In 2001, in an unprecedented move, Roche succeeded in negotiating the acquisition of Chugai and more recently, in 2003 Merck & Co. acquired 100 percent ownership of Banyu Pharmaceuticals. There is still a long way to go, however; Japan’s political system is not geared towards rapid reforms. There is little immediate prospect of a Mutual Recognition Agreement between Japan and the worlds other major regulators, and backsliding on the part of Japanese regulators is feared by many.
The introduction of a reference pricing system was abandoned in 1999, although many suspect it may re-emerge in the near future. In addition to increased multinational activity, the creation of Astellas Pharma Inc through the merger between Yamanouchi Pharmaceutical and Fujisawa, and the proposed merger between two of Japan’s leading drug companies, Sankyo and Daiichi, promises to boost the domestic production sector and perhaps herald a new era for the industry, where the nation’s leading manufacturers are increasingly being forced to forge agreements with each other to enable them to compete with rivals from overseas.
The best future prospects in the Japanese medical sector are related to the care of the elderly. The number of people aged 65 and over will exceed 25 percent of the population over the next 20 years. April 2000 saw the introduction of Japan’s major new insurance system for care of the elderly. The initial annual cost of this scheme is estimated at $40 billion or around 15 percent of total health care expenditure.
Global pharmaceutical companies have already begun to take advantage of the changing regulatory and economic conditions in Japan. The pharmaceutical companies have been taking note of such situation. They are queuing up to avail the favorable conditions .
The following five years will see further mergers and acquisitions as already demonstrated by the leading companies within Japan.
The Leading Pharmaceutical Companies Within Japan
1. Takeda
2. Astellas
3. Daiichi Sankyo
4. Pfizer
5. Roche (Chugai)
6. Eisai
7. Dainippon Sumitomo
8. Novartis
9. Taisho
10. Mitsubishi Pharma
In the wake of the current industrial and economic situation it is being assumed that more Japanese pharmaceutical companies would either emerge with outstation companies or be owned by them. The market is therefore an attractive target for western companies’ expansion plans. The building of strong in-house R&D capabilities will be central to Japanese Pharma companies’ strategies for survival. However, improving R&D capabilities will not be achieved by increasing spending alone; strategic and organizational change is also needed.
Of all the Japanese pharmaceutical companies only Takeda is counted amongst the best twenty pharmaceutical companies in the world. Despite the various problems that continue to affect them the research and development facilities of the Japanese pharmaceutical companies are significant.
Japanese pharmaceutical companies: Survival through improved R&D
A strong R&D base needed- The advantages to building a strong R&D base are considerable for Japanese companies. At a basic level, this should provide more reliable opportunities to drive future sales growth; reducing the reliance on licensing drugs from Western companies.
More importantly, it could provide the strategic opportunities necessary to ensure Japanese companies’ survival in the face of increasing competition, even enabling them to secure a position among the global pharmaceutical leaders in international markets.
The size of the Japanese pharmaceutical market makes it an attractive target for Western companies’ expansion plans, but the low level of market growth is contributing to an increasingly difficult operating environment for domestic players. The continued pace of regulatory reform, aimed largely at reducing the government’s health care bill is increasing the need for Japanese companies to change their operating strategy.
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