Ask just about anyone about what the best, fastest-growing market in their specific sector is, and more often than on, you will run into the BRICs at some stage. But in the pharmaceutical and medical device space, there is one brightly shining, yet often overlooked, star – Japan.
At first sight, this may be surprising, since much of the headline news about Japan and the Japanese economy has not been positive for some time. There have been plenty of reasons - aging and shrinking population (in this regard, Japan is simply spearheading the trend that many other countries are going to experience, only a bit later), deflationary for more than a decade, new challengers throughout Asia, strong yen hitting exports, you name it.
However, dig deeper, and you will see that Japan continues to be a success story and a great market and leader in many industries. And, it is still the economy #3 globally, remember.
So what led Ira Wolf from PhRMA to declare "For foreign [drug] companies, it’s the best market in the world right now?" The answer is: the "emerging-market" growth rates (12-31%) that multinational drug firms enjoy in Japan.
Drug Lags? No More.
Until very recently, Japan's Life Sciences market was, for many foreign manufacturers, characterized by the word "lag". The way the regulatory system worked caused major delays in the approval of drugs and medical devices in Japan. As a result, new products reached the Japanese market a lot later compared to Europe or the US. This also discouraged many manufacturers to actually try and get their devices or medicines approved in the first place. For new drugs, for instance, the total review time in the standard review process used to be well over 20 months.
It was PMDA (Japan's Pharmaceuticals and Medical Devices Agency), effectively a government body, that was tasked with the major overhaul of the Japanese system of drug approval, payment and administration (remember, PMDA has a much wider role in the whole health system in Japan compared with FDA or EMA). And their efforts are now bringing fruit.
Approval times have been vastly shortened and, as a result, the existing lags were greatly reduced. In addition, fewer expensive and cumbersome trials, often duplicating those carried out elsewhere, are now needed.
Among other things, the drug pricing system in Japan came under review. Prices of new drugs used to be lowered every two years (on average 6.5% last year). Under the new model, currently, in pilot, they may now be maintained through the life of the patent. This means a major impetus for research and development (R&D) in Japan. Among other recent achievements of PMDA, the goal of 30% of the drugs by volume to be generics has been already almost attained. Last but not least, PMDA created a Science Board composed of outside experts designed to improve its rulings on new technologies.
To illustrate the progress, compare how PMDA was able to reduce the review times for new drugs (priority reviews and standard reviews), and increase the number of approved applications.
Source: PMDA Annual Report 2011
Japanese Companies Go Global
All this has also helped the Japanese drug manufacturers thrive and increasingly expand internationally. While it has become harder to compete at home with the global big drug companies, they have used their cash to go on an acquisition spree. It is not too long since Takeda acquired Swiss Nycomed ($14B) or Millennium ($9B), Astellas paid $4B for OSI, or Daiichi Sankyo bought India's Ranbaxy for $4.6B. Some of the Japanese drug companies have moved their global R&D hubs to America. But most Japanese firms have not gone fully global yet: majority of their revenues still comes from home. Perhaps another proof of the attractiveness of the Japanese market.
We have spoken about what it takes to succeed on the Japanese pharmaceutical market at the Life Sciences Business Round Table, expertly moderated by Clio Schils, at the recent Localization World conference in Singapore. We will put Japan and Asia in the global context at the upcoming Round Table during the Localization World London, where we will speak about the regional differences between North America, Europe, and Asia in the context of Life Sciences translations, and the way companies from each region get their products ready or approved for local markets. See you in London!