Japanese pharmaceutical industry: experience for Russia
The current state of the pharmaceutical industry in Japan in some way serves as a guideline for the development of the pharmaceutical industry in Russia by 2020. Our eastern neighbors managed to grow their own innovative farm, relying only on the domestic market. And now the strengthened Japanese medicine industry has begun to expand in the international markets of both generics and innovative drugs. Interestingly, many features of Japanese society are very similar to those that make up the traditional Russian specifics, such as the predominance of public interests over private ones, the dominance of unwritten rules, a tendency to isolationism. This similarity makes it possible to borrow the experience of neighbors, including in the pharmaceutical industry. Observations of the drug market in the Land of the Rising Sun are shared by Sergey Kotlyar and Andrey Ivashchenko from the Central Research Center "HimRar".
The Japanese pharmaceutical market is the second largest (approximately 11 percent of the global market) with sales of 65 billion US dollars in 2007. Of the 178 new drugs put into production in the world in the period 1999-2003, 47, that is, every fourth drug, are Japanese.
Despite the extremely high level of sales, the Japanese pharmaceutical industry does not occupy a leading position in the world market. The products of Japanese pharmaceutical manufacturers mainly enter the domestic market, and exports account for a little more than six percent of total production. It is important to note at the same time that local manufacturers are trying to offer their products on the domestic market at least 10 percent cheaper than their Western counterparts.
In comparison with global indicators, the market for the production of medicines in Japan is growing slowly, which disappoints leading pharmaceutical companies. Due to the rather long consideration of new drugs by Japanese regulatory authorities, innovative drugs appear on the Japanese market on average four years after their approval in the United States and Europe, which slows down profit. So, if the release of a new drug to the market in the USA takes about 10 years, then in Japan it takes 15-17 years.
Today, the Japanese pharmaceutical market is entering a period of drastic changes. And although high rates of its growth are not predicted until 2011 (according to IMS Health experts, in 2008 the growth will be two percent, while for China and South Korea the expected figure is 12-13 percent), a significant increase in the activity of companies is expected, primarily in terms of international competition. Global pharmaceutical concerns have already begun to take advantage of the changing regulatory climate and economic conditions in Japan. The trends of the next five years in pharmaceuticals and biotechnology, primarily mergers and acquisitions in the industry, will determine the future prospects for its development.
The pillar of Japanese pharma: features of state policy and the special mentality of the nationThe government and business circles of Japan believe that the competitiveness of a particular industry is determined primarily by R&D, and only then by production and distribution.
In relation to R&D expenditures to GNP, Japan was one of the world leaders back in 2001.
The pharmaceutical industry of Japan, largely regulated by the government, is among the leading industries in the country both in terms of the absolute amount of R&D contributions and in terms of expenses per researcher. The R&D costs of pharmaceutical companies in Japan, members of the National Association of Pharmaceutical Manufacturers (they account for over 70 percent of the total turnover of pharmaceutical products in the country), accounted for about 11-13 percent of their turnover in 1991-2001.
The Japanese government is looking for ways to stimulate further industrial growth of the pharmaceutical market, at the same time it must inevitably reduce healthcare costs. In December 2007, the Government announced that it planned to provide financial incentives for pharmacists who resort to generic medicines in an effort to reduce the country's medical costs. According to this plan, pharmacists will receive remuneration through the national health program if at least 30 percent of all medicines distributed by them are generic. According to statistics, generic drugs sold in the country in 2006 accounted for about 31 percent of the total number of medicines.
In 2006, the Ministry of Health, Labor and Welfare of Japan announced to generic companies that from the 2011-2012 budget year, each generic produced by them should correspond in terms of indicators to the entire range of branded drugs of a certain class, and not to one (or several) drugs. In 2006, generics accounted for only 16 percent of the Japanese pharmaceutical market, while in the United States and Europe this figure was on average 50 percent.
One of the many features of the development of the pharmaceutical industry in Japan is the relatively low presence of foreign capital. Thanks to the policy of preferences pursued throughout the post-war period, conditions were created for national drug manufacturing companies that practically exclude competition from stronger European and American pharmaceuticals. This allowed Japanese firms to gain a firm foothold in the domestic market. In the rapid development of the pharmaceutical industry in Japan over the past 20 years, the partial reorientation of other industries (for example, chemical, food and textile) to the production of medicines has also played a role. This was prompted by a series of crises, after which additional capital rushed into the medicine production industry, hitherto not subject to economic downturns.
Although the local pharmaceutical market is becoming more and more attractive for foreign companies, only individual players decide to act on it alone, relying solely on their own strength. It is known that Japanese firms have a much better understanding of national-mental preferences and are able to more successfully carry out activities related to marketing, advertising and distribution of products. Therefore, over the past few years, agreements on joint activities have been increasingly concluded between local and foreign manufacturers. However, the gradual process of penetration of foreign companies into the Japanese pharmaceutical market has not yet become truly large-scale.
To understand the national peculiarities of the functioning of the Japanese economy, it is necessary to identify at least three of its most important elements: grouping, management regime and state regulation.
Grouping consists in the entry of national companies into production and sales associations and giant financial and industrial groups that have close and trusting relationships with financial institutions - suppliers of funds. The management regime focuses firms on the need to be guided primarily by the interests of Japanese society as a whole, as well as personnel (lifelong hiring, seniority payment, etc.), and not by momentary maximum profits, which determines a huge social effect. State regulation is based, among other things, on an extensive, pervasive network of detailed formal and informal regulations, the latter traditionally dominate Japanese society.
The peculiarities of the mentality of society and the dangers that lie in wait for it were well formulated at the time by the famous Japanese politician Ichiro Ozawa in an article for the Economist: "Japan has been living with a regulated society for more than a thousand years. We have a lot of people, little land and almost no natural resources. In order for everyone to have their share in the economy with numerous shortages, regulations were necessary, and in general people accepted them. In modern times, the concept of justice and equality has prevailed over the concept of individual freedom. In Japanese society there is no deep gap between rich and poor, between managers and employees... I know that most Japanese people feel uncomfortable and disoriented due to the prospect of living in a society with a small number of regulations, where each individual will have to rely more on himself and take greater responsibility for his actions."
Forced by the success of information and communication technologies, the processes of blurring national boundaries, integrating the economies of Japan's neighboring countries into a single world, global pricing, as well as the strongest aggravation of competition in foreign markets, the deterioration of the demographic situation, the emergence of new and new individualistic traits in the system of moral values, a general increase in the degree of uncertainty of the current situation and especially long-term prospects - all this today has a negative impact on the main elements listed above, reduces their effectiveness, puts the search for alternatives on the agenda.
National and foreign playersAmong the leading players in the pharmaceutical market of Japan are such companies as Takeda, Astellas, Daiichi Sankyo, Otsuka, Yamanouchi, Pfizer, Roche (Chugai), Eisai, Dainippon Sumitomo, Novartis, Taisho, Merck&Co, Mitsubishi Pharma.
One of the significant characteristics of the entire Japanese industry is the predominance of small enterprises (with a staff of less than 100 people), among which various types of cooperation are widespread, providing for general management or the use of industrial and commercial space. It is clear that the financial capabilities of Japanese manufacturers are not comparable to the assets of the same Pfizer or Merck & Co, and in order to maintain critical mass and resist the expansion of foreign manufacturers, Japanese firms are very actively cooperating both with each other and with other, not so large Western players looking for access to Eastern markets. The Government encourages such actions with financial and legislative support measures.
Japanese experts in the field of licensing and long-term development express doubts about the possibility even for the largest international companies to achieve long-term success in Japan on their own. In their opinion, an international company can plan marketing activities, but its analysts in any case do it from outside the country. To succeed, foreign firms must involve Japanese specialists and their unique national experience in conducting marketing research. That is why most of the agreements concluded between Western and Japanese companies affect various aspects of marketing research or distribution assistance.
But there are also examples of the creation of joint research and production enterprises. Of the world's largest companies, only Pfizer, which has a powerful marketing service, decided to take up the challenge and act alone, promoting, in particular, the original drug Zoloft. However, in 2008, according to Bloomberg, the company's management announced its intention to transfer clinical trials of medicines from Japan to South Korea in order to avoid unjustified delays in bringing drugs to market and reduce the cost of research. And back in June 2007, Pfizer announced unfavorable working conditions in Japan and plans to invest 300 million US dollars in research activities in South Korea. At the end of 2007, GlaxoSmithKline and Novartis also announced the closure of research centers in the Land of the Rising Sun, and the American company Amgen Inc. sold its Japanese division to Takeda Pharmaceutical Co.
Creating new medicines: stages and regulatory organizationsCompetent and coordinated evaluation of pharmaceutical and cosmetic products, including therapeutic and prophylactic cosmetics, test tube diagnostics and medical equipment in Japan is provided by the Law on pharmaceutical issues, proposed in 2002 and fully entered into force in 2005.
In order to strengthen control over clinical trials of medicines and organizations conducting them, as well as to improve the safety and quality of drugs entering the Japanese market, attempts are constantly being made to ease bureaucratic obstacles when registering new drugs. For this purpose, the Ministry of Health, Labor and Welfare and other Japanese departments regulating the field of pharmaceuticals have been modified.
Under the administration of the Ministry of Health, Labor and Welfare is the Japanese Medicines Organization, a half—private, half-state organization whose tasks include monitoring any adverse reaction to drugs during clinical trials, promoting R&D in the field of creating new drugs, selective study of patented medicines, generics and cosmetics, ensuring safety standards and licensing, checking raw materials and providing advice to companies on clinical trials.
The Bureau of Pharmaceutical and Medical Safety is responsible for the effectiveness and safety of prescription and non-prescription drugs, the supply of donated blood, the control of toxic and harmful substances, and drug control measures. A special evaluation and licensing unit under its management provides evaluations and instructions to drug developers, is responsible for contacts with other international regulatory agencies and determines the need for new medicines.
In 1997, under the patronage of the National Institute of Science and Health, a Center for the Evaluation of Pharmaceutical and Medical Equipment was established, designed to promote a better study of the use of new drugs.
Registration of new medicines in Japan is carried out in several stages, the final decision is made by the evaluation and licensing division of the Ministry of Health, Labor and Welfare. The necessary reports are provided to the Ministry by the Central Committee on Pharmaceuticals. Moreover, the Japanese government publishes all the research results for each product. Thus, the relevant departments are trying to increase the transparency and effectiveness of their actions.
The number of pharmacoeconomical studies is rapidly gaining momentum. Thus, from 2000 to 2005, data on 700-800 studies of medicines were published annually in Japan, slightly less on pharmacoeconomical analysis of medical equipment.
Clinical trials always take place in three phases. In the first phase, the drug is tested on 20 healthy volunteers; in the second phase, clinical trials are conducted in hospital conditions, except in cases when the safety of the drug is fully guaranteed (test on 100 patients); in the third phase, tests are conducted in conditions similar to real clinical practice, with the participation of both inpatient and outpatient patients, in depending on the characteristics of the drug (200 patients, including the control group).
Japan has adopted Standards for Qualified After-sales Supervision (Good Post-Marketing Surveillance Practice, GPMSP), which apply to pharmaceutical manufacturers, importers and distributors. This practice of supervision is an original system of evaluation and rechecking, which allows you to quickly and reliably identify an adverse reaction to any type of medicine. Depending on the classification of medicines, their evaluation lasts from four to ten years, after which a re-evaluation is carried out every five years. According to the regulation, all therapists, dentists and pharmacy managers are required to immediately report to the Ministry of Health, Labor and Welfare of Japan about all cases of an adverse reaction to the medicine, and manufacturers — also about each case of the disease due to an adverse reaction to the medicine. In addition to emergency information, a detailed report must be submitted: up to 30 days in general cases, and no more than 15 days if the patient has died or the company suspects that the drug causes serious diseases.
For all its external attractiveness and transparency, the existing system makes it possible to effectively influence the policy of choosing medicines and many other issues. The organizations mentioned in this section have more freedom of action in terms of regulation and can make important decisions independently. Why not choose a domestic manufacturer, if there is the will of the state and society?
Prices and compensation for medicinesAll residents of Japan over 65 years of age, and in the presence of certain diseases and for persons over 40, the health insurance system applies.
The insurance covers only prescription medications. Citizens under the age of 40 are required to pay for their own treatment.
The list of medicines for which medical insurance guarantees are valid is updated annually (in March, May, August and November). The prices of medicines containing new chemicals are calculated in comparison with existing similar medicines. If there are none, the price is determined by the cost method. Drug prices are reviewed every two years. This is partly due to the fact that more than 90 percent of prescription medications are delivered to medical institutions through wholesalers, the remainder is delivered directly to hospitals, clinics and distribution pharmacies. As a result of passing through all these channels, the problem of sharp jumps in prices for medicines arises. In order to optimize the regulation of prices for medicines, a commission was established in 2002 under the management of the Central Medical Council for Social Insurance, whose duties include reviewing prices for various groups of domestic and foreign medicines and developing appropriate recommendations.
A big problem in Japan is the rapid aging of the population. According to the forecast, by 2025 the number of residents aged 65 years and older will be 25.8 percent, which makes Japan the state with the fastest aging nation among developed countries. This will lead to higher costs for pensions, medical care, etc., while the share of working citizens who bear the burden of all these costs will decrease.
National expenditures on medical care will increase rapidly in the coming years, that is, there will be a threat of a large gap between the growing financial requirements and the ability of society to fulfill them. Until 2008, Japan carried out a reform of the health care system aimed primarily at cost-effective provision of quality medical care and a proportionate distribution of costs. Among its expected results are the decentralization of the medical insurance system, the development of a network of general medical care hospitals, the introduction of a new insurance system for people over 75 years old.
ConclusionThe future of the Japanese pharmaceutical market largely depends on the processes of international integration.
Investing in Japan has always been and still is not an easy thing. Nevertheless, the revision of regulatory laws and procedures that transform the Japanese business environment makes the Japanese pharmaceutical market more accessible to foreign companies, which has not happened before in the history of the country.
Sergey Kotlyar, Andrey Ivashchenko, TSVT "HimRar" for STRF.ruPortal "Eternal youth" www.vechnayamolodost.ru