Pharmaceutical Industry in Japan Faces Challenges Amid Reforms to Attract Global Drugmakers

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Key Takeaways

• Japan’s pharmaceutical industry faces challenges due to stringent price controls and regulatory hurdles, leading to drug delays and reduced global competitiveness.
• The Japanese government is implementing reforms, including a roadmap to boost innovation, financial incentives, and faster drug approvals, to attract global pharmaceutical companies.
• Despite these reforms, Japan must address rising healthcare costs and increase investment in scientific research to regain its position as a leader in pharmaceutical innovation.

Japan, once a global leader in pharmaceutical innovation, is now grappling with a decline in its attractiveness to international drugmakers. Despite being the world’s third-largest pharmaceutical market, stringent price controls and regulatory hurdles have deterred companies from launching new medicines in the country. As a result, Japan has fallen behind its competitors in the U.S., Europe, and China in drug discovery and innovation.

In recent years, Japan’s healthcare policies, particularly those aimed at reducing drug prices, have contributed to this decline. Since 2015, over 50 changes to the drug pricing regime have slashed profits, with drug prices often being about half of what they are in the U.S. This has led to a “drug loss” and “drug lag” problem, where many new medicines are either not launched or delayed in the Japanese market. As of March 2023, 143 drugs approved in Europe or the U.S. had not been approved in Japan, and many had no plans to seek approval.

Japan Introduces Reforms to Boost Pharmaceutical Innovation and Attract Global Drugmakers

Recognizing the need for change, the Japanese government has introduced a series of reforms aimed at making the country more attractive to foreign pharmaceutical companies. In July 2024, Prime Minister Fumio Kishida unveiled a roadmap to turn Japan into a “drug discovery land” and ensure that the latest medicines are available to Japanese patients. The plan includes kick-starting clinical trials on previously unavailable drugs, establishing drug discovery start-ups, and providing financial support to boost innovation.

In addition to these efforts, the government has also introduced incentives for pharmaceutical companies, such as a 5-10% price premium for the rapid introduction of new drugs. These reforms, combined with the elimination of the requirement to conduct phase 1 clinical trials in Japan, are designed to attract more investment and reverse the trend of delayed drug launches.

Japan’s Pharmaceutical Industry Faces Ongoing Challenges Despite Reforms to Revitalize Innovation and Global Competitiveness

Japan’s pharmaceutical industry still faces significant challenges. The country’s aging population and rising healthcare costs have strained the national health insurance system, with healthcare spending reaching nearly 11% of GDP in 2020. As the government seeks to balance innovation with affordability, it must find ways to adequately compensate companies for their efforts in developing new treatments.

While the reforms are a step in the right direction, some experts believe more needs to be done. Japan’s share of clinical trial starts has dropped significantly, while China’s pharmaceutical industry continues to rise, with China now the second-largest pharmaceutical market. Japan must also address its faltering investment in basic scientific research and weak industry-university collaboration if it hopes to regain its competitive edge.

Despite these challenges, pharmaceutical companies like Novartis and Chugai remain committed to Japan, recognizing the country’s potential as a significant market with a strong scientific foundation. As Japan accelerates its reforms, the government hopes to reignite its pharmaceutical industry and ensure that patients have access to the most advanced treatments available.

Resource: SWI Swissinfo, August 16, 2024

Zahra Ahangar Atashi