About Japan:



Japan is the second largest market in the world in terms of both total pharmaceutical R&D expenditure and annual drug sales. Whereas R&D expenditure continues to grow steadily, the number of companies is decreasing, due to foreign competition and the government plan to encourage efficiency to contain the spiralling health care costs in this aging society. Companies without high-margin products that persist in trying to remain all-round manufacturers of their own drugs are unlikely to survive.

Whereas until the mid 1990’s local differences from international norms were maintained to protect the domestic pharmaceutical industry, the overriding goal is now to reform the healthcare system to provide safe and effective treatments at reasonable cost. Globalisation is recognised as a key means to achieve this, as shown by the formal subscription of Japan to the 4th International Conference on Harmonisation (ICH) in April 1998. Put simply, this has meant that it is now possible for western data to be used for registration of drugs in Japan. The implementation of Good Clinical Practice (known as New GCP in Japan) at the same time has made it correspondingly difficult to undertake clinical trials domestically, so the two measures together have led to a much greater use of western CROs for clinical studies outside Japan. Many companies have gone a step further, undertaking trials in the US or Europe, gaining approval in this regions and then launching the products there, rather than first in Japan. The data from the foreign trials is then used for the regulatory submission in Japan.

The regulatory environment here remains rather slow and indecisive, particularly with regards to products based on revolutionary science such as tissue engineering and gene therapy. However, the new Pharmaceutical Affairs Law introduced in July 2003 is leading to a number of promising changes. A new regulatory body modelled on the FDA is being established and fast-track priority reviews are being introduced. Moreover, product-specific marketing authorisations will replace manufacturer/importer based approval during 2005, making it easier for foreign companies to market products manufactured overseas. Regulatory costs are expected to be higher, but products should be approved much faster than before.

Japanese pharmaceutical companies continue to be assailed by a number of pressures, which are having the cumulative effect of forcing them to restructure and, for the larger ones at least, to develop new markets and research bases outside Japan.

Realignment in the industry in recent years has included the following:

1998 Yoshitomi acquires Green Cross Pharmaceuticals
2001 Mitsubishi Pharma acquires Welfide (new name of Yoshitomi)
2002 Daiichi Pharmaceuticals acquires pharma operations of Suntory, becomes Daiichi-Suntory Pharma
2002 Chugai becomes subsidiary of Roche
2005/04 Yamanouchi and Fujisawa plan to merge to create a new company, Astellas.
2005/10 Three planned mergers. Namely between, Sankyo and Daiichi Pharma; Dai Nippon Pharma  and Sumitomo Pharma; and Grelan Pharma and Teikoku Hormone Manufacturing, respectively.

There are a number of reasons why Japanese pharmaceutical companies are particularly keen to partner with US and European biotechnology ventures and outsourcing companies. Domestic opportunities to access new technologies are severely limited as there are very few indigenous bio-venture companies. Also, there are cultural and structural obstacles to the successful development of strategic research alliances with Japanese universities.

Analysts believe it is likely that Japanese pharmaceutical companies will increasingly become divided into two camps – those involved in production, and those involved only in development. The logic being that this will allow larger pharmaceutical companies to focus their resources on strengthening development capability to survive global competition, at the same time as allowing smaller companies without deep pockets for new drug development would be able to leverage their manufacturing know-how.

A new pharmaceutical law to be introduced in 2005 will allow companies to completely contract out all production to CMOs. Currently they are limited to outsourcing only part of their production. This has already led to a decision by many companies to cut their in-house production facilities.

Takeda Chemical closed its plant in Fujisawa, Kanagawa Prefecture, in fiscal 2005, and is expected to farm out part of its production to smaller drug makers.
Nikken Chemicals will close its plant in Omiya, Saitama Prefecture, by the end of fiscal 2006, and will commission output of liquid used in intravenous drip infusions to an outside firm.
Chugai closed a plant in Fukuyama, Hiroshima Prefecture, in December 2003, and has sold its plant in Takaoka, Toyama Prefecture, to Fuji Pharmaceutical.
Sankyo and Yamanouchi are also known to be considering increasing the amount of their production which is contracted out to other companies.

On the other hand, a number of companies are increasing their facilities with a view to capitalising on the expected increased market for contract manufacture.

Nippon Kayaku ¥300 million yen on new facilities for cancer drugs in 2003.
Mochida ¥11 billion yen to build a plant to produce intravenous drugs, and plans to spin off its production operations into a separate firm in April 2005.
Hishiyama invested ¥13 billion yen during 2003 to increase capacity for contract manufacture. Over the longer term it plans to invest a total of ¥100 billion in building additional capacity.
Taiyo invested ¥6 billion yen in fiscal 2003 to build a facility to make antibiotics for outside firms.
Fujisawa spun off four of its drug plants into separate firms in October 2003.