Japan Pharmaceutical Market Overview Regulatory reforms will stimulate generics uptake

Introduction

The pharmaceutical market in Japan was valued at $69.4 billion in 2009. Key growth drivers for branded pharma include the growing use of chronic high-value innovative treatments driven by an increasingly elderly population, the high proportion of the healthcare budget spent on pharmaceuticals compared to other developed pharmaceutical markets, and the low level of generic penetration.

Scope

*Overview of socioeconomic and demographic trends, healthcare system, regulation, pricing, reimbursement and intellectual property position in Japan

*Assesses the size of Japan's pharmaceutical market by prescribing setting, therapy area, leading brands and by leading companies

*Examines Japan's generics and biosimilars landscape in terms of regulatory issues, level of penetration, key players and degree of brand erosion

*Quantifies Japan's R&D and manufacturing infrastructure for the leading pharmaceutical companies, including key metrics and domestic M&A analysis

Highlights

Korosho determines the reimbursable drug price in Japan which is added to the National Health Insurance (NHI) list which must be followed by all insurers. The few non-reimbursed prescription drug groups include oral contraceptives, lifestyle drugs, and some vaccines.

Korosho implemented guidance for biosimilars approval in March 2009 and since then two biosimilars have been launched in Japan. Although this is a positive step for the biosimilars industry, the conservative and brand-loyal nature in Japan means that uptake will be slow, with only the larger, more well known players likely to succeed.

In contrast to the bleak prospects pervading the other major markets, Japan seems to have a brighter outlook with pharma companies having been less affected by job cuts and site closures.

Reasons to Purchase

*Evaluate the evolving regulatory landscape and the impact of pricing and reimbursement controls on market access in Japan.

*Quantify the size and growth of the prescription pharmaceutical market in Japan, analyzing key therapy areas, brands and companies.

*Assess drivers and resistors of generic and biosimilars uptake in Japan as well as the level of erosion brands can expect to face post patent expiry.

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ABOUT DATAMONITOR HEALTHCARE 2
About the Healthcare Strategic Analysis Team 2
Geographic specific reports: 2
Global issue reports: 2
1. Japan - Executive Summary 3
Strategic scoping and focus 3
Key findings - healthcare drivers and resistors in Japan 4
Key findings - healthcare drivers and resistors in Japan 4
Japan - Socio-demographic and economic analysis 7
Socio-demographic trends 7
Socioeconomic trends 8
Japan - Healthcare system and drug regulatory analysis 9
Japan healthcare expenditure 9
Japan regulatory issues 10
Japan pricing and reimbursement issues 11
Japan - Prescription pharmaceutical sales analysis 13
Pharmaceutical market size 13
Leading therapy areas 13
Leading prescription pharmaceutical brands 13
Leading pharmaceutical companies 13
Japan - Drug expiry analysis 15
Japan generics market 15
Japan brand erosion post patent expiry 15
Japan biosimilars market 15
Japan - Pharmaceutical Industry Infrastructure analysis 17
Pharmaceutical industry infrastructure overview 17
Related reports 19
Upcoming related reports 19
Table of Contents 20
2. Japan - Socio-demographic and economic analysis 21
Key findings 21
Socio-demographic trends 21
Socioeconomic trends 21
Demographic trends in Japan 22
Japan's population is declining leading to a potential demographic crisis 23
Birth rate in Japan is the lowest in all major markets 25
Proportion of elderly individuals and life expectancy 26
Disease burden in Japan 28
Cerebrovascular disease is the leading cause of death in Japan 28
Non-communicable diseases are the main cause of overall disease burden in Japan 30
Political climate in Japan 31
Recent election resulted in a change of ruling political party 31
Japan is the second largest economy in the world but is on a verge of a fiscal crisis 32
Japan's budget deficit is projected to reach almost 10% of GDP in 2010 33
Business environment in Japan 35
Corporate income tax is high in Japan but is offset by a low personal income tax 35
There is little inward foreign direct investment in Japan 35
The unemployment rate in Japan is lower than in Western markets but rose during the recession 36
3. Japan - Healthcare system and drug regulatory analysis 37
Key findings 37
Japan healthcare expenditure 37
Japan regulatory issues 37
Japan pricing and reimbursement issues 37
Healthcare expenditure 39
Japan has a lower than OECD average healthcare spend per capita, but higher pharmaceutical spend 39
Health insurance system in Japan 42
The public health insurance system dominates healthcare provision in Japan 42
A range of government and non-government stakeholders exist in Japan 44
Provider fees are dictated by the government 46
Private health insurance in Japan focuses on covering out-of-pocket costs 47
Primary care versus hospital care in Japan - hospitals are the main destination for patients seeking healthcare 47
Hospital provision is weighted towards outpatient care 47
Japan has a high number of hospitals but low number of physicians 49
Several problems have been highlighted in the Japanese healthcare system 49
The Japanese healthcare system lacks cost-containment measures while the quality of care could be improved 50
Healthcare reforms in Japan focus on healthcare provision for the elderly 51
Aging population necessitates more stringent cost-containment measures 51
Since 2008 the elderly are covered by 2 types of insurance depending on age 52
Regulatory issues in Japan 53
The MHLW and the PMDA are the national drugs regulatory bodies in Japan 53
The application process in Japan consists of several stages 54
Certain drug categories can circumvent the ordinary review procedures 55
Requirements for manufacturing and clinical trials in Japan have relaxed although those for post-marketing requirements have increased 55
Drugs typically launch in Japan 3-4 years after launch in the EU and US 56
The PMDA has made efforts to reduce the drug lag-time 56
Intellectual property - patents are valid for 20 years from date of application in Japan 57
Revisions to the patent term extensions are both good and bad for the pharmaceutical industry 57
Revised patient examination guidelines for medical interventions broaden scope of patentable subject matter 58
Japan permits generic manufacturers to perform work using patented technology 58
Japan gives branded pharma companies 8 years of data exclusivity through re-evaluation requirement 58
Drug counterfeiting in Japan 59
Pricing and reimbursement in Japan 60
A number of healthcare stakeholders impact government P&R strategy and healthcare provision 60
The DPO and Chuikyo are the key governmental stakeholders shaping P&R 60
The influence of healthcare stakeholders in shaping healthcare reform and P&R implementation is varied 61
Pricing and reimbursement are closely connected in Japan 61
The process of gaining a price and reimbursement level in Japan 61
Drug pricing largely depends on the level of innovation 63
A wide range of premiums are available for innovative drugs 65
The level of innovation required for premiums is difficult to attain 67
Recent changes to reference pricing will bring down launch prices 67
Cost containment in Japan revolves mainly around biennial price cuts 67
Prices of drugs were cut by an average of 5.75% in April 2010 69
Health reforms focus on cutting the country's drugs bill 71
Other pricing and reimbursement issues 72
Prescribing and dispensing have traditionally been linked in Japan 72
Out-of-pocket costs are high in Japan 73
Pharmacoeconomic analysis plays a role in Japan but on an informal basis 73
4. Japan - Prescription pharmaceutical sales analysis 74
Key findings 74
Pharmaceutical market size 74
Leading therapy areas 74
Leading prescription pharmaceutical brands 74
Leading pharmaceutical companies 74
Pharmaceutical market size in Japan 76
Leading therapy areas in Japan 78
Cardiovascular drugs hold the largest value share of the Japanese market 80
Immunology and inflammation drugs have exhibited the fastest growth following approval of biologic drugs 81
The musculoskeletal market is contracting due to intensifying generic competition 81
Oncology drugs will drive market growth out to 2015 81
Leading therapy areas out to 2015 (for the top 50 pharma companies) 82
Leading prescription pharmaceutical brands in Japan 83
Blopress is the highest selling brand in Japan but its position may be in jeopardy from 2012 onwards 85
Diovan has been growing strongly thanks to numerous indication approvals 86
Lipitor maintains growth despite the availability of cheaper generic statins 86
Leading pharmaceutical companies in the Japanese prescription pharmaceutical market 87
Roche and Eisai have experienced particularly strong growth in Japan 88
Leading companies out to 2015 91
The leading domestic companies are exhibiting modest growth rates 92
Takeda 93
Daiichi Sankyo 94
Mitsubishi Tanabe 94
5. Japan - Drug expiry analysis 95
Key findings 95
Japan generics market 95
Japan brand erosion post patent expiry 95
Japan biosimilars market 95
Japan generics market dynamics 97
Japan generics volume uptake 98
Japan generics value uptake 99
Japan generics market size 100
Drivers and resistors in the Japanese generics market 101
Japan's generics market has shown steady growth 103
Healthcare providers reluctant to use generics 103
Physicians require greater incentive to prescribe generics 104
New prescription forms have yet to realize their potential 104
Financial incentives for physicians are lacking 104
Pharmacists present obstacles to generic uptake 105
Generic dispensing rate must be improved 105
Pharmacist compensation offset by administrative costs 105
Pharmacist premium set for revision 106
Hospitals represent a potentially important driver of generics uptake 106
Generics prescribing in hospitals subject to institution-wide policy 106
Diagnosis Procedure Combination hospitals will drive uptake 106
Quality holds the upper hand in Japan 107
Improving information provision 107
Imposing quality control for generics 107
Twice-yearly pricing opportunity for manufacturers allows generics to enter the market more rapidly 108
Generics supply and distribution is gradually improving 109
Manufacturers continue to build wholesaler ties 109
The industry moves to ensure stable generics supply 109
Initiatives to raise awareness/trust for patients and healthcare providers 109
Financial incentive for patients is lacking 110
Biennial price cuts a resistor to generics uptake 111
A cost-sensitive population beginning to emerge 111
Key generics players in the Japanese market 112
Opportunities for the generics industry 112
Company strategy in Japan 113
Domestic industry set for massive consolidation 114
Domestic branded players entering the Japanese generics market 114
Hospital focused Nichi-Iko enters joint venture with Sanofi-Aventis 115
Sawai seeks capital tie up 115
Non-traditional companies entering the drugs sector 115
Multinationals compete to enter the Japanese generics market 116
Teva beefs up Japanese presence with domestic support 116
Mylan to expand in Japan 116
Actavis to expand in Japan 117
Pfizer to become a major generics player in Japan 117
Sanofi-Aventis teams up with Nichi-iko 117
Small molecule brand erosion in Japan 118
Overview of drugs analyzed 118
Mean level of brand erosion in Japan 119
Brand erosion in the Japanese retail and hospital setting 120
Brand erosion by therapy area in Japan 121
Brand erosion by drug formulation in Japan 123
Japan biosimilars market dynamics 124
Key players in the Japan biosimilars market 124
Sandoz maintains pioneer status with launch of Omnitrope in Japan 125
First epoetin biosimilar approved in Japan 125
GlaxoSmithKline gains rights to biosimilar epoetin 125
Companies set to enter the biosimilars market 126
Opportunities for the biosimilar industry 126
Branded monoclonal antibody therapies could soon face biosimilar incursion 128
Biosimilars in development internationally 129
6. Japan - Pharmaceutical Industry Infrastructure analysis 131
Key findings 131
Pharmaceutical industry infrastructure overview 131
Japanese pharmaceutical industry infrastructure overview 132
R&D and manufacturing strategies in Japan 132
Key company infrastructure in Japan 134
Pfizer 135
Daiichi Sankyo 144
Daiichi Sankyo sells a manufacturing plant and non-core chemicals business 148
Mitsubishi Tanabe 149
Mitsubishi Tanabe expands in the generics market 152
Roche 153
Roche increases its stake in Chugai to secure access to new innovative therapies 157
Novartis 158
Astellas Pharma 162
Merck & Co. 165
Eisai 168
Otsuka 172
Otsuka enhances peptide production capabilities through the acquisition Ito Life Sciences 176
7. Bibliography 177
Japan - Executive summary 177
Publications and online articles 177
Datamonitor reports and products 177
Japan - Socio-demographic and economic analysis 178
Publications and online articles 178
Japan - Healthcare systems and regulations 180
Publications and online articles 180
Datamonitor reports and products 183
Japan - Prescription pharmaceutical sales 184
Publications and online articles 184
Datamonitor reports and products 184
Japan - Drug expiry analysis 184
Publications and online articles 184
Datamonitor reports and products 190
Japan - Pharmaceutical industry infrastructure analysis 190
Publications and online articles 190
Datamonitor reports and products 191
APPENDIX 192
Exchange rates used in this report 192
Japan brand erosion - additional data and analysis 193
Brand erosion - methodology 195
Datamonitor prescription pharmaceutical definition and therapy area classification 198
About Datamonitor 199
About Datamonitor Healthcare 199
Datamonitor consulting 199
Disclaimer 200
Disclaimer 201
List of Tables
Table 1: Japan - changes in the key value drivers of the Japanese pharmaceutical market, 2005-09 5
Table 2: Japan - demographic indicators, 2005 and 2010 7
Table 3: Japan - key economic indicators, 2005-2012 8
Table 4 10
Table 4: Japan - healthcare expenditure indicators, 2006-09 10
Table 5: Japan - a range of pricing and reimbursement tools are used, 2010 12
Table 6: Japan - sales and volume of the pharmaceutical market ($ and IMS Standard Units), 2009 14
Table 7: Japan - key metrics for the generics and biosimilars market, 2010 16
Table 8: Japan - R&D and manufacturing infrastructure data, 2010 18
Table 9: Japan - demographic indicators, 2005 and 2010 22
Table 10: Japan - top 10 causes of mortality, 2004 28
Table 11: Japan - disability-adjusted life years (DALY) rates compared to Australia, the BRIC nations, North America and five major EU markets (5EU), 2004 30
Table 12: Japan - key economic indicators, 2005-2012 32
Table 13 40
Table 13: Japan - healthcare expenditure indicators, 2006-09 40
Table 14: Japan - hospital bed and healthcare worker density 2000-07 49
Table 15: Japan - a range of pricing and reimbursement tools are used, 2010 60
Table 16: Japan - price premiums are given to drugs that can demonstrate a level of innovation, 2010 66
Table 17: Japan - sales and volume of the pharmaceutical market ($ and IMS Standard Units), 2009 77
Table 18: Japan - pharmaceutical sales by therapy area ($m and %), 2005-09 79
Table 19: Japan - pharmaceutical volume by therapy area (SUm and %), 2005-09 80
Table 20: Japan - sales growth for top 20 pharmaceutical brands (%), 2009 84
Table 21: Japan - volume growth for top 20 pharmaceutical brands, 2009 85
Table 22: Japan - sales growth for the top 10 pharmaceutical companies ($ and %), 2009 89
Table 23: Japan - volume growth for the top 10 pharmaceutical companies (SU and %), 2009 90
Table 24: Japan - sales growth for the leading Japan-based pharmaceutical companies ($ and %), 2009 92
Table 25: Japan - volume growth for the leading Japan-based pharmaceutical companies (SU and %), 2009 93
Table 26: Japan - key metrics for the generics and biosimilars market, 2010 96
Table 27: Japan - comparison of generic penetration versus other major pharmaceutical markets ($ billion and %), 2007-08 97
Table 28: Japan - reforms that have impacted generics uptake, 2002-10 102
Table 29: Japan - generics chosen to be quality checked by Korosho (Japan's ministry of health, labor and welfare) in Japan, 2010 108
Table 30: Japan - brands exposed to generic competition, 2010-12 112
Table 31: Japan - leading biosimilar companies, 2010 124
Table 32: Japan - sales (based on 2009 sales data) of biologics both expired and expected to come off-patent, 2010-15 127
Table 33: Japan - sales growth for the top 10 pharmaceutical companies ($m and %), 2009 134
Table 34: Japan - Pfizer's R&D and manufacturing infrastructure (post-merger with Wyeth), 2010 135
Table 35: Japan - Pfizer's R&D and manufacturing infrastructure data (post-merger with Wyeth) compared with other top 10 companies in Japan, 2010 136
Table 36: Japan - Takeda's R&D and manufacturing infrastructure, 2010 139
Table 37: Japan - Takeda's R&D and manufacturing infrastructure data compared with other top 10 companies in Japan, 2010 140
Table 38: Japan - Takeda's domestic M&A activity, Q1 2008-Q1 2010 143
Table 39: Japan - Daiichi Sankyo's R&D and manufacturing infrastructure, 2010 144
Table 40: Japan - Daiichi Sankyo's R&D and manufacturing infrastructure data compared with other top 10 companies in Japan, 2010 145
Table 41: Japan - Daiichi Sankyo's domestic M&A activity, Q1 2008-Q1 2010 148
Table 42: Japan - Mitsubishi Tanabe's R&D and manufacturing infrastructure, 2010 149
Table 43: Japan - Mitsubishi Tanabe's R&D and manufacturing infrastructure data compared with other top 10 companies in Japan, 2010 150
Table 44: Japan - Mitsubishi Tanabe's domestic M&A activity, Q1 2008-Q1 2010 152
Table 45: Japan - Roche's R&D and manufacturing infrastructure, 2010 153
Table 46: Japan - Roche's R&D and manufacturing infrastructure data compared with other top 10 companies in Japan, 2010 154
Table 47: Japan - Roche's domestic M&A activity, Q1 2008-Q1 2010 157
Table 48: Japan - Novartis's R&D and manufacturing infrastructure, 2010 158
Table 49: Japan - Novartis's R&D and manufacturing infrastructure data compared with other top 10 companies in Japan, 2010 159
Table 50: Japan - Astellas's R&D and manufacturing infrastructure, 2010 162
Table 51: Japan - Astellas's R&D and manufacturing infrastructure data compared with other top 10 companies in Japan, 2010 163
Table 52: Japan - Merck & Co's R&D and manufacturing infrastructure (post acquisition of Schering-Plough), 2010 165
Table 53: Japan - Merck & Co.'s R&D and manufacturing infrastructure data (post acquisition of Schering-Plough) compared with other top 10 companies in Japan, 2010 166
Table 54: Japan - Eisai's R&D and manufacturing infrastructure, 2010 168
Table 55: Japan - Eisai's R&D and manufacturing infrastructure data compared with other top 10 companies in Japan, 2010 169
Table 56: Japan - Otsuka's R&D and manufacturing infrastructure, 2010 172
Table 57: Japan - Otsuka's R&D and manufacturing infrastructure data compared with other originator companies in the top 10 in Japan, 2010 173
Table 58: Japan - Otsuka's domestic M&A activity, Q1 2008-Q1 2010 176
Table 59: Currency exchange rates, 2010 192
Table 60: ATC (anatomical therapeutic chemical) classification codes assigned to a given therapy area within the prescription pharmaceutical market 198
List of Figures
Figure 1: Japan - key value drivers of Japan's pharmaceutical market, 2009 4
Figure 2: Japan - drivers and resistors facing branded pharmaceutical companies 6
Figure 3: Japan - Population and population growth rate, 1950-2050 23
Figure 4: Japan - population growth compared to Australia, the BRIC nations, North America and five major EU markets (5EU), 1950-2050 24
Figure 5: Japan - birth rates per 1,000 individuals compared to Australia, the BRIC nations, North America and five major EU markets (5EU), 1950-2050 25
Figure 6: Japan - proportion of population over 65 years compared to Australia, the BRIC nations, North America and five major EU markets (5EU), 1950-2050 26
Figure 7: Japan - life expectancy compared to Australia, the BRIC nations, North America and five major EU markets (5EU), 1950-2050 27
Figure 8: Japan - GDP per capita growth rate compared to Australia, the BRIC nations, North America and five major EU markets (5EU), 2005-09 33
Figure 9: Debt trap rankings for Japan, the five major EU markets, North America, and Australia, 2010 34
Figure 10: Unemployment rates in Japan, the five major EU markets, North America, the BRIC nations and Australia, 1990-2008 36
Figure 11: Japan - healthcare expenditure indicators, 2006 39
Figure 12: Japan - healthcare costs are set to rise dramatically to 2035 41
Figure 13: Japan - structure of the public health insurance system, 2010 42
Figure 14: Japan - Flow of funds within the healthcare system, 2010 43
Figure 15: Japan - a range of bodies and groups impact the country's healthcare provision 44
Figure 16: Japan - Cost-containment is largely absent or ineffectual 50
Figure 17: Japan - Structure of the drug regulatory system 53
Figure 18: Japan - drug approval process, 2010 54
Figure 19: Japan - drug price (Yakka) setting process for new products, 2010 62
Figure 20: Japan - pricing of new drugs differs depending on whether similar alternatives exist, 2010 64
Figure 21: Japan - biennial price revision 68
Figure 22: Japan - medical fee revision, April 2010 69
Figure 23: Japan - components of the biennial drug price revision, April 2010 70
Figure 24: Japan - drug pricing reforms bring mainly bad news for Pharma 71
Figure 25: Japan - relative sales and volume of the Japanese pharmaceutical market (indexed against volume or value in 2005), 2005-09 76
Figure 26: Japan - pharmaceutical sales by therapy area (%), 2005-09 78
Figure 27: Japan - sales forecast for the top 50 global pharma companies by therapy area ($ billion), 2010-15 82
Figure 28: Japan - sales growth for the leading pharmaceutical brands ($m and %), 2009 83
Figure 29: Japan - sales growth for leading pharmaceutical companies (%), 2005-09 87
Figure 30: Japan - sales forecast for the top 10 pharma companies in Japan ($ billion), 2010-15 91
Figure 31: Japan - comparison of generic volume uptake versus other major pharmaceutical markets (%), 2007-08 98
Figure 32: Japan - comparison of generic value uptake versus other major pharmaceutical markets (%), 2007-08 99
Figure 33: Japan - comparison of generics market size in Italy versus other pharmaceutical markets, 2007-08 100
Figure 34: Japan - key factors influencing the generic industry, 2010 101
Figure 35: Japan - growth of generics market, 2005-2010 103
Figure 36: Japan - brand sales at risk of generic erosion ($m), 2010-12 113
Figure 37: Japan - mean erosion (by value and volume) of branded small molecules during the first 2 years of generic competition 119
Figure 38: Japan - mean erosion (by value and volume) of branded small molecules by prescribing setting during the first 2 years of generic competition 120
Figure 39: Japan - mean erosion (by value and volume) of branded small molecules by therapy area in the Japanese market during the first 2 years of generic competition 121
Figure 40: Japan - sales of tablet forms of mesalazine (by value and volume) in the first six quarters of generic competition 122
Figure 41: Japan - mean erosion (by value and volume) of branded small molecules by formulation during the first 2 years of generic competition 123
Figure 42: Japan - sales (based on 2009 sales data) of biologics expected to come off-patent, 2010-15 126
Figure 43: Drivers and resistors to biosimilar monoclonal antibody entry, 2010 129
Figure 44: Japan - key biosimilars in development internationally by product class, 2010 130
Figure 45: Pharma's strategic responses to slowing sales and operating profit growth 133
Figure 46: Japan - Pfizer's presence (post-merger with Wyeth) compared with other top 10 companies in Japan, 2010 137
Figure 47: Japan - Pfizer's pharmaceutical operations (post-merger with Wyeth), 2010 138
Figure 48: Japan - Takeda's presence compared with other top 10 companies in Japan, 2010 141
Figure 49: Japan - Takeda's pharmaceutical operations, 2010 142
Figure 50: Japan - Daiichi Sankyo's presence compared with other top 10 companies in Japan, 2010 146
Figure 51: Japan - Daiichi Sankyo's pharmaceutical operations, 2010 147
Figure 52: Japan - Mitsubishi Tanabe's pharmaceutical operations, 2010 151
Figure 53: Japan - Roche's presence compared with other top 10 companies in Japan, 2010 155
Figure 54: Japan - Roche's pharmaceutical operations, 2010 156
Figure 55: Japan - Novartis's presence compared with other top 10 companies in Japan, 2010 160
Figure 56: Japan - Novartis's pharmaceutical operations, 2010 161
Figure 57: Japan - Astellas's pharmaceutical operations, 2010 164
Figure 58: Japan - Merck & Co.'s pharmaceutical operations (post acquisition of Schering-Plough), 2010 167
Figure 59: Japan - Eisai's presence compared with other top 10 companies in Japan, 2010 170
Figure 60: Japan - Eisai's pharmaceutical operations, 2010 171
Figure 61: Japan - Otsuka's presence compared with other top 10 companies in Japan, 2010 174
Figure 62: Japan - Otsuka's pharmaceutical operations, 2010 175
Figure 63: Japan: sales erosion of branded small molecules during the first 2 years of generic competition 193
Figure 64: Japan: volume erosion of branded small molecules during the first 2 years of generic competition 194
Figure 65: Drugs experiencing generic erosion between Q1 2006 and Q2 2007 195
Figure 66: Erosion curves for each drug experiencing generic entry 196
Figure 67: Mean erosion curve for drugs A, B, and C experiencing generic entry 197

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