Rising healthcare costs, ageing population and high cost of drug development in Japan offer huge opportunities for Indian generic majors. The Japanese government is collaborating with leading generic manufacturers in India and other parts of the world to develop low cost generic medicines. Thus today Japan is a big market for major generic suppliers like India and China.
India which is globally recognized for its high quality low cost generics is also planning to synchronise its moves to meet the Japanese requirements in the generic space. Japan has always been a tough market for India to tap. Its regulatory set up for pharmaceuticals is one of the toughest in the world. Each and every minute product registration undergoes comprehensive and complete test procedures which is not only time consuming but also is tedious and complex.
Both nations have taken many diplomatic steps at the government level to build trade relations and increase industry-industry interaction in the pharmaceutical and healthcare sectors. The Comprehensive Economic Partnership Agreement (CEPA) is an encouraging move to boost the pharmaceutical trade between the two nations.
“Initially it is an uphill task for any company to enter Japanese market, but once you are through there is no looking back. However it’s not easy to pass through such stringent regulatory procedures. Our main aim is to encourage and strengthen SMEs and medium scale Indian pharmaceutical companies to enter Japanese market. And this will definitely help the Indian exports to grow in the long run,” said Dr. Appaji, DG Pharmexcil.
Encouraged by these moves, industrialists from both countries are exploring possibilities to build collaborations and trade relations. In this regard, recently a delegation of pharmaceutical firms from Japan's Toyama prefecture visited New Delhi for a meeting with the Federation of Indian Chambers of Commerce and Industry (Ficci). Toyama prefecture is an industrial cluster on Honshu Island of Japan. Yasuhiko Shioi, president, Kokando leader of the Japanese pharmaceutical delegation to India indicated that Japanese companies are keen to collaborate in trade and technology development.
As Japan is known for its innovative research, Indian collaboration with the Japanese companies could help undertake joint market research and product development for world markets. In future collaborations between the companies of both countries may also jointly develop new technologies.
Giving presentations about ‘Toyama Cluster City of Pharmaceutical Industry' in Japan, Dr. Shoichiro Hamano, President of Hamano International gave optimistic views on the long term partnerships with Indian companies. “There is immense scope of exporting Japanese products to Indian market and similarly Indian products can be traded in the Japanese market," he opined.
The upcoming CPhI Japan 2013 is a big platform for Indian companies in Japan to explore opportunities and build long term trade relations among the pharmaceutical traders of both the nations. In this regard the pharmaceutical export promotion council of India (Pharmexcil) is planning to organize India Pavilion for the fourth time in row in Japan.
Despite being a highly regulated market, many Indian firms have succeeded in entering the Japanese market. Of late global events like CPhIs have also enabled the Indian firms to showcase their innovations in drug development and have attracted the attention of many big global firms. Moreover the quality and cost effectiveness of the Indian generics is what attracting the world today and Japan is not an exception.
Since 2010 onwards, there is a gradual improvement of Indian exports to the Japanese markets. Exports to Japan are growing at 78 per cent with US$ 144 million during the year 2011-12.
Indian bulk drug exports to Japan have increased more than 50 per cent from US $ 58 million in 2010-11 to US$ 87 in 2011-12. Similarly the exports of formulations have jumped from US$ nine million in 2010-11 to US $29 million with an increase of 216.60 per cent year on year (YoY). A part from bulk drugs and formulations, the herbal exports from India to Japan have also shown almost 100 per cent increase from US$ 14 million to US$ 28 million during the same period.
Presently Japan has more than 89 pharmaceutical manufacturers with approximately 9,000 employees in the country. Their annual pharmaceutical output is US$ 76 billion.
While making a presentation on the ‘Overview of Indian pharmaceutical industry', Daara Patel, Secretary General, Indian Drug Manufacturers' Association (IDMA), stressed that pharmaceutical is a knowledge-based industry and India is one of the world's largest and most developed in this sector.
During the past few years now India is also slowly strengthening its legal or regulatory framework for IPR, which has received favourable responses from various countries across the globe. India’s economic policies and availability of huge talent pool for sustaining and growing operations are making India an attractive choice for global pharma companies for investment, tie-ups, mergers and acquisitions.
Japanese society is rapidly ageing as compared with other industrially advanced countries. Based on the statistics (2007) released by Statistics Bureau MIC, currently the population of 65 years old and above is 27,180,000. This figure is 21.3 per cent of the population and by 2040 it is projected to rise to 33.2 per cent meaning that for every three Japanese, one of them will be a senior citizen. With this population pattern, the need for greater medical and nursing care services is expected. In the coming years, this need is expected to grow and this market is projected have a value of 75 trillion yen.
Generics to fuel growth in Japan
The Japanese pharmaceutical market is the world’s second largest next to the US, with annual sales of more than six trillion yen. But it is also pointed out that the sales accounted for generic drugs is just 10 per cent of this market value as opposed to other developed countries which is around 50 per cent. Thus it can be seen that generic drugs are not yet that popular in Japan as compared to its counterpart countries.
If one looks at the Japanese pharmaceutical and healthcare sector from 2005 to 2010, there is a gradual increase in the prescription drugs sales. From JPY 6358645.0 billion in 2005, the prescribed drugs sales have gone up to JPY 6702659.0 billion in the year 2010. On the other hand, the sales of OTC (Over-the-counter) drugs are slowly coming down. As projected by Business Monitor International (BMI) the prescription drug sales would continue to increase until 2010 and OTC drugs would experience a slight decrease in sales.
According to Japan Pharmaceutical Manufacturer’s Association (JPMA), the growth in pharmaceutical imports increased to 78 per cent from 432 billion Yen to 769 billion yen during 1994 to 2004. Moreover, the export from Japan rose from Yen 158 billion in 1994 to 383 billion yen in 2004.
In a span of 10 years ,Japanese export have increased by 142 per cent. During the past few years, the national and local government has shown strong effort in uplifting its health care and pharmaceutical sectors.
The Japanese Government is partnering with international companies to develop plans for R&D and to provide services in the field of medical devices for senior citizens. Some are even looking to build regional research centres aimed at bringing together advanced healthcare technologies.
The healthcare and welfare market in Japan is estimated at 75 trillion yen. In 2002 this market mostly consisted of medical care service and pharmaceuticals and health foods and this might still hold true for 2010 market.
In a span of three years, the number of nursing care facilities has increased 38 per cent from 2002 to 2005. A survey by Sawai, local generics medicine company, showed that 94.5 per cent of the respondents were willing to use generic medicine. It also showed that within next few years expenditure on generics would reach more around 1.2 trillion yen.
Pharma events in Japan
As the largest pharma ingredients event in the country, CPhI Japan and co-located events offer exhibitors an environment to directly establish contacts within the Japanese local business community. This will provide them an excellent chance to explore new business opportunities, expand network, meet other pharmaceutical professionals and build partnerships. It will enable them to find all major suppliers of pharmaceutical ingredients, the latest machinery and technology, outsourcing solutions and bio-solution under one roof.
For promotion of pharma exports, the Government of India has already finalized the "Brand India Pharma" Project, the main objective of which is to create confidence among overseas stake- holders about the affordability and reliability of Indian pharma/generic products.
In view of the recent liberalization policy adopted by the government of Japan, the Indian government feels that it is the right time to launch the ‘Brand India Pharma’ project. The main reason for the change in the Japanese policy is to increase the share of generic medicines in domestic consumption. Taking this as an opportunity, the Indian government is leaving no stones unturned to tap the Japanese market with its low cost, quality generics and APIs. Accordingly, the "Brand India Campaign" is being launched on March 21 on the sidelines of CPhI Japan.
“We are optimistic about the CPhI Japan programme. This forum will definitely help the Indian industry to explore new opportunities and will also enable our industry to improve standards in accordance with Japanese requirements. This event will not only enhance the quality of Indian generics but also will enable us to improve our standards on par with the international players,” said P.V. Appaji, executive Director, Pharmexcil.
Currently, Indian pharma sector is undergoing major changes. Much of this is due to the country's introduction of Product Patent Act in 2005. This Act has been instrumental in the domestic industry's huge success as a worldwide exporter of high quality generic drugs.
Many Indian pharma giants like Dr. Reddys, Lupin, and Ranbaxy have collaborated with Japanese firms to explore mutual business interests. Dishman pharma has formed partnership with Merk to outsource intermediates to Losarthan to be supplied to its contract manufacturer in Japan. Recently Dr. Reddy’s has reached an understanding with Fuji film maker of Japan.
Apart from upcoming CPhI 2013 in April, Japan is also set to organize the ‘7th in-Pharma Japan’ which is an international pharmaceutical ingredients expo and conference. This event will be held in Tokyo Big Sight, Japan from July 10-12, 2013. Reed Exhibitions Japan along with Indian Drug Manufacturers Association (IDMA) is organizing this event.
Challenges for Japan
Among major challenges, Japanese pharmaceutical companies have failed to make intensive research on degenerative diseases and thus were not able to cater this market. Examples of these degenerative diseases are Alzheimer and Parkinson’s disease. Malignant neoplasm, heart disease and cerebrovascular diseases are the top three causes and most of the carriers of these diseases are the elders. This shows that there will be a big demand for medicine to cure/rehabilitate from these listed causes.
With the foreign companies penetrating Japan pharmaceutical market, a number of local pharmaceutical companies have also merged to be more competitive. In April 2005, Yamanouchi Pharmaceutical and Fujisawa Pharmaceutical merged and formed the Astellas Pharma. In September 2005, Sankyo and Daiichi Pharmaceutical also merged to form Daiichi Sankyo.
Multinational companies like Merck Pharmaceuticals made the local Banyu Pharmaceutical as its subsidiary. Pfizer on the other hand, acquired the local player Pharmacia which enhanced its share of the local market. Roche of Switzerland has acquired 50.1 per cent of the local Chugai Pharmaceutical.
Biotechnology in Japan
Apart from formulations and generics, Japan is also a leading player in the biotechnology sector in the world. Japan is the second largest biotechnology market in the world after the United States.
The Japan government recognized the big demand on this sector and realized the need of having a national strategy for biotechnology development. A plan based on the Biotechnology Strategy Guidelines is being implemented. This list of guidelines is a report detailing specific strategies that should be implemented to foster growth in Japan’s biotechnology sector.
Currently, Japan still lags behind the US in this sector but it is taking a lead in the field of gene analysis, genetic recombination, bioinformatics and others. With substantial government support, biotechnology is expected to become a major sector.
Furthermore, the Industrial Cluster Plan Policy is one of the efforts of the government to strengthen the capabilities of the defined regional cluster areas to develop new technologies and product. Among the 17 projects, eight of them are focused on the biotechnology industries.