30 November 2006 – Japan’s pharmaceutical market offers increasing opportunities for Western drug companies, according to latest research by PricewaterhouseCoopers. The Japanese market is opening up, with the separation of marketing from manufacturing and a more efficient system for approving new drug applications. Like many markets where the demand for healthcare is growing but where funding is limited, the government is tempting companies at both ends of the pharmaceutical value proposition. Indeed it appears keen to encourage greater use of generics as well as offering incentives for the development of innovative drugs.
The revision of the Pharmaceutical Affairs Law has been a turning point in the liberalisation of the Japanese market. Companies can now outsource the manufacturing process, allowing pharmaceutical companies to market their drugs in Japan without operating their own production facilities. Foreign players are already tapping into the more liberal environment; with foreign multinationals now accounting for 34% of the market.
The new Pharmaceutical and Medical Devices Agency (PDMA) intends to accelerate the drug approvals process by approving 80% of all new drugs in 12 months by 2009. There will be a fast track process for new drugs with significant clinical benefits. Indeed, Japan’s research base is rapidly improving, thanks to various government initiatives, such as tax credits designed to encourage greater investment in drug development. Japan’s nascent biotech industry is attracting considerable investor interest both at home and abroad.
Simon Friend, global pharmaceutical leader, PricewaterhouseCoopers commented:
“Although Japan has the world’s second-largest pharmaceuticals market, it represents relatively new terrain for many Western drug makers. Foreign players are looking outside their core operating areas, namely to the emerging economies, in their quest to counteract sluggish sales in the main markets. Recent changes have made it easier for multinationals to bring their products to the Japanese market and maximise the sales they generate before patents expire.”
The value of the Japanese pharmaceutical market reached over $60 billion in 2005, when it saw its highest year-on-year increase since 1991, with sales rising 6.8%¹. Demographic trends will play a large part in boosting future sales, as the proportion of the population aged 65 or more will rise from 19.7% to 35.9% over the next 45 years². It is no surprise therefore that the three leading causes of death are now malignant neoplasms, heart disease and cerebrovascular disease, as evidenced by sales by therapeutic area³.
Japan’s aging population has placed a considerable burden on the healthcare system, in terms of funding and facilities. In its latest biennial drug pricing review, the Japanese Ministry of Health, Labour and Welfare (MHLW) announced plans to cut the country’s total medical bill by $2 billion. The government is therefore eager to promote the use of generics; which accounted for just 16.4% of the Japanese pharmaceuticals market in 2005, compared with 55% in the UK and 53% in the US. The MHLW proposes to counterbalance the cuts with higher premiums deemed very innovative or useful.
Simon Friend, global pharmaceutical leader, PricewaterhouseCoopers, concluded:
“Acquisition is the best strategy for new entrants to the Japanese market – and preferably at the specialised end of the spectrum. Japan offers some major advantages over many emerging nations such as a highly developed healthcare system, a strong distribution network and a relatively safe investment climate. That said, the high cost of clinical trials and the population’s reluctance to participate in testing are drawbacks. The legal system for dealing with patent infringements is cumbersome and there are political and cultural obstacles. However aside from the emerging markets, Japan looks increasingly promising to Western pharmaceutical companies.”
1. IMS Health statistics
2. United Nations Population Division
3. Datamonitor
Notes to Editor:
- Japan: Prescription for Growth, is available to download at www.pwc.com/pharma or contact Vanessa Shaw on 020 7212 1002.
- PricewaterhouseCoopers provides industry-focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 140,000 people in 149 countries across our network share their thinking, experience and solutions to develop fresh perspectives and practical advice.
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