Japan to Drop Some Trade Barriers : U.S. Pharmaceutical, Medical Equipment Firms Benefit

The United States and Japan announced agreement Monday on trading procedures that will lower bureaucratic and other barriers that have kept American-made medical equipment and pharmaceutical products from competing equally in the Japanese market.

The agreement, announced by Assistant Treasury Secretary David C. Mulford, who headed the U.S. team, reflects substantial concessions by Tokyo during a year of intense bargaining. It marks the first successful conclusion reached in the four-pronged trade talks approved by President Reagan and Japanese Prime Minister Yasuhiro Nakasone at their meeting in Los Angeles in January, 1985.

Treasury Department officials estimated the total Japanese market for medical products and pharmaceuticals at $25 billion yearly, of which only $2 billion goes to foreign products. U.S. products commanded less than half of the total import market in 1984, about $825 million.

Under the agreement, Japanese procedures will be eased in three main areas: testing of U.S. medical equipment and pharmaceutical products, licensing of U.S. subsidiaries and distributors, and pricing of products to conform with Japan’s national health insurance program, which covers virtually the entire population.

According to a joint U.S.-Japanese report issued Monday, American firms seeking to sell or manufacture medical technology and pharmaceuticals in Japan were hampered severely in all three areas.

Mulford, at a briefing for reporters, cautioned that results of the agreement will not be known for several years and will depend on how fully the Japanese carry out the agreement. Follow-up meetings of the teams headed by Mulford and Hitoshi Yoshimura, Japanese vice minister of health and welfare, are scheduled every six months to deal with any additional issues, such as the sale of U.S. vitamin products in Japan.

Negotiations in other sectors of the four-part talks--electronics, telecommunications and forest products--are still under way. In the case of forest products, a highly protected industry in Japan, the talks are known to have lagged badly.

U.S. Trade Representative Clayton K. Yeutter, eager to help the Administration regain credibility on trade policy with a protectionist-minded Congress, sought several times last year to gain overall agreement on medical equipment and pharmaceuticals by Dec. 31.

Progress Slow

But progress was slower than Yeutter had hoped for. In two preliminary pacts, one effective last July and the other last October, Japan agreed to accept foreign test data in applying health and safety standards and to set three-month to two-year timetables for processing the licenses of various types of medical products.

Another pact, to take effect in April sets new procedures for transferring approval licenses in an orderly fashion.

Finally, both sides agreed on a new procedure for listing health insurance reimbursement prices four times a year--no longer than 90 days after a new product is approved for import. The rationale for Japan’s pricing system also is expected to be clarified, so American firms can anticipate decisions.

In the past, Japan’s standards for testing medical products have been as stringent as American standards, but the Japanese did not accept foreign clinical test data and required repeat testing by Japan’s Health and Welfare Ministry.

Bureaucratic Barriers

Intricate licensing procedures further slowed entry of new products. And the bureaucratic system made it difficult to transfer licensing approval when a manufacturer wished to change or expand its distributing arrangement, complicating efforts to adjust to a changing market.

The transfer issue has been especially important to U.S. companies already operating in Japan as manufacturers, which at present compete unequally with Japanese companies, Mulford said.

In addition, the Japanese standards for setting the price of reimbursement under the national health insurance system were unclear and never published. The prices themselves were listed infrequently, giving a U.S. manufacturer trying to enter the Japanese market no reliable information on which to base pricing decisions without lengthy, costly delays.