Globalisation and Change in the Japanese Pharmaceutical Industry, 1990-2010
9 August 2011 Workshop on British and Japanese Enterprise: Technology, Knowledge, Culture, and the Challenges of Globalisation Maki Umemura Cardiff University
2
Japanese pharmaceutical performance in context Leading global pharmaceutical firms, by pharmaceutical sales
Source: Scrip Pharmaceutical Company League Tables, IMS Midas
3
Japanese pharmaceutical performance in context Leading global pharmaceutical firms, by pharmaceutical sales
Source: Scrip Pharmaceutical Company League Tables, IMS Midas
8
Japanese pharmaceutical performance in context
Source: Yūka Shōken Hōkokusho [Annual Securities Report] Tokyo Ōkurashō Insatsukyoku,, various years
2007
4
Pharmaceutical Production: 1945-2005 (in trillions of 2005Yen)
Source: Ministry of Health and Welfare, Yakuji Kogyo Seisan Dotai Chosa Tokei, various years. Yakugyo Keizai Kenkyujo, Yakuji Nenkan, various years (1952, 1957).
5
Second largest market since the 1960s Value of pharmaceutical production, in millions of dollars
Source: OECD, Gaps in Technology, 1969; OECD, OECD Health, various years
6
Imports and Exports: 1955-2005 (in billions of 2005yen)
Source: Ministry of Economy, Trade and Industry, White Paper on Trade, various years.
9
Japanese pharmaceutical performance in context
Source: OECD, International Trade by Commodities Statistics
10
Few of the leading global products are by Japanese firms
Top 10 global products, 2009
Source: IMS Health Midas, December 2009
12
Existing scholarship suggests Many explanations: Late entry
Chandler Poor government policy
Anagawa, Howells and Neary, Reich Lack of R&D/research environment Collins, Nakayama, Low Organisational culture
Nakane, Kneller, Vogel, Anchordoguy A combination of these -- along with medical infrastructure and medical culture/
practice
15
Pressures in the 1990s
In addition to the pressures of foreign governments to open the Japanese market, several factors prompted change in the Japanese pharmaceutical industry came from several areas:
Participation in the ICH
(International Conference on the Harmonisation of Technical Requirements for Registration of Pharmaceuticals for Human Use)
Reforms to the distribution sector Introduction of several laws that encouraged/facilitated
entrepreneurship
14
Japanese pharmaceutical firms in the 1990s
Following exposure to global markets, Japanese firms exhibited:
Increasing R&D orientation Dismantling of traditional Japanese practices Unprecedented industry consolidation Emerging biotechnology sector Growth of generics sector
17
R&D Expenditure and R&D/sales: FY1960-2005 (percent; in billions of 2005 Yen)
Source: Statistical Survey Department, Statistics Bureau, Ministry of Internal Affairs and Communications, Survey of Research and Development (Kagaku Gijutsu Kenkyu Chosa Hokoku), various years.
18
R&D/Sales US-Japan comparison
Source: Statistical Survey Department, Statistics Bureau, Ministry of Internal Affairs and Communications, Pharmaceutical Research and Manufacturers of America. Pharmaceutical Industry Profile 2008, 53.
19
Reforms to the distribution sector
Previously highly fragmented, uncompetitive Supply chain linking manufacturers to patients involved two
intemediaries: wholesalers and physicians Retail price maintenance of pharmaceuticals since 1951 limited
competitive pressures on wholesalers 1991 Government prohibited retail price maintenance in
pharmaceuticals, dissolving the relationships between wholesalers and manufacturers
Wave of consolidation, from 434 in 1987 to 126 by 2007; top
three firms comprise 70% of market
20
Encouragement of entrepreneurship Entrepreneurship was limited due to inflexible labour markets,
underdeveloped capital markets Bankruptcy laws offer limited protection to entrepreneurs, high capital
requirement for incorporation. Government measures post 1990s: Laws that encouraged the establishment of small to medium size
enterprises at the regional level Laws that promoted technology transfer
21
Some growth of bioventures
Number of bioventures in Japan Source: Japan Bioindustry Association, Baiobenchā Tōkei Chōsa
Hōkokusho [Statistical Survey on Bioventures], (Tokyo: Japan Bioindustry Association, 2010).
22
But still rather limited in comparative perspective ...
Profile of biotechnology firms in the United States, Europe and Japan, 2009 (in millions of US dollars) Source: Japan Bioindustry Association, Heisei 22 nendo Jigyo Hokokusho
[Report on Activities, 2010] (Tokyo: Japan Bioindustry Association, 2010), Ernst & Young, Beyond Borders: Global Biotechnology Report (London: Ernst & Young, 2011), 39, 40, 48.
23
Quite a lot of change, but …
The Japanese market remains unattractive to many pharmaceutical firms because of:
Annual drug price reductions
Undeveloped infrastructure for R&D Drug lag
25
Growth of generic sector
Non-existent generics sector prior to the 1990s Growth from the late 1990s onwards:
Ex.1999-2009: 10.8% to 23.0% of prescription drugs dispensed (in volume)
However, still lower than US, Britain, Germany, where
generics account for more than 70% of drugs dispensed Competitive environment fuelled by foreign entry and M&A
activity
25
Lack of infrastructure
Fewer qualified reviewers
Ex. PMDA: 250 vs FDA: 2,300 (2005) Belated implementation of quality standards Late adoption of clinical trials procedure Drug lag, 12th in 1994, 28th in 2004 Drug approval times, much improved from the mid-1990s (>35
months), but still slower than the United States and Europe
27
Japanese firms expand into foreign markets Number of Japanese firms expanding overseas Source: Yano Research Institute, reprinted in JPMA, Databook 2009,
2009.
27
Conclusion As the Japanese pharmaceutical market opened up to global
competition in the 1990s, the industry experienced a transformation: Industry consolidation by both manufacturer and distributors across
keiretsu loyalties, with domestic and foreign rivals Emergence of biotechnology sector, growth of a generics sector Undeveloped infrastructure that disincentivised R&D also prompted
Japanese firms to look beyond the domestic market for growth. Leading ‘Japanese’ firms resembled foreign counterparts, as they
pursued R&D, production, and sales in different locations, and responded to regimes where rewards to innovation were greater.
27
Leading Japanese vs global pharmaceutical firms Top Three Pharmaceutical Firms in Global and Japanese Markets, 2010 (in millions of US dollars) Source: IMS Health, Company Annual Reports.
