For some years, Japan has lagged behind other developed markets in digital health, but the tide is decisively turning – making this an opportune time for western companies keen to make an impact in this potentially lucrative market.
Despite being the third largest medical device market and boasting one of the best healthcare systems in the world, Japan has been slow to embrace digital transformation in healthcare from both regulatory and technology adoption perspectives.
This is partly due to the conservative nature of the country’s medical industry. It’s also stemmed from the fact the population has enjoyed low-cost, high-quality care under the universal health insurance system, which has historically made it less urgent to adopt advanced technologies to monitor health and prevent diseases. But with some fundamental shifts in demographics and Japanese businesses’ increasing focus on accelerating innovation, this situation is changing.
Rapidly ageing population
It’s no secret Japan’s rapidly ageing population is posing huge challenges for its healthcare system. But just how serious is it?
Today, roughly 28% of the population is over the age of 65. By 2040, the Ministry of Health expects this to reach 35%. This not only means more elderly people in society but dramatically fewer people to take care of them. In fact, the shortage of labour has already become a significant problem, especially in the healthcare sector, and it’s being exacerbated by the steady decrease in the overall population.
Combine this with the fact that Japanese people have the highest life expectancy in the world and it’s not difficult to imagine how regulators are desperate to find ways of containing health expenditure while ensuring Japan continues to deliver quality care.
Various efforts are already being made, such as relaxing immigration policies and tightening control of the price of drugs and devices. But technologies - especially those based on advances in the Internet of Things, big data and artificial intelligence (AI) - are seen as vital means to address the strains on the system. This is requiring both the abandonment of conservative mindsets and acceleration of innovation.
With such looming challenges, the government has taken several measures to achieve reform and made information technology - including wider use of telemedicine - an important part of Japan Vision: Health Care 2035.
The steps so far include the introduction of the Medical Big Data Law in 2017, which details provisions for handling personal medical data, and the partial liberalisation of telemedicine in 2018, allowing online consultations to be covered under health insurance - with further liberalisation expected by 2020.
In addition, Japan’s Pharmaceutical & Medical Device Agency (PMDA) has set up a working group to decide on the appropriate approval criteria for solutions using artificial intelligence, and the government plans to introduce clear guidelines on AI-based solutions in clinical settings. Other forums such as the Healthcare IoT Consortium are also discussing ways to harness emerging technologies from within and outside Japan.
There are, of course, further steps needed to fuel the growth of the industry - such as clarifying the delineation between medical devices and consumer products and creating a separate device category for digital health to expedite registration processes. But we’re seeing meaningful steps in the right direction.
The serious interest in digital health is not just coming from the public sector. The less-regulated and cross-industrial nature of digital health, which opens the door for accessing the wider population and making use of Japan’s existing capabilities within ICT, has led a growing number of companies to venture into the space, hoping to capitalise on the relatively open playing field.
This includes not just medical device companies and the big pharmas - which are actively looking to safeguard their futures - but unconventional players ranging from telcos and insurance companies to consumer electronics makers and even automotive firms. Each of the three major telcos in Japan (NTT Docomo, KDDI and SoftBank) has set up a subsidiary or business unit to offer services for health monitoring apps and wearables. And many of the major insurance companies have invested in new services focused on digital health – like Sumitomo Life Insurance, which recently launched Vitality in partnership with Discovery and SoftBank.
There are also several Japanese start-ups disrupting the market, such as Micin Inc., which operates the leading telehealth platform Curon, and Triple W Japan, which has developed a wearable ultrasound device called DFree that can monitor and predict urinary excretions. Both have raised sizable investments from major Japanese corporates including Mitsubishi Corporation and Nissay.
These activities are consistent with a broader trend among Japanese companies to invest in emerging tech, pursue aggressive M&A strategies and commit to open innovation to stay competitive globally. 2018 was a record year for M&A deals in Japan, with 2,950 confirmed in the first nine months - 28% of them in healthcare. These companies are not only investing but putting open innovation into practice by collaborating closely with tech firms to develop new products and services. And this forward-thinking mindset is playing an important role in speeding the adoption of new technologies.
As more and more solutions are introduced to the market, the Japanese population is warming to the use of digital health as part of daily life, which is arguably the most critical point of all.
A good example is Luna Luna, a popular mobile app among Japanese women which helps manage menstrual cycles. The app has had more than 13 million downloads and the company behind it, MTI Ltd, has now released a version for use in healthcare institutions. Curon, meanwhile, has signed up 1,000 medical organisations to its online consultations platform in less than four years and, with LINE rumoured to be about to enter the telehealth market soon, we can expect online consultations to continue gaining traction.
Further, it’s worth noting it’s not just younger people who are adopting such technologies. Of the two million users of NTT Docomo’s health monitoring app D-Healthcare, 47% are over 50 according to research by Value Inc. In fact, smartphone use in general has risen significantly among older people, and many companies are designing new solutions to appeal to this generation. Though Japan still lags behind European and North American counterparts in the use of wearables and other digital health devices, the public is opening up to new ways of managing its health and receiving care.
Despite the positive trends, there are still many challenges Japan must overcome to break the mould of traditional healthcare. For one, the country is far behind the rest of the world when it comes to digitisation of medical records. The penetration of electronic medical records (EMR) systems is still around 34%, and there’s a huge lack of integration of IT systems between institutions, which is only just starting to change. This is preventing healthcare providers from fully harnessing the benefits of digital health which come from data sharing.
There are also regulatory issues, with some traditionally-minded regulators and opinion leaders taking a cautious stance on important issues - such as the dominant role of doctors in every level of healthcare - and hence slowing reform. While there’s good momentum towards change, the next three to five years will be key in determining how well Japan can transform the system to set a solid foundation for technology-driven care in the longer term.
What does all of this mean for international companies exploring opportunities in Japan?
Firstly, there’s great potential for western companies not only to offer pioneering solutions but to share expertise gained from mature digital health markets. Japan has a great deal to learn from other countries, particularly when it comes to innovative business models for digital health services.
Secondly, there are many opportunities for start-ups as well as larger tech providers to collaborate with big Japanese corporations jointly to develop and sell new products and services. More than ever before, Japanese companies are looking to foreign sources of inspiration to innovate and can offer great support for trials and data gathering through their open innovation initiatives.
Finally, there are large sums of money flowing into digital health from Japanese corporations, and companies looking for funding may well find Japan an attractive source of investment. With many industries eyeing digital health as the gateway to the medtech business, companies will find plenty of options if their technologies fit the needs of Japanese society.
In short, we’re seeing growing excitement around digital health in Japan, and the moment is right for western businesses hoping to make an impact in the market. It’s probably still too early to call it a digital health revolution. But the opportunities are there, and the landscape is certainly shifting.