A comparison of healthtech regulations: Japan

    By Kengo Nishigaki, Andrew Trost Griffin and Yuji Yamamoto, GI&T Law Office
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    CHINA

    INDIA

    JAPAN

    From first-hand experience of fraud investigations for pharmaceutical and medical device manufacturers operating in Japan, the authors highlight legal issues specific to healthcare companies that often arise, with precautionary advice for conducting such sensitive enquiries.

    INVESTIGATION PRECAUTIONS

    Investigating company emails does not require employee consent. Conducting fraud investigations in Japan often includes employees’ emails and other forensic investigations. If the fraud investigation is justifiable based on reasonable suspicion, the company’s investigation team will access the company’s email account or other information stored in electronic media, such as computers and mobile phones lent by the company, without consent from the employees.

    However, consent is necessary to access electronic media owned by the employee and the employee’s personal email.

    Kengo Nishigaki
    Kengo Nishigaki
    Representative Partner
    GI&T Law Office in Tokyo
    Tel: +81 3 6206 3285
    Email: kengo.nishigaki@giandt-law.com

    Attorney-client privilege. Since there is no pre-trial discovery system in Japanese litigation, where parties exchange information on evidence to be presented in court, the concept of attorney-client privilege does not exist. Attorney-client privilege refers to a legal doctrine that protects confidential communications between an attorney and their client. However, in the event of a bribery case investigated at a Japanese subsidiary of an American company, application of the Foreign Corrupt Practices Act will be a problem in the US, so the results of fraud investigations in Japan will be subject to attorney-client privilege under US law.

    To secure attorney-client privilege, it has become common in recent years for an “Upjohn warning” – a notice that the lawyer represents the company but not the employee individually – to be issued when interviewing employees of a Japanese subsidiary of a US company. In this case, it is necessary to explain the unfamiliar matter of the attribution of attorney-client confidentiality privilege in a simple and easy to understand manner to all involved parties, without arousing unnecessary caution.

    Difficulty in dismissing employees. Since Japan’s labour law is based on the premise of long-term employment, there are very limited cases in which dismissal can be made under judicial precedent. Therefore, even if an investigation finds that an employee of a Japanese subsidiary of a European or US company has committed a certain amount of fraud, it is often difficult to dismiss the employee under Japanese law.

    In many cases, minor violations of the Pharmaceutical and Medical Device Act and industry rules do not constitute grounds for dismissal. In such cases, it is necessary to respond by taking disciplinary action, including dismissal or demotion, in accordance with the employment rules.

    OFF-LABEL PROMOTIONS

    Off-label promotions are regulated under the Pharmaceuticals and Medical Devices Law. In the event of an exaggerated advertisement, or advertisement of the product’s efficacy and effects that have not been approved under the law, the violator shall be ordered to rescind the illegal advertisement and also pay a 4.5% levy on sales of the product during the violation period.

    Andrew Trost Griffin
    Andrew Trost Griffin
    Counsel
    GI&T Law Office in Tokyo
    Tel: +81 3 6206 3283
    Email: andrew.griffin@giandt-law.com

    Restrictions on off-label promotion have been relatively lenient in the past. In 2013, Novartis conducted a large-scale doctor-led study in Japan on the blood pressure lowering drug Diovan at five university hospitals and sent its own employee as researcher, who was accused of falsifying data and publishing research papers in favour of the company claiming the drug was effective not only for hypertension but also cardiovascular complications. Based on this, Diovan reportedly recorded a total of JPY1 trillion in accumulative sales since it was made available in Japan in 2000.

    The case developed into a criminal case, but in 2021 the Supreme Court of Japan ruled that the employees and Novartis were not guilty of tampering with data, and the research paper did not fall under the category of advertisement under the Pharmaceuticals and Medical Devices Law.

    In response to this incident, the Ministry of Health, Labour and Welfare began to tighten off-label promotion regulations and introduced the above-mentioned levy system by amending the Pharmaceuticals and Medical Devices Act (enforced on 1 August 2021), and issued the Guidelines for Provision of Sales Information on Prescription Drugs (Guidelines for Provision of Sales Information), as well as establishing a system to prevent off-label promotion by pharmaceutical companies.

    The ministry also established a system to obtain information on suspicious advertising activities by pharmaceutical companies from medical institutions by launching the Advertising Activity Monitoring Project.

    To decide whether a product falls under the category of off-label or not, it is necessary to see if the advertising activity falls outside the scope of regulatory approval, but this requires medical and scientific consideration, and the content of regulatory approval itself is often unclear.

    In addition, the Guidelines for Provision of Sales Information do not prohibit sales representatives from providing off-label information at the request of medical professionals, but prohibit the unsolicited provision of information. Therefore, it may be necessary to investigate whether there was a request for information from medical professionals.

    DATA PROTECTION

    Japan has received an adequacy decision under the EU’s General Data Protection Regulation (GDPR), which means the country has an adequate level of data protection outside the EU, and strictly protects personal information based on the country’s Act on the Protection of Personal Information (APPI).

    Yuji Yamamoto
    Yuji Yamamoto
    Associate
    GI&T Law Office in Tokyo
    Tel: +81 3 6206 3927
    Email: yuji.yamamoto@giandt-law.com

    Patient information is regarded as sensitive personal information, and its acquisition and provision to third parties are strictly regulated. Healthcare companies may receive patient data for clinical trials, clinical studies and services to healthcare institutions. As promulgated in the APPI, the acquisition and provision of personal data to a third party based on the consent of the data subject are relatively widely accepted.

    Unlike the GDPR, consent in the APPI is not limited to explicit consent but also includes implicit consent. However, when a healthcare company obtains a patient’s personal information from a medical institution for promotional purposes, it is unlikely that the patient will “implicitly consent” to provide their information for promotional purposes.

    Therefore, if a medical institution or healthcare company has not obtained explicit consent, the acquisition or transfer of such information is likely to violate the APPI. Healthcare companies should therefore exercise caution when conducting post-marketing surveillance for commercial purposes.

    On the other hand, the latest amendment of the APPI, in 2022, recognises the concept of pseudonymised information, which means information relating to a particular individual that has been processed by replacing all or part of the identifiers in such a manner that the individual is no longer identifiable unless it is collated with other information. This paved the way for medical institutions to remove patients’ personally identifiable information from their personal information, and then jointly use it for collaborative research with healthcare companies.

    However, it should be noted that this may conflict with ethical guidelines for medical and biological research involving human subjects issued by the government.

    ANTITRUST LAW

    Japan’s antitrust laws, similar to the EU, UK and US, broadly regulate vertical restrictions (including resale price maintenance and tying) and horizontal restrictions (including cartels). Since the healthcare industry manufactures and sells highly unique prescription drugs and medical devices, there are few cases where horizontal restrictions become a problem, although a large-scale cartel was uncovered in 2021 regarding the wholesale trade of pharmaceuticals.

    With regard to vertical restrictions, to prevent resale price maintenance, pharmaceutical and medical device manufacturers have conducted in-house training to ensure that sales representatives do not engage in resale price maintenance actions against wholesalers. In particular, it should be noted that rebates paid by pharmaceutical companies to wholesalers may be used as a means of maintaining resale prices.

    When medical equipment manufacturers sell medical equipment and consumables, it is common to have a business model in which profits are obtained from the continuing sales of consumables. As such, the problem of predatory pricing arises when medical equipment is sold at significantly lower prices. In addition, the provision of equipment and medical equipment below fair market price may also violate the Fair Competition Code.

    The authors explained anti-bribery laws and industry codes in Japan’s healthcare sector in Asia Business Law Journal’s September/October 2022 issue.

    GI&T LAW OFFICE
    8/F Shin-Yurakucho Building
    1-12-1 Yurakucho, Chiyoda-ku
    Tokyo – 100-0006, Japan
    Tel: +81 3 6206 3283

    www.giandt-law.com/english

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