Regulatory changes lead to new interest in Japanese

The Japanese market is proving more appealing to Western drug companies, following the separation of marketing from manufacturing and a more efficient system for approving new drug applications.

According to PricewaterhouseCoopers (PwC) foreign players are already tapping into the more liberal environment; with foreign multinationals now accounting for 34% of the market.

A new report out by PwC says the Japanese government is keen to encourage greater use of generics as well as offering incentives for the development of innovative drugs. It says 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.

Japan's 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.

The country's research base is also rapidly improving, thanks to various government initiatives, such as tax credits designed to encourage greater investment in drug development.

Simon Friend, global pharmaceutical leader, PwC commented: "Recent changes have made it easier for multinationals to bring their products to the Japanese market and maximise the sales they generate befor patents expire."

The value of the Japanese pharmaceutical market reached over $60 bn in 2005, when it saw its highest year-on-year increase since 1991, with sales rising 6.8%. 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.

Friend at PwC maintains that 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. The high cost of clinical trials and the population's reluctance to participate in testing, a cumbersome legal system for dealing with patent infringements as well as other political and cultural obstacles are still downsides to the market.