Japanese pharma industry energized by the next wave of growth

Japan’s pharmaceutical industry is the third largest worldwide after the US and China with a share of approximately ten percent of the world market and a value expected to reach $109 billion by 2026.

Both the Japanese market and industry however, have proved difficult for international companies to access due to a complex regulatory system and pricing process – yet this is set to change. The country’s domestic market is increasingly looking towards international options, whilst foreign companies are seeking to access its well-funded healthcare system.

R&D in Japan is at the forefront of the global pharmaceutical industry – a result of both the attractiveness of the nation’s medicine market and the strength of local research institutions. In terms of biomedical R&D spending, Japan is the third largest worldwide behind the US and Europe, accounting for approximately 10% of total expenditure. R&D was further boosted in April 2015 when Japan established the Japanese Agency for Medical Research and Development (AMED). The institution looks to enhance and accelerate R&D projects from basic research to practical application.

The deregulation of the Japanese pharma industry has made for a speedier and more efficient drug approval process which is helping to attract increased foreign investment while simultaneously spurring competition between Japanese companies and boosting exports. The reduction in the amount of time needed to evaluate new drugs for approval in the country has led to international pharma manufacturers – who at one point were closing their research bases in Japan – re-establishing R&D centres and upping their investments.

The fastest-growing generics sector in the world, Japan’s Office of Generic Drugs was established by the Pharmaceutical and Medical Devices Agency in November 2014 in response to market needs following a dramatic rise in the use of generic drugs. The office focuses on the review of generics as well as how to enhance and accelerate their approval procedures. Japan’s ageing population combined with the government’s initiative to reduce health expenditure is expected to result in the volume share of generic drugs (as opposed to branded options) reaching 80% or more by 2020. There is currently a strong focus on the generic drugs sector with the nation’s government going as far as to identify the growth of its generic drugs market as “imperative to Japan’s long-term economic health.”

One of the most critical issues affecting the expansion of Japan’s generic drug sector is the lack of a stable API supply. More than 50% of Japan’s APIs are imported into the country for generic drugs manufacturing with its main international suppliers being Korea, China, India and European countries (Spain, Germany, Italy, Hungary etc) With the Japanese government looking to grow the generic drugs sector the demand for APIs is set to rise and the country will continue to search further for supplier options.

With a review of the Japanese Pharmaceutical Affairs Law, the acquisition of Japanese companies by overseas players and the expansion of the country’s generic drugs market, global standardisation has been one of the industry’s key trends for the past decade. In April ‘18, the EU and Japan signed a trade deal to facilitate European pharmaceutical companies exporting to Japan, while the GMP Inspection saw them agree to extend the scope of their mutual recognition agreement (MRA). This extended scope covers a wide spectrum of medicines including: sterile medicines, certain biological medicines, vaccines and immunological product and APIs of any medicine covered in the agreement. The EU and Japan thus recognise GMP inspections in each other’s territories for a swifter and easier approvals system. This global standardisation sees Japanese companies cooperating and building strong relationships with international partners who can provide them with competitive products, technologies and services.

As the Japanese government strives to boost generic medicine usage and increase foreign investment, now is the perfect time to enter this rapidly changing pharma market.