ARTICLE
6 May 2025

Life Science Newsletter April 2025

The Ministry of Health, Labour and Welfare (MHLW) and the Ministry of Economy, Trade and Industry (METI) have revised the Guidelines for New Business Activities in the Healthy Life Extension Industry Sector...
Japan Food, Drugs, Healthcare, Life Sciences

1. Revision of guidelines regarding the legality of disease risk assessment services by unqualified business providers

The Ministry of Health, Labour and Welfare (MHLW) and the Ministry of Economy, Trade and Industry (METI) have revised the Guidelines for New Business Activities in the Healthy Life Extension Industry Sector (the "Guidelines") as of March 28, 2025. The Guidelines categorize business activities with high business needs in industries closely related to the medical and long-term care sectors and provide basic legal interpretations and points to be considered. Specifically, the Guidelines provide interpretations of relevant laws and regulations regarding (1) cases in which a private business operator provides exercise or nutrition guidance based on physicians' instructions, (2) cases in which medical corporations provide hospital meals through meal delivery, and (3) cases in which a private business operator performs simple tests (measurements). In particular, the Guidelines sets forth analyses concerning the legal permissibility of services provided by private business operators in the aforementioned cases (1) and (3) under the Medical Practitioners' Act and other relevant laws.

Article 17 of the Medical Practitioners' Act prohibits persons other than medical practitioners from engaging in "medical practice"1, and Article 31 of the Act on Public Health Nurses, Midwives, and Nurses prohibits persons other than nurses from engaging in medical assistance, therefore private business operators who are not physicians or nurses are not allowed to engage in any services that fall under medical practice or medical assistance. As there is uncertainty over the scope of services that unlicensed private business operators can provide in relation to the aforementioned Articles, the Guidelines provide the following interpretations.

(1) Cases in which a private business operator provides exercise or nutrition guidance based on physicians' instructions

First, based on the user's physical function, vital data, etc., any practice involving medical judgment, such as diagnosis of certain diseases and determination of treatment methods, must be performed by a physician, and exercise/nutrition guidance services involving medical judgment and skills, such as treatment of injuries and diseases, must be performed by a physician, a nurse (under the instruction of a physician), or physiotherapist (for exercise guidance).

A private business operator is allowed to provide exercise/nutrition guidance services to persons whose physicians have permitted said persons to receive such services from a private business operator, in accordance with the exercise/nutrition instructions and advice as diagnosed and provided by the physician, to the extent that such services do not involve medical judgment and skill.

(3) Cases in which a private business operator performs simple tests (measurements)

First, the collection of specimens such as blood sampling is a medical practice that cannot be performed by private business operator and must be performed by the service users themselves.2 In addition, private business operators are not allowed to make medical judgements such as diagnosis or to indicate the likelihood of diseases based on the test results. On the other hand, private business operators are allowed to provide the following information:

  • factual results of the test (measurement);
  • general standard values for test (measurement) items;
  • general information on test (measurement) items;
  • results of an objective comparison of the user's test (measurement) results with values that have a medical or scientific basis, are objective, and cannot be arbitrarily altered by the private business operator; and
  • the relative classification of the user's test (measurement) results within a medically assessed risk category of disease or health conditions (e.g., A-rank, B-rank, C-rank, low risk, high risk) which is based on values that have medical or scientific basis, are objective, and cannot be arbitrarily altered by the private business operators.

It should be noted, however, that in providing the above information, private business operators must present medical and scientific evidence to the degree that users can objectively recognize that the information being conveyed reflects factual data or generally adopted standard values. In particular, in cases where private business operators indicate comparative results or relative classification, as in the last two items above, if there is no substantial medical or scientific basis indicated with such results, or if the information is not based on general standard values, private business operators may be regarded as making a medical judgment such as presenting the possibility of the disease or making a diagnosis based on the test (measurement).

The previous response concerning the System to Remove Grey Zone has presented the same interpretation as above regarding the applicability of medical practice to test services provided by private business operators.3 In this regard, the Guidelines follow the direction of such previous responses, but the Guidelines are significant in that such an interpretation has been comprehensively confirmed with specific examples.

Although there is no logical basis for using the same criteria for determining whether an act constitutes medical practice and whether a software program is regulated as a medical device, the guidelines on the applicability of medical device regulations to software programs have provided illustrative examples that are generally aligned with the concepts of what constitutes medical practice as outlined in the Guidelines. For example, the medical device guidelines state that "a program which, for certain factors related to multifactorial diseases such as diabetes, compares the user's entered test result data with data from a specific population and, based on the entered test results, presents the risk of developing the disease in a group with similar test results for the factor (limited to programs that do not provide users with the false impression of a diagnosis) is not a medical device. However, a program that provides a list of possible diseases and the risk of developing the disease for a specified individual is regarded as intended to be used for diagnosis, and thus falls under a medical device".4

2.Formulation of guide for collaboration, investment, and acquisition between healthcare startup companies and operating companies

From the perspective of supporting the further growth of healthcare startup companies, the METI has formulated and published the "GROWTH & EXIT PLAYBOOK – A Guide for Collaboration, Investment and Acquisition between Healthcare Startup Companies and Operating Companies"5 (the "Guide") on March 12, 2025. The purpose of the Guide is to promote partnerships, investments, and acquisition between healthcare startup companies and operating companies (such as large companies that have partnerships with healthcare startup companies) in order to contribute to the growth of the healthcare industry and the creation of an appropriate ecosystem. It summarizes the basic market environment and issues in each segment of the healthcare industry, including global perspectives. Set forth below are some points to be considered from a legal perspective.

2.1 Exits of healthcare startup companies

As a general trend among startup companies in Japan, including healthcare startup companies, IPOs and liquidations have been more common than M&A by operating companies. However, the Tokyo Stock Exchange (TSE) released a document titled "Future Measures in the Growth Market" on December 10, 2024, indicating that it intends to suppress small IPOs by raising listing standards and maintenance standards, changing management awareness, and promoting M&As. In the future, in addition to conventional financing methods and IPO-based capital policies, healthcare startup companies should consider flexible financing options, including subsidies, grants, and loans, and be prepared for a flexible choice of exit options.

2.2 Guidance for investment in and acquisition of healthcare startup companies by operating companies

(1) Importance of proper evaluation by operating companies

When considering investment in or acquisition of a startup company, including healthcare startup companies, it is important for an operating company to properly evaluate investment or acquisition target companies. When evaluating the target company, it is recommended to identify typical issues which may arise in the business segment to which the startup company operates in, and to evaluate its corporate value based on its business KPIs and sales performance. In addition, it is also recommended to clarify the amount of resources that can be invested in the growth of the startup company after the acquisition and to evaluate the "synergies" and business impact objectively and concretely.

(2) PMI issues

To ensure the success of a M&A transaction, post-merger integration (PMI) is a key issue. According to a survey conducted by METI, many companies face challenges in PMI. Factors contributing to PMI failures include prioritising short-term profit targets over long-term growth and the original objectives of the acquisition, neglecting the acquired company, and forcing integration without considering the corporate culture and values of the acquired company. To realize the true value of the acquisition and to achieve the expected goals of the acquisition, it is essential to plan and execute the integration process effectively.

In addition, the Guide introduces market entry and financing status of healthcare startup companies, as well as barriers faced by healthcare startup companies across different business sectors. METI (Kansai) has also published a "Guidebook on Intellectual Property and Legal Affairs for Startup Companies: Key Points in the Startup Phase in the Bio and Life Science Fields".6 This guidebook provides a wide range of basic information on business models of startup companies in the bio and life sciences segment, intellectual property strategies, and contracts concluded in the bio and life sciences segment. This guidebook is also a good reference for those newly involved in intellectual property and legal affairs in the bio and life sciences sector.

Footnotes

1 Medical acts and practices concerning medical care and health guidance which, if not performed by a physician, may cause harm to public health must be performed as a business (Supreme Court decision on September 16, 2020, Case Book of Criminal Trials, Vol. 74, No. 6, p. 581).

2 With regard to specimen collection, the Guidelines also explain the relationship with Article 20-3 of the Act on Clinical Laboratory Technicians, which requires the registration of clinical laboratories. This provision requires registration as a clinical laboratory if a private business operator regularly conducts testing on specimens excreted by or collected from human bodies, but it does not require registration as a clinical laboratory if such testing is conducted at a facility that performs biochemical tests on specimens collected by users themselves and not used for medical treatment. Therefore, private business operators who are not registered as a clinical laboratory are only allowed to provide their services to this extent.

3 System to Remove Grey Zone / New Business Special Exception System Response dated April 30, 2021 (Business that sells residual blood after it has been used in clinical tests for testing purposes)

4 "Examples of determining whether a programme is a medical device" (March 31, 2023, Medical Device Evaluation and Management Division, Pharmaceuticals and Consumer Health Bureau, MHLW)

5 https://www.meti.go.jp/press/2024/03/20250312002/20250312002.html

6 https://www.kansai.meti.go.jp/2-4bio/Startup/lifescience_startup_guidebook.htm

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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