the areas where I see companies fail. They just think: we’ll leave it up to the distributor.

Well, leaving it up to the distributor usually is not a very good recipe just for success. So you need … you need to drive mindshare with the distributor. They may have 20 or 30 bags in your specialty … or products in that bag in your specialty.

How do you know that they’re bringing your product out of their bag? Well, the best way to do that is to get over there. In the first couple of years, in particular, you know put somebody on the ground, send some people over there, have people like us help you, get some kind of support on the ground. Some expertise on the ground to drive the mindshare.

If you have somebody in Japan who’s saying okay calling up the distributor I’m going to go you know and travel with your reps in Osaka next week to poke of the week after that support of the week after that. If you’re there with the reps, they’re going to pulling your product out of the bag.

And the other thing is and the most important thing if you’re there with them when they get that objection from the doctor that they don’t know how to handle you can step in and handle that. After you do that a few times, they get used to it, and you can pull off the training wheels and they can go on their own. But to really be successful in Japan you ultimately need to work really closely with whoever your distribution partners are or if you’re a large company and you have direct sales you still need to send the experts over to help with the initial market development phase of the business.

This is our firm Asia Med Market Access. We help companies get into the medical device market in Japan. And I don’t know if we have time for questions. I’m happy to take questions. Happy to talk to anybody over lunch. We do have time for questions. Do we have any from the room?

Q&A with Kirk Zeller

Question: I will start. For someone who has not previously considered the Japanese market, what would you say is the first step, contact you of course? [hahaha] You’re very easy, Kirk. Thank you. What is what is the second step?

Answer: Well, I mean the first step really is to is to do some basic research into the market opportunity. You know maybe go out meet with some Kol or as some of the physicians from Japan come to your exhibit at international meetings. Speak to them, look at what the regulatory pathway would be, look at what kind of products are on the market, what kind of reimbursement precedent you have, and the competitors, I mean those are the kind of the ingredients, if all that seems to make sense you know then most likely you want to proceed.

Question: Hi, my name is Atan. A quick question. So in Japan, what type of products you think would be a good product too, to try and push, that will have a good success? Because I, one thing is that their aging population is very big so I would assume that that would be a good field to try to push for us to, but what type of products do you think yeah okay?

Answer: That’s, very certainly products that you know that is that the that can be used in the aging population. A lot of the orthopedics you know spine those types of products are those companies are doing very well. Cardiology has always been a big business in Japan. When I worked in Japan, the number of interventional revascularization to surgical was about 10 to 1. Whereas the same time period and just in the U.S. it was 3 to 1.

So anything in interventional procedures is oftentimes quite good. They’re adverse to surgery, depended strongly prefer interventional type procedures over open surgery or even minimally invasive surgery. Again, as I had mentioned earlier, usually if you have a commodity type item or if you have like kind of me too something, it’s a tough market.

You really need to have differentiated products to do extremely well, with the exception of some of the stuff that are covered out a procedure fees sometimes that’s more price competitive and you can actually manufacture lower price points sometimes you can compete.

Question: Hi Chris. I’m curious about digital healthcare and kind of internet or IOT connected medical devices. Can you give any insights into the challenges or opportunities?

Answer: Well, I’m sure the opportunities are huge I wish I could tell you, to give you three examples of successes in Japan in that space but unfortunately I don’t know of any yet. I know there are some companies one of the gentlemen here I think they’re sitting right here earlier, I was talking about smoking cessation.

I just met with a start-up right before I left Japan that wanted advice on you know, it had a digital health app for that, wanted some advice on that. So I know there are companies kind of looking at the market, but I don’t know within my circle of friends, I don’t know if any of them succeeded as of yet, but there’s no doubt an opportunity.

Ladies and gentlemen, Kirk Zeller. Thank you.