Warnings for Japan’s pharma market could lead to more lenient price controls

Japan is currently the fourth largest market in the world. According to GlobalData estimates, the Japanese pharmaceutical market generated 9,392 billion yen ($67.32 billion) in total sales in 2021 and is expected to grow by 1.1% in 2022 to reach 9,498 billion yen ( $68.08 billion). However, despite this large market share, the Japanese market is likely to become a less attractive market for international pharmaceutical companies based on recent findings from the Office of Pharmaceutical Industry Research (OPIR)

OPIR, a research division of Japan’s leading pharmaceutical industry association, the Japan Pharmaceutical Manufacturers Association (JPMA), recently released a report that sheds light on the drug delay phenomenon in Japan, showing that ten of the 37 JPMA member companies (27%) considered Japan a lower investment priority for their business activities since 2016. Among the 37 member companies, 17 of them are foreign companies and 20 of them are Japanese companies with an overseas pharmaceutical sales ratio above 10%. According to the report, five member companies decided to reduce their investment in Japan between 2016 and 2017, four companies changed their investment targets between 2018 and 2020, and one company lowered the priority given to Japan after 2021. In contrast , a total of 27 companies (73%) reported no major changes in their investment plans.

One of the reasons at play is the concern expressed by the Japanese pharmaceutical industry about the impact of annual price reviews. Six companies responded to the OPIR survey stating that falling drug prices were the main reason for changing their market strategy, while two other companies said that drug prices were the second most important factor. more important for them to change their investment plan. Other reasons include lower sales demand and high investment costs. Regarding the influence caused by the negative changes in international investment in Japan, pharmaceutical companies that decided to reduce their business priority in Japan reported a decline in sales of pharmaceutical products. A lower number of clinical trials and regulatory filings were other significant influences behind the decision. Other contributing factors include the decreasing number of post-marketing studies and difficulties in primary research and manufacturing.

The OPIR report showed that Japan’s pricing policy has caused serious concern among large multinational pharmaceutical companies, which are wary of a potentially lower return on investment. However, it is difficult to distinguish between the investment plans of foreign companies and Japanese companies with an overseas pharmaceutical sales ratio above 10%, because the results of the OPIR survey are presented anonymously. .

The survey result may spur further industry calls for higher prices in fiscal year 2023, which will start from April 2023, as it may directly indicate a decline in investment opportunities on the market for pharmaceutical companies directly caused by pricing policy. . The Japanese Ministry of Health, Labor and Welfare (MHLW) has introduced a series of price regulations to reduce the prices of drugs registered with the National Health Insurance (NHI), including the implementation of revisions annual off-year prices. GlobalData estimates that the FY2021 NHI drug price review has resulted in price reductions for approximately 70% of major pharmaceutical treatments, with major drugmakers facing average NHI price reductions of 2% at 4%. This trend continues as it estimates that the FY2022 price review resulted in an average price reduction of 4% to 5% for major drugmakers.

MHLW is currently proposing discussions on drug price review for fiscal year 2023. Experts from an MHLW price review committee have acknowledged that the Japanese pharmaceutical market is struggling to attract international investment and carries risks. . For example, lower investment may signal delays in innovative drug launches in Japan. Meanwhile, another recently released MHLW report confirmed that 696 essential medicines from 94 companies have been identified as unprofitable due to rising manufacturing and packaging costs and the depreciation of the Japanese yen.

Japan’s pharmaceutical industry has warned that the supply of some drugs could be disrupted if NHI drug prices remain low and said current pricing policy has discouraged drugmakers from launching new products in Japan. GlobalData expects that concerns over the withdrawal of drugs from the Japanese market and the disruption of the supply of essential generic drugs may lead to a more lenient approach to price controls to ensure a stable supply of essential drugs. .