BMI's Executive Summary

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Valued at an impressive US$64bn, Japan has the world's second largest pharmaceutical market and, accordingly, is of great interest to drugmakers. However, there exist numerous challenges to operating in the country, including sluggish growth, delays in the introduction of innovative medicines, severe downward pressure on prices and reimbursement, and a culture of over-prescribing. In response to the farreaching April 2006 price cuts, the Japan Pharmaceutical Manufacturers Association (JPMA) proposed a new drug pricing system in July 2007 for the National Health Insurance (NHI) price list, in order to strengthen international competitiveness and establish appropriate drug prices in the market, although this has yet to have an impact on the market.

Like many other industries in the country, the pharmaceuticals sector poses substantial barriers to entry for foreign firms, so multinationals frequently form joint-ventures with local players. Importantly, the market is dynamic – as illustrated by Japan's top spot in the BMI's adjusted Business Environment Ranking table - and reforms to pricing transparency and the encouragement of generic drugs will provide upside to enlightened players.

Consequently, BMI marginally upgraded its projection for Japan's generic drug market in July 2007 after a basket of medicines lost patent protection and public knowledge of the benefit of this type of pharmaceutical improved. Moreover, the spread of flat-sum reimbursement schemes, a number of fee changes and increased co-payments for drugs over the past few years have also had an effect. A key change in 2006 was the introduction of a tick box on script forms, allowing doctors to indicate their approval of substitution. BMI fully expects the uptake of generics in Japan to continue, with the value of the sub-sector reaching US$10.36bn in 2013, or 14.7% of the total pharmaceutical market.

While Japan's overall pharmaceutical market is stagnating, sales of antidepressants are increasingly rapidly as the stigma attached to this class of drugs, and mental health in general, decreases. A surge in advertising by pharmaceutical firms beginning in the late 1990s is partly responsible, as well as the cultural shift during the recent economic downturn. BMI expects this strong growth to continue as suicide rates continue to rise and the phenomenon of hikikomori or acute social withdrawal increases.

Contents

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Chapter 1 - Executive Summary

Japan Pharmaceuticals & Healthcare Industry SWOT

Chapter 2 - Business Environment Ranking

Business Environment Ranking

Economics - Long-Term Risk

Politics - Long-Term Risk

Regulatory Barriers

Domestic Sector Threat

Market Growth Potential

Market Size Ranking

Chapter 3 - Japan: Market Summary

Chapter 4 - Regulatory Regime

Intellectual Property Developments

Intellectual Property Disputes

Pricing And Reimbursement Issues

Table: Reimbursement Categories And Rates

Changes To Government Sector Policy

Table: Concerns of Pharmaceutical Associations

International Reaction

Other Regulatory Developments

Table: Japan - FY05-06 Regulatory Performance

Chapter 5 - Industry Trends & Developments

Healthcare Sector

Epidemiological Trends

Healthcare Sector Finance Issues

Pharmaceutical Industry Trends

Table: Japan - Recent Pharmaceutical Industry M&A

Table: Share Repurchasing At The Leading Japanese Drugmakers

Domestic Company Activity

Table: Timeline- Eisai's International Expansion

Table: Chugai: Oncology Product Pipeline (As Of July 31, 2006)

Generics Sector

Foreign Generic Sector

Table: Timeline: Indian Manufacturers In Japan, 2005-2006

Multinational Sector Developments

Chapter 6 - Industry Forecast Scenario

Overall Market Forecast

Table: Japanese Ethical Market: Leading Therapeutic Classes (FY2005-06)

Table: Japan Drug Market Indicators

Key Growth Factors - Industry

Key Growth Factors - Macroeconomic

Table: Japan - Macroeconomic Forecasts

Prescription Market Forecast

Table: Prescription Drug Market Indicators

Cardiovascular Segment

Oncology Segment

OTC Market Forecast

Table: OTC Market Indicators

Generics Market Forecast

Table: Generics Market Trends

Branded Market Forecast

Table: Branded market indicators

Export/Import Forecasts

Table: Export/Import Trends

Healthcare Data & Forecasts

Table: Hospital Data Trends

Table: Healthcare Trends

Key Risks To BMI's Forecast Scenario

Chapter 7 - Competitive Landscape

Overview

Table: Japanese Ethical Market: Sales Value (FY2005-06)

Chapter 8 - Company Profiles

Leading Foreign Manufacturers

Pfizer

Sanofi-Aventis

Merck & Co (Banyu)

Novartis

GlaxoSmithKline (GSK)

AstraZeneca

Chapter 9 - Company Profiles: Indigenous Manufacturers

Takeda

Astellas

Sawai Pharmaceutical

Chapter 10 - BMI Forecast Modelling

How We Generate Our Industry Forecasts

Technical Process

Pharmaceutical Industry

Sources

Competitive Landscape for Asia Pharmaceuticals and Healthcare: Sample of Companies Ranked

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Cross-border analysis of regulatory systems comparing the patenting environment, summarising regional pricing and reimbursement factors and monitoring the growth of the Pharmaceuticals sector across the region. Company SWOTs cover leading multinational and national drug companies operating in each market.

Network of Asian Pharmaceuticals & Healthcare Sources

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BMI's Asian Pharmaceuticals Healthcare Reports are based on an extensive network of multilateral organisations, government departments, pharmaceuticals & healthcare industry associations, chambers of commerce and company reports. Information sources include: