|Adapted from Special Feature on Pulse Oximeters: The invention that changed the paradigm of patient safety around the world. (LiSA (1340-8836) vol28 No3 Page237-308, 2021.03 (in Japanese)
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The pulse oximeter was invented by Dr. Takuo Aoyagi of the company Nihon Kohden. The device originated in Japan, but at that time (late 1970s to mid-1980s) the device was hardly sold in Japan at all.
Our company works closely with both Japanese and foreign anesthesiologists in selling ventilators and anesthetic devices, so we were keeping a close eye on the developments in the market for pulse oximeters in the US. Perhaps because Japanese clinicians were not involved in the development of pulse oximetry, the devices from Japan lacked in both function and design. Understanding of and interest in pulse oximeters by Japanese anesthesiologists was not very high.
How I Came Upon My First Pulse Oximeter
While pulse oximeters that use sensors attached to the fingertips or ears to measure oxygen saturation in the blood in a non-invasive manner are as essential as echocardiograms and respiratory monitors in modern medicine, this was not the case in Japan around 1983. Very few physicians paid attention to this new technology.
The US is a free country that gives all people a chance to start their own venture companies and many clinicians have started such companies. Nellcor is a venture company started by a clinical anesthesiologist (with a background in electrical engineering), Dr. New, to manufacture and sell pulse oximeters. He designed and sold a small, but sophisticated device and gathered attention from many anesthesia departments in the US.
Our company approached Nellcor around 1983 after realizing the importance of pulse oximetry, despite the lack of interest in Japan. The negotiations started out well, but as they entered the final stages towards signing a contract, Nellcor told me to meet with the vice-president of a large automobile parts manufacturer (SE, Inc.)
I was told I would understand why the meeting was important when I went. The moment I walked in the door, the vice-president said “Don’t you know that our company manufactures the diodes for Nellcor’s pulse oximeter, one of its most crucial parts. Our SE Company has the rights to sell this product in Japan.” I was hit with this one-sided announcement without warning. I thought, “What were all those negotiations about anyway? This is ridiculous!” I felt like a fool and had great regret.
The work of a retail company selling medical devices is not just to simply sell machines. It is important to have background knowledge of, experience with, and technical knowledge of the product in order to provide the best service and advice. This will result in the development of a good relationship with the customer.
I was disappointed by Nellcor’s decision to allow SE Company to sell their products even though they were not familiar with the way things worked in the medical industry in Japan. I didn’t think it was in Nellcor’s best interest.
Introducing Ohmeda’s Pulse Oximeter and Our Sales Activity
About a year later, the US journal “Anesthesiology” published a review of the pulse oximeter developed by Ohmeda BOC Healthcare. Ohmeda’s product (Ohmeda Biox 3700) was found not to be inferior in accuracy compared to Nellcor’s device. (1)
I still had bad feelings toward Nellcor and SE Company, so I contacted the president of Ohmeda Japan right away and started to negotiate the right to sell their product. Things did not go well at first, but eventually we convinced them that ours was the only company with the experience needed to sell a new product like this. We finally signed a contract as their sales representative.
We started a drive to sell this product. It was not well known in Japan and in order for the Biox pulse oximeter to make inroads in Japan, it was important to deal with the issue that it was not covered by Japanese health insurance. We also had to negotiate with Ohmeda to reduce their price so that Japanese hospitals could afford to buy them. We cut the price in half, from 3,600,000 yen to about 1,800,000 yen. (In 1985, one dollar was worth about 200 yen. Most imported medical devices from the US cost about 3 times the equivalent price in the US. So, if something cost $6000 in the US, it would sell for 3,600,000 yen in Japan, a markup of 300%. Nellcor’s pricing followed this rule.)
We were encouraged by Japanese anesthesiologists who predicted that one day every patient would have their own pulse oximeter. We also felt it was important to improve the product to make it more appealing to anesthesiologists. Pulse oximeters produce stable readings of 97 to 98% in healthy people, and unless the person is very sick, it will not show lower readings. Using this to our advantage, at the suggestion of an anesthesiologist, we talked to Ohmeda about adding a brand new function, the first in the world, of showing the waveform so you could see the validity of the measurement at one glance. Ohmeda implemented this immediately.
The device started selling very well due to its low price and the visual functionality of its continuous waveform display (showing the normal status of the patient and the device) which increased the confidence medical staff had in the device.
It was important to study the clinical efficacy of pulse oximeters as that is what was used to determine whether it would be covered by national health insurance, so following the enthusiasm of physicians at the National Children’s Hospital, the ‘Pulse Oximeter Research Group’ was established and physicians in major hospitals from Sapporo in the north and Okinawa in the south participated in this research. (2) The group came up with a protocol and began clinical studies.
Most people with influence in academics in Japan at the time were from public universities and staff physicians who were required to comply with a high standard of conflict of interest guidelines. Thus, the research group formed voluntarily by qualified anesthesiologists was very welcome.
The Research Group, consisting of physicians from participating hospitals, met about once every three months for two years on a voluntary basis and discussed the clinical use of the device and other issues, presenting a wide range of studies in academic conferences related to pulse oximetry use.
In 1987, Ohmeda held a workshop in Hakone, Japan, the first of its kind in the world outside the field of anesthesia, on how to conduct research on pulse oximeters in newborn infants. We co-sponsored the meeting. The first book in Japanese on pulse oximetry grew out of this meeting. (3) This meeting was the neonatal equivalent of the International Chartridge Meeting held in 1985, outside of London. It was organized by Drs. Payne and Severinghaus, and the naming of SpO2 was agreed upon there.
Thanks to the great effort and time spent on research and participation in the research group, even though it took a while, pulse oximetry achieved formal recognition in the national health care system. At last pulse oximetry found a place in the Japanese medical system. The Pulse Oximeter Research Group decided to expand its role after achieving its first purpose. It developed into the Japanese Association of Clinical Monitoring.
Due to these efforts, Ohmeda’s pulse oximeter was selling well. Nellcor’s device did not sell well, and while it was rumored that SE Company had given up, after a while CM Company, the medical device subsidiary that imported medical devices for a large trading company (IC Company) took over sales. At the time, Ohmeda had the largest share of the pulse oximeter market in Japan. While Nellcor held the largest share in other countries, the reverse trend in Japan was unusual from the point of view of both sides.
Our company has had one mission from the start, and that is not just to sell devices, but to help deepen the understanding physicians and nurses who use these devices have. This applies to selling products from Bird or Newport ventilators. This is invaluable in Japan where continuing education for post-graduates is not well developed.
I think this mission for our company helps explain why were able to successfully introduce pulse oximetry to Japan and contribute to a healthy spread of its use.
Termination of the Contract and the End of Our Dealing with Pulse Oximeters
We thus expanded sales of Ohmeda’s pulse oximeter and were planning on strengthening the market even more.
But suddenly one day, Ohmeda told us they were cancelling our sales contract with them. A new company (OS Company) was formed with Ohmeda and a subsidiary of a large electronic manufacturing company (N Company) called S Company that manufactured and sold medical devices. They planned on selling all over Japan. At the time, the Ohmeda Company itself was caught in the currents of change of the medical setting, which continues even today, where mergers are based simply on monetary relations and not the convenience of customers. Once more it was our fate to accept the loss of our retail stores and the products in which we invested so heavily. Looking back, OS Company’s plans failed completely and I’ve heard it took years to resolve all the issues.
The next step we took was to get the rights to sell the pulse oximeter from the American company, CS (a company that sells products for the ICU). Compared to previous negotiations, the contract was concluded relatively smoothly. But at the time change was coming to the market for pulse oximeters. This was the rise of disposable sensors.
CM Company, a subsidiary of a large trading company, the new representative of Nellcor in Japan, aggressively tried to attain the number one share of the market. Our company had been left out by the Ohmeda Company, giving Nellcor a better chance. They lent their devices out for free and tried to increase their sales by making money out of selling disposable sensors.
But CS Company, that dealt with the American market, was too late in putting out their line of disposable sensors. The functionality of the device was not that good and sales lagged. We considered ending our involvement with the products of CS Company, but we couldn’t find a replacement sales company. In order to keep our responsibility to the hospitals who had already bought these products, we continued to sell their products in a non-exclusive relationship.
It was under these circumstances that we signed a sales contract with DM Company, a subsidiary of a large American airport surveillance device company. This company had disposable sensors that were compatible with the Nellcor device, and they sold pulse oximeters as well all over the world. They also handled devices for veterinary devices. The owner was from India, and had close contact with a company that primarily sold X-ray machines to inspect airport luggage. The company was quite successful.
We weren’t sure whether to get involved, as we had never dealt in compatible or generic products, only original products. We were reassured by the size of the company and by their claim that the patent for disposable sensors by Nellcor had expired and they were free to make and sell copies.
Before signing a contract, we too looked into the patent issue and signed a contract based on DM Company’s promise to guarantee the product. We began to sell pulse oximeters and sensors. I felt our company was better equipped to handle sales in Japan than Nellcor (partnering with the CM Company to sell in Japan).
We proceeded to promote these products to the network of people we knew in the ICU, NICU, and Emergency Medicine, who were using our company’s original Newport ventilator. There were some problems with the device and with the sensors, but we solved them through our sales force and technical skills. We were making inroads all over Japan, especially around Nagoya, where we received a very large order.
Nellcor (CM Company) was beginning to show results, and with the purpose of holding onto their customers, started changing the connectors between the device and the disposable sensors so as to make generic products incompatible with it. However, we felt that there were enough older machines around, and enough hospitals that would continue to use the original product, that our business would be all right.
Just as we thought the products from DM Company were doing well in the market, we got a registered letter from Nellcor saying that DM was infringing on its patent for disposable sensors.
We gathered a team of company executives and company workers involved in this project and along with a legal team from Japan came up with a strategy. We were in contact with DM by email and telephone, but we were unable to get a clear response from them regarding the patent.
We went straight to DM in the US through our American subsidiary, TKB-I. We argued with the president, but were discouraged by his lack of sincerity. In the end, we terminated our contract with DM. Our company has not dealt with pulse oximeters since then.
Our company trades mainly in sales of imported medical devices. We place great importance on the promotion and proliferation of imported clinical devices that are at the cutting edge of the field, that might otherwise not be introduced into the Japanese medical field. (4)
This is true of the pulse oximeter, as well as the first hemodialysis machines, mass spectrometers, Holter electrocardiographs, etc. We have a policy not to deal with medical devices that are easily accessible in the Japanese market or in a price war.
The essence of our business model is to contribute to the health of people through medical professionals, but it is not necessarily an easy way to be profitable. The road is rough, with many barriers, but we are proud of our company. (5)
I am grateful for being given the chance to talk about our experience with spreading knowledge of imported medical devices in Japan and our efforts to increase anesthesia safety through this special memorial to the great achievements of Dr. Takuo Aoyagi, inventor of pulse oximetry.
I hope this will be of some use to anesthesiologists in Japan and to people who work in the medical field. It would please me greatly if this report is useful in the field.
President and Chair
Tokibo, Inc., Tokyo Japan
- Kagle DM, Alexander CM, Berko R, et al. Evaluation of the Ohmeda 3700 pulse oximeter: steady-state and transient response characteristics. Anesthesiology 66:376-380, 1987
- Suwa K. (ed), Pulse Oximeters, Igakutosho Shuppan, 1992 (in Japanese)
- Miyasaka K. Use of Pulse Oximeters in Neonates and Children, Nihon Igakkan, 1988 (in Japanese)
- Miyasaka K., Dawn of Pulse Oximeters and Anesthesiology, Masui 67S: S245-251 (in Japanese)
- Sata Y. (ed), Growing a 60 year-old tree planted by my father: Tokibo’s 60 Year Anniversary Issue, 2015
|Read more articles from this special collection hosted by the APSF on Pulse Oximetry and the Legacy of Dr. Takuo Aoyagi.|