Dr. Bates’ Talkback: Is Japan the new re-emerging pharma market?
Dr. Andree K Bates explains why Japan is still a very attractive marketBy Mar 8, 2012 on
A lot of attention is currently on the larger emerging markets that have significantly more growth than the mature markets. These are seen as a pick-me-up to some of the ailments of the global industry. Japan is the second largest drug market after the US and is considered a mature market in many respects. Like many mature markets it is not seeing the double-digit growth of many of the emerging markets.
The Japanese market strictly controls drug launch pricing and also imposes biannual price cuts throughout the drug lifecycle, making it a sometimes difficult market to compete in. However, there are many interesting changes occurring in this market, not the least the relatively new premium pricing reform, which make it a very attractive market to refocus resources in.
Drug launches and continued lifecycle
Drugs tend to reach the Japanese market much later than other markets due to additional clinical trial requirements. This means that blockbusters that have gone off patent in other markets often are either not launched yet or are still in early lifecycle in Japan. However, because of this launch delay, many drugs available elsewhere in the world are not yet available in Japan. This is an opportunity for manufacturers, as it means that a lot of the growth and sales of existing drugs are still to happen in Japan.
This delay in launch in Japan also means that Japanese patients do not have access to many of the drugs that patients in other countries have. In April 2010, the Japanese government, wishing to address this issue, introduced a new premium as an incentive to companies wishing to launch innovative drugs in Japan. Although this is still on a trial basis, it is a significant change to the industry pricing system in Japan and has the potential to lead to even more significant changes in the future. It is expected that this will increase government spending on drugs by roughly $748 million per annum. This will clearly assist companies with a steady stream of new and innovative drugs, but would hinder companies with long listed drugs.
Of the drugs yet to be approved that should benefit from this change are many cancer treatments. Around 33% of all deaths in Japan are oncology-related, so these treatments are more likely to receive approval in Japan. (For more on oncology in Japan, see How pharma can help improve cancer treatment in Japan, 3 steps to delivering personalized medicine in Japan and Dr. Bates’ Talkback: How to profitably compete in the oncology market.)
Vaccine opportunities for foreign manufacturers
Another area that has seen changes that are likely to lead to an increase in growth are vaccines. Historically, the government did not make vaccination mandatory. However, outbreaks and increasing cases of cervical cancer mean that the government has now listed some vaccines as mandatory. These include hepatitis, cervical cancer, and pneumococcal virus vaccines. They are also recommending an additional spend of roughly $175 million for vaccines purchasing for public health. This shows there is a significant opportunity for foreign vaccine manufacturers, given that they account for only around 2% of the total vaccine market in Japan.
The generics market in Japan is not large but is steadily growing. It is significantly less than in other mature markets for a few reasons, including the fact that generic substitution was not allowed until 2006. There is also insufficient incentive to use generics, the quality is viewed with mistrust, and there is not a significant difference in price between the branded and generic products. However, the government is encouraging their use and set targets for them to account for 30% of all drugs by the end of 2012.
Whether this target will be met is open to debate, but nonetheless the government is attempting to stimulate the use of generics. Therefore, this represents an opportunity for companies wishing to make more use of this product category. Pfizer announced that it will be entering this market in Japan, along with Daiichi Sankyo Espha (joint venture between Daiichi Sankyo and Ranbaxy), Sanofi-Aventis Nichi-Iko (joint venture between Sanofi-Aventis and local generics company Nichi-Iko). (For more on generics, see Dr. Bates Talkback: How to mount an effective defense against generics, Branded generics: The emerging market opportunity and Pharma’s evolution: From blockbusters and biologics to branded generics, medical devices and functional foods.)
Like generics, biosimilars are a small market currently in Japan and there are only two products available: Sandoz’s human growth hormone Somatropin for growth hormone deficiency, and JCR’s recombinant human erythropoietin for renal anemia. The MHLW has created guidelines for development of biosimilars that suggest support of biosimilars due to cost saving pressures. (For more on biologics, see Pharma forecasting: Stress-testing the business case for biosimilars, Forecasting the future of biosimilars, Forecasting the potential of the biosimilars market, Forecasting the future of biologics and Will biobetters beat biologics?)
Japan is the second largest drug market and is still growing modestly. As a pharmaceuticals market, it has a lot of existing life left in many of the expired or expiring blockbusters in the rest of the world. It also has premium pricing reform for newly launched innovative drugs.
Despite many difficulties within the pricing and reimbursement system, it still offers companies many advantages. It will be posting revenues of $4-$5 billion per year for the next few years, which is similar to the combined sales in Russia, India and Brazil.
China has some way before it overtakes Japanese drug sales. Japan also will have a large chunk of pharmaceutical sales (roughly 30-40%) from foreign companies, whereas Chinese drug sales will favor local companies. The foreign drug companies have not fully tapped this market in many areas, so there are many financial advantages to be gained here.
Dr. Andree K. Bates, a regular contributor to eyeforpharma, is CEO of Eularis, which applies analytics to determine the sales impact of marketing programs.
For more on Japan, visit Marketing Excellence Japan 2012 on May 15-16 in Tokyo. For more on emerging markets, join the sector's other key players at Emerging Markets USA in June and Sales & Marketing Excellence Latam Congress on June 28-29 in Miami. Also see eyeforpharma’s Special report: Pharma's emerging markets and download Pharma Emerging Markets Report 2011-12.
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