Japan Pharmaceuticals and Healthcare Report Q1 2009

Summary

In BMI's Business Environment Ranking matrix for Q109, Japan retained its pole position, out of the 15 regional markets in Asia Pacific, now including Bangladesh. The maturity of the market, as well as its size due to high per capita expenditure and the preference for branded drugs, will continue to ensure that Japan remains among the most attractive propositions within the region. Other positives include a 3.7% year-on-year (y-o-y) increase in the public healthcare budget for 2009, to over US$210bn.

However, government cost-cutting measures, including the hardening stance on reimbursement due to population ageing, among other factors, have already reduced market growth to moderate levels.

Additionally, the proposal to link original drug prices and market shares to generic equivalents in order to stimulate price competition has a strong potential to reduce the value of patented as well as overall drug markets. In fact, the generics segment is expected to post a much stronger rate of growth over the 2008- 2013 period than the overall market, which will only rise to US$88.8bn, from around US$82bn.

Consequently, as part of its global cost-cutting plan ahead of the company's own 'patent slope' in 2010- 2014, Merck & Co's Japan subsidiary is to reduce the number of its sales offices by over 70%.

Tough operating conditions at home are forcing the consolidation of both pharmaceutical production and distribution in Japan. In October 2008, the two leading domestic distributors - Mediceo Paltac Holdings and Alfresa Holdings, each of which control more than 20% of the prescription drug market, while their combined market share exceeds 50% in some regions of Japan - agreed to merge, forming a powerhouse.

The deal follows Matsumotokiyoshi Holdings' acquisition of just over a 50% stake in over-the-counter (OTC) drug wholesaler Mogi Pharmaceuticals on September 30 2008, for around JPY200mn (US$1.9mn), while Welcia Kanto, a Japanese drug store chain unit of Growell Holdings, expressed plans to acquire at least a 50.2% stake in rival chain Terashima. OTC sales have been poor in recent years, although expected regulatory changes, allowing their sales through convenience stores, supermarkets and other retail outlets, have the potential to revitalise the sector.

In the pharmaceutical sector, the fourth Japanese outbound pharmaceutical deal in less than a year was announced in September 2008 by Shionogi, which is buying US-based Sciele Pharma for US$1.4bn.

Japanese firms are taking advantage of their strong position in the current economic climate, having largely avoided the repercussions of the credit crisis. Earlier in the year, Eisai bought US-based cancer specialist MGI Pharma, Takeda purchased US-based Millennium, while Daiichi Sankyo acquired India's generics specialist Ranbaxy Laboratories.

Contents

• Executive Summary
• Japan Pharmaceuticals And Healthcare Industry SWOT
• Japan Political SWOT
• Japan Economic SWOT
• Pharmaceutical Business Environment Ratings
• Limits Of Potential Returns
• Risks To Realisation Of Returns
• Japan - Market Summary
• Regulatory Regime
• Recent Regulatory Developments
• Intellectual Property Developments
• Pricing And Reimbursement System
• Recent Pricing And Reimbursement Developments
• The Federation Of Pharmaceutical Manufacturers Association Of Japan (FPMAJ)'s Proposed Revisions To The National Health Insurance
• Pricing Procedures
• Other Regulatory Issues
• International Trade Agreements
• Industry Trends And Developments
• Epidemiology
• Healthcare Sector
• Healthcare Sector Financing
• Healthcare Reforms
• International Reaction
• Pharmaceutical Industry
• Domestic Company Activity
• Foreign Generic Sector
• Timeline: Indian Manufacturers In Japan, 2005-2007
• Multinational Sector Developments
• Pharmaceutical Wholesale and Retail
• Research And Development
• Medical Devices
• Medical Device Regulations
• Industry Forecast Scenario
• Overall Market Forecast
• Key Growth Factors - Industry
• Macroeconomic Forecast Scenario
• Prescription Market Forecast
• OTC Market Forecast
• Patented Medicines Market Forecast
• Generics Market Forecast
• Export/Import Forecasts
• Other Healthcare Data And Forecasts
• Key Risks To BMI's Forecast Scenario
• Competitive Landscape
• Company Profiles
• Leading Foreign Manufacturers
• Pfizer
• Sanofi-Aventis
• Merck & Co (Banyu)
• Novartis
• GlaxoSmithKline (GSK)
• AstraZeneca
• Indigenous Manufacturers
• Takeda
• Astellas
• Eisai
• Daiichi Sankyo
• Mitsubishi Tanabe
• Sawai Pharmaceutical
• Country Snapshot: Japan Demographic Data
• Section 1: Population
• Section 2: Education And Healthcare
• Section 3: Labour Market And Spending Power
• BMI Forecast Modelling
• How We Generate Our Pharmaceutical Industry Forecasts
• Pharmaceutical Business Environment Ratings Methodology
• Ratings Overview
• Weighting
• Sources
• List of Tables
  • Table: Pharmaceuticals & Healthcare Business Environment Rankings For Q109
  • Table: Reimbursement Categories And Rates
  • Table: Concerns Of Pharmaceutical Associations
  • Table: Mortality By Cause In Japan
  • Table: Japanese Ethical Market - Leading Therapeutic Classes (FY05)
  • Table: Japan - Drug Market Indicators, 2002-2013 (JPYmn unless otherwise stated)
  • Table: Japan - Healthcare Market Indicators, 2002-2013 (JPYmn unless otherwise stated)
  • Table: Japan - Economic Forecast
  • Table: Japan - Prescription Drug Market Indicators, 2002-2013 (JPYmn unless otherwise stated)
  • Table: Japan - OTC Market Indicators, 2002-2013 (JPYmn unless otherwise stated)
  • Table: Japan - Patented Medicines Market Indicator, 2002-2013 (JPYmn unless otherwise stated)
  • Table: Japan - Generics Market Indicators, 2002-2013 (JPYmn unless otherwise stated)
  • Table: Japan - Pharmaceutical Export/Import Indicators, 2002-2013 (US$mn)
  • Table: Japan - Other Healthcare System Indicators, 2002-2013
  • Table: Japanese Ethical Market - Sales Value (FY06)
  • Table: Demographic Indicators, 2005-2030
  • Table: Rural/Urban Breakdown, 2005-2030
  • Table: Education, 2002-2005
  • Table: Vital Statistics, 2005-2030
  • Table: Employment Indicators, 2001-2006
  • Table: Consumer Expenditure, 2000-2012 (US$)
  • Table: Average Annual Wages, 2000-2012
  • Table: Pharmaceutical Business Environment Indicators
  • Table: Weighting Of Components