Summary
Valued at an impressive US$64bn, Japan has the world's second largest pharmaceutical market and, accordingly, is of great interest to drugmakers. However, there exists numerous challenges including sluggish growth, delays to the introduction of innovative medicines and a culture of over-prescribing. Like many other industries in the country, there are substantial barriers to entry for foreign firms, so multinationals frequently form joint-ventures with local players. Importantly, the market is dynamic and reforms to pricing transparency and the encouragement of generic drugs will provide upside to enlightened players.
BMI marginally upgraded its projection for Japan's generic drug market in July 2007 after a basket of medicines lost patent protection and public knowledge of the benefit of this type of pharmaceutical improved. Moreover, the spread of flat-sum reimbursement schemes, a number of fee changes and increased co-payments for drugs over the past few years have also had an effect. A key change in 2006 was the introduction of a tick box on script forms, allowing doctors to indicate their approval of substitution. We fully expect the uptake of generics in Japan to continue, with the value of the sub-sector reaching US$9.44bn in 2011, or 13.7% of the total pharmaceutical market.
While Japan's overall pharmaceutical market is stagnating, sales of antidepressants are increasingly rapidly as the stigma attached to this class of drugs, and mental health in general, decreases. A surge in advertising by pharmaceutical firms beginning in the late 1990s is partly responsible, as well as the cultural shift during the recent economic downturn. BMI expects this strong growth to continue as suicide rates continue to rise and the phenomenon of hikikomori or acute social withdrawal increases. In response to the far-reaching April 2006 price cuts, the JPMA proposed a new drug pricing system in July 2007 for the NHI price list, in order to strengthen international competitiveness and establish appropriate drug prices in the market. The plan consisted of four principles: fair and representative pricing, elimination of opaque rules, government neutrality, and pre-defined roadmap for the new system.
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