Through automation, leading global healthcare company NIPRO is focused on increasing the volume while lowering the cost of supply to the international medical industry. We speak with president Sano Yoshihiko, who explains how NIPRO’s ongoing investment in automation has not only increased its ability to create volume, but also its ability to effectively integrate its products and global business units, which hire 33,000 employees worldwide. Mr. Yoshihiko also gives more info on NIPRO's strategy in the international market, with dialysis treatment in the US being a target focus for the company, whose dialyzer machines have been a key product in the US market.
Japanese companies are renowned for developing niche tech which play a key role in the international supply chain. What do you think is the role of Japanese pharmaceutical companies in developing niche technologies and how can Japan contribute to the worldwide healthcare and pharmaceutical markets?
I do not know everything about the Japanese companies as a whole, the only thing I could tell you is based on what I have observed about what a Japanese company is like. Compared to other countries, the Japanese mindset is based on the concept of doing good things in three aspects: buyers, employees, and society. With this mindset the goal is to pursue long term benefits for the employees and society. The employees, as they try to respond to the needs of the users, will get the benefit and feel motivated in the long term. Since we have been doing this practice in our company the quality of our service has improved quite significantly.
The development of the production line takes a long time. When we wanted the fully automated production line it required a lot of effort and time; we had to overcome a number of challenges. To establish a fully automated production line requires a high level of technology and expert engineers - it also requires a lot of time to train the engineers. We are deeply rooted to the concept of Sampo-yoshi in which we are good at keeping and improving the quality of our products and technology for a long period of time. With this mindset, Japan is strong when it comes to the improvements in production. For other countries that do not have this kind of business mindset it might be difficult for them to spend five to ten years making a profit.
In the medical industry, in which NIPRO belongs, we can never stop supplying our products to hospitals even during natural disasters. If we are affected by a natural disaster and we stop providing the hospitals with our products, this will endanger the lives of the patients. After a natural disaster has occurred it is often said that the first three hours are the most critical, second is the first three days. We have to continuously supply our products to the medical facilities or else, if we wait for a week the patients’ lives will be in danger. The medical industry is different from other industries for this very reason. To establish a stable supply requires spending a significant amount for the production processes, and that is why we have two production sites. As a company in the medical industry, we must meet this requirement even though it can be costly. The medical industry goes hand in hand with the pharmaceutical industry and the medicine manufacturing industry. The medical system as a whole will not work if any of these three is lacking. Furthermore, there is no company that has the comprehensive production line from the raw material to the finished products, and for this reason there is always a network among the manufacturers of these products. We even exchange information with our competitors on a regular basis. In the past there was a huge flood in Thailand and at that time a plant that manufactures a tube used for dialysis for Japanese hospitals had to shut down due to the flood. Our company together with other manufacturers here in Japan came up with a decision on which company would supply these tubes to which hospital in Japan. That act was one of anti-monopoly, however the Ministry of Health, Labor and Welfare viewed that as an exception and that we did not violate the law. These are some of the situations where the regular rules do not apply during the times of emergency and crises. Alliances or networking with rival companies is necessary during this kind of situation.
Japan is one of the countries that is pushing automation because of the decreasing demography which has caused a lot of social and economic problems. For the medical sector this problem has become an opportunity as Japan is the first country to learn how to cope with an elderly population. How is Japan’s decreasing demography influencing your company? What are some of the products or innovative projects that you have launched to tackle this issue?
We can reduce the cost if we can fully automate the production line. The operators will change their role into managing the automation processes, even the elderly can perform this job and they may be more capable compared to the younger generation. At NIPRO our production lines are almost all automated and we are able to produce our products at a cheaper cost compared to countries like China with a more expensive labor cost.
Another advantage of a fully automated production line is the volume of products produced is more. We sell these products in the domestic as well as in the international market - that was how we started our international market share and we are continuously expanding. The products in the medical field have a higher value compared to other products of other industries, but the market size in the global market is smaller. For each of our products we have to be in the top three in the global market or else we would not be able to survive.
Japan’s population is rapidly ageing, and this is putting pressure on the social security payments - that is, the public finance system. We are seeing the need to reduce medical and insurance expenses and as a result there is a shift from treatment towards preventative treatment. How is your company adapting to this trend? What technologies have you developed for preventative treatment?
In advanced countries the awareness of preventive treatment is spreading, and the money allocated for this is increasing. One of the examples is supplements; there are many people spending a huge amount of money each month for supplements. We do not have a plan to produce supplements, however, we are going to keep producing products for preventive treatments.
An interesting feature that we found in your company is the level of integration that you have. Your firm makes medical devices such as renal products, injection and infusion products; you have your pharmaceutical division where you develop certain types of drugs; you also have your packaging business where you package pharmaceutical products; you also make syringes and glass tubes. How are you able to create synergies among these different business segments?
Let me use hospitals as an example. In hospitals they dispense medicines for their patients and the same goes for injection and transfusion, with the dispensing work every year a few people die due to an illness such as Hepatitis B, that is why we do not want the hospitals to do the dispensing. For this reason, a form of packaging technology was created. Because hospitals are facing certain problems, we try to give them solutions. Naturally, we establish a system by supplying certain products; that is certainly a synergy. Our three business segments - Medical Device, Pharmaceutical, and Pharma Packaging - are there to cater to the needs at hospitals.
Since our business is diverse, hospitals have given us higher levels of requests. For example, they wanted to find a way to mix two different medicines before administering them to their patients. If we mix two different medicines the quality of the medicines changes, also if these medicines are exposed to the air the risk of infection increases. Our company came up with an idea to put two different chambers in a syringe which make the mixing of two different medicines possible before giving them to the patients.
Japan is famous for its level of spending on R&D, 3% of Japan’s GDP goes to R&D. In the past Japan had much success developing blockbuster drugs but nowadays it is focusing on developing generic drugs in shorter time frames. Could you please share with us your R&D strategy and do you have any upcoming products that you’d like to showcase to us and our international readers?
There are three phases when we launch our products into the market: first, basic research; second, the development and manufacturing of the products; and third, the competition in the market with rival companies. At NIPRO we put our emphasis on the third phase which is to provide the products to the end-users. To complete the steps, we sometimes work together with academic institutions or engage in joint ventures with other companies. When nobody wants to work with us, we do everything ourselves starting from phase one.
Speaking of the Nipro Institute in Shiga Prefecture, every month we have more than a thousand doctors, nurses, pharmacists, and clinical engineers training there. This kind of activity enables us to directly listen to the needs of the users. Since we have the laboratory for medical devices and pharmaceutical products near that institute, we are able to get the information directly from the users and forward that information to our laboratory very quickly.
NIPRO is an international player in both developed and emerging countries. Your company has specialized in identifying a problem and providing the solutions and been very successful with this business model here in Japan. How are you able to do this - identifying a problem and providing solutions - in your overseas operations?
Our motto is “Willingness”, we encourage our employees to be actively involved in the planning phase and to be convinced with what they are trying to do. It is also necessary for them to have an in-depth understanding of the plan they are making. If we see an opportunity with any plan designed by our employees, we never decline our customers’ requests. This is the kind of culture that we have at NIPRO. We have more than thirty thousand employees and we understand that it would take time for everyone to fully understand this culture, however, this is deeply rooted in their hearts.
Speaking of our sales representatives, if they receive complaints from our clients, these are easily communicated but not when they receive compliments. Therefore, we encourage them to communicate these compliments as well.
When we spoke to Dr. Nagata, the chairman of Shin Nippon Biomedical Laboratories (SNBL), he said that the strength of SNBL is their ability to cooperate internationally to meet regulatory requirements through joint development with different offices. Your company has offices all over Europe, America, and Asia, can you tell us the advantages of this international sales and production strategy and what advantages it brings to your business?
Since we have a lot of plants all over the world, one of them may be able to produce a better product than any of the other plants. When that happens the plant that was able to come up with a better product is going to share their knowledge and skills, conduct training or seminars for everyone else. Furthermore, we conduct regular committee meetings with our plant managers to talk about the productions of particular products. If one of them has developed a technology that has not been used in the other plants, then that manager receives compliments from his fellow managers.
The US is a fascinating market when it comes to drugs, pharmaceutical and medical devices. Please tell us more about NIPRO’s strategy in your operations in the US and how you are catering to the needs of this market?
Our dialyzer has been a key product for us in the US market and we are about to launch some vascular-related products soon too. The US has the highest number of people undergoing dialysis and one of our core products which is for dialysis has a large share in the US market because we have developed that product with the highest level of quality monitoring here in Japan, that is why we were able to be competitive there. We have about 15% market share there and I think it will continue to grow.
A number of patients initially would go for cheaper and lower-quality products but eventually they would be taking more medications, in the end they would be spending more money. We encourage them to use our comprehensive products because in the long run they would be able to reduce the total cost. The dialysis treatment requires blood tubes and needles. Our company manufactures needles that are less painful, and we have the largest market share for those needles. Another requirement for dialysis treatment are our machines and we are trying to make our customers understand the value of having a set of our products for certain types of treatments.
You spoke of the value of your products and the reasons why they are better in the long run. One of the things that is happening in the US now is there is a shift from an inpatient model to outpatient model to reduce the cost of an already inflated medical industry there. With your products that are catered to dialysis treatment, how are you adapting them for this outpatient model that is becoming more popular?
In the Trump administration there was a proposal to do the dialysis treatment at homes rather than at hospitals because that will reduce the cost for the patients, but that is still under discussion. When we think about the safety of the patient, it is more appropriate to administer the treatment at hospitals and it is more effective. We believe that doing the dialysis treatments at clinics or hospitals will continue.
We have a device for dialysis treatment, in that device the dialysis solvent is produced which is mostly made up of seawater, there is also a sterilizer. The solvent and sterilizer could potentially damage the machine because the machine is equipped with advanced electronic components. With this device the dialysis process is almost fully automated, however, in order to properly control the system, you need to have the necessary skills. We do provide the dialysis treatment at homes under the assumption that somebody in that household has the know-how on the proper utilization of this machine. Given these conditions it is difficult to entirely shift the entire treatment to homes.
Starting this year, we will establish a sales department in New Jersey and launch our vascular products in the market. The history of our vascular products is relatively short compared to our needles, syringes, and the ones used for dialysis treatment, however, we kept acquiring relevant companies and developed our own product. We have two companies for the development and manufacture of vascular products which are different from our office in New Jersey. We will also launch our products that have a large market share in Japan overseas.
In the distant future you will eventually retire and hand over the company to the next generation of executives. When that happens, what vision would you like to have achieved? What kind of legacy would you like to leave?
My hope is to have NIPRO’s culture which is Willingness to take root firmly. I would like to see my employees have their own plans and to just do them, to approach every activity with “Willingness” in accordance with our Corporate Creed. Willingness to adopt the patient’s point of view in order to provide beneficial products, Willingness to continuously develop our businesses and strive for self-actualization, and Willingness to create new value worldwide through the cooperation and the self-actualization of all NIPRO employees.