Opportunities in the pharmaceutical industry in Japan

Japan’s pharmaceutical industry has undergone a huge change. By streamlining the approval process, there is almost no delay in new drug introductions and innovation. Let us take a closer look at the major factors have led to this transformation, making Japan an ideal destination for investment in the drugs and medicine industry.

No drug lag

A few years back, Japan’s medicine industry was faced with the challenge of a huge time loss between approvals of medicines in either Europe or USA, before the products finally reached the Japanese market. Moreover about 10% of world’s top drugs were not available in Japan at all. There was no incentive to lure companies to invest here. The year 2010 saw a change in the attitude of investors with most of them willing to set up production units here mainly due to Innovative Premium introduced by the Japanese government. Thus closing the drug lag, reducing the review time and even placing Japan ahead of Europe in gaining approvals.

Investment promoting policies

The Japanese government has been following a policy of price reduction on drugs every two years. While earlier this would cover all drugs and medicines, today there is exclusion of innovative products that attract an innovation premium. This in turn has boosted financial investment in the Japanese drug and medicine industry.

Effective cost control

Japan plans to continue to maintain a healthy growth in the pharmaceutical industry by following the Innovative premium policy along with a biennial price revision strategy. Although drug prices remained stable for nearly 10 years, an increase in the generic medicine costs helps to balance the innovation premium that the government shells out. This system seems to work very well in controlling drug costs.

Avoiding annual price revision

Although a rapidly aging population results in an increase in healthcare costs, there is no substantial rise in the drug costs in even ten years. Despite this if the government insists on abolishing innovative premium, increases generic penetration and practices annual price revision, a negative word about the market will go around. This may deter investors and may deprive patients from accessing innovative medicines.

Competence in dealing with trade barriers

Japan has intently abolished many unfavorable rules that it once followed. The ‘two week restriction’ policy permitting doctors only to write prescription of two weeks as a safety precaution, as Japan was not a part of global clinical trials, has now been rendered invalid. This was a major deterrent to the Japanese market.

An investors market

Japan has emerged as one of the most attractive markets for pharmaceutical companies to invest in owing to its reward innovation policy. A progressive attitude and the European Federation of Pharmaceutical industries and Association’s (EFPIA) decision to offer an innovation premium are the key reasons for a pharmacy investor should look at Japan as a potential market.

For detailed nuances of the Japanese pharma sector, specialized market research will prove to be helpful before investing in a long term business prospect.

This entry in Asia was updated on 22 May 2021 by specialist.