Perspective

10.1517/17460441.1.3.205 © 2006 Informa UK Ltd ISSN 1746-0441 205

Perspective on the drug discovery and market landscape in Japan: can it compete in the worldwide arena?Toshi KobayashiPhRMA (USA), Japan Office Room 202 Toto Building., 5-1-4 Toranomon, Minato-ku, Tokyo 105-0001, Japan

The global pharmaceutical industry is described as facing an ‘innovationcrisis’ following the ‘go-go-pharma’ era; in other words, the problem is oneof ‘more money and fewer products’. Nevertheless, patients worldwide areawaiting innovative drugs. Therefore, the pharmaceutical industry has a dutyto discover and develop novel drugs and medical technologies. Through uni-versal coverage and reform of the patent system, the Japanese pharmaceuti-cal industry has expanded greatly in line with the Japanese economy.However, in terms of scale and R&D investment, the Japanese pharmaceuticalfirms have lagged behind the foreign multinationals, which have undergonesuccessive mergers and acquisitions. Meanwhile, it is true that several Japa-nese firms are playing an active role in overseas markets with their ownblockbusters. This paper analyses and gives an overview of new trends inJapan’s pharmaceutical industry within the global context.

Keywords: Japan-originated blockbusters, Japan pharmaceutical industry, PMDA, user fees

Expert Opin. Drug Discov. (2006) 1(3):205-209

1. Introduction

The fundamental considerations for the pharmaceutical and biotechnologyindustries are [1]:

• patients are waiting• our enemy is diseases• working to save lives is our job

Our mission is to discover and develop drugs accessible to patients worldwide inboth International Committee on Harmonization (ICH) and non-ICH countries ina spirit of ‘beyond harmonisation’ and ‘beyond cultural differences’. Japan, the sec-ond largest market in the world after the US (worth US$60 billion), is also sufferingfrom the impact of healthcare cost containment policies, but it is undisputedly themost important market in Asia. The following section analyses the ‘today andtomorrow’ of this Japan including R&D, review process and market comparisonswith the West.

2. Japanese pharmaceutical industry landscape from the global perspective

2.1 Past and current overviewThe corporate R&D investment infrastructure in Japan was set up through the gov-ernment introduction of universal coverage in 1961 and the patent reforms in 1972(implementation of process, product and use patents; Figure 1). Japan’s drugindustry also grew in line with the rapid development of the economy. However, the

1. Introduction

2. Japanese pharmaceutical

industry landscape from the

global perspective

3. Regulatory environment and

R&D productivity in Japan

4. Expert opinion

Exp

ert O

pin.

Dru

g D

isco

v. D

ownl

oade

d fr

om in

form

ahea

lthca

re.c

om b

y N

yu M

edic

al C

ente

r on

12/

07/1

4Fo

r pe

rson

al u

se o

nly.

Perspective on the drug discovery and market landscape in Japan: can it compete in the worldwide arena?

206 Expert Opin. Drug Discov. (2006) 1(3)

Table 1. Global market (US$500 billion, 2004).

1995(200)

1997(220)

1999(269)

2003(466)

2004(518)

2006(600)

US 31% 35% 41% 52% 54% 52%

Japan 21% 16% 13% 12% 11% 9%

Europe 29% 29% 30% 23% 23% 22%

Others 19% 20% 16% 12% 12% 17%

Figure 1. Overview of Japanese pharmaceutical industry: sales/marketing. Source: T Kobayashi (PhRMA-J). Drug Discovery and Development Summit in Japan. April 24, 2006.

Pha

rma-

prod

uctio

n/tr

illio

n

Recession period

Economy bubble brokenRegulatory environmentAIDSScandal

Challenge period

+ 3%/year

+ 1%/year

Growing period

-1961 national health insurance-1972 new patent law-Japan economy growing

0

1

2

3

4

5

6

7

8

1975 1980 1990 1995 2000 2005 2010 2015

** Overseas companies in Japan 30%

?

* * Percentage of overseas sales by Japanese companies + 30% Takeda 44% D-Sankyo 34% Astellas 45% Eisai 55%

**

Others

Europe

Japan

US

drug market has slumped over the past 10 years due to thehealthcare cost curbs following the collapse of the bubbleeconomy and several scandals such as the HIV-contaminatedblood products precipitating the regulatory approval reviewdelays. It is highly interesting that, while Japan was in reces-sion, drug production (sales) in the US and elsewhere grew by∼ 2.5 times between 1995 and 2004 (Table 1).

Japan’s market share in 1995 was as much as 21%, but hadhalved to 11% by 2004. In contrast, the US share rose from31 (1995) to 50% (2004) – evidence of US predominance inthe drug industry in the twentieth century (Table 1). In theUS, legislation is implemented rapidly following successfulinitiatives by official lobbyists and Congress, and prioritygiven to public benefits. As a result, transparency is main-tained through reports to Congress. Furthermore, in the USeven losers always have a chance to rechallenge. Cooperation

between industry, government and academia is also fruitful inthe US, as symbolised by the Federal Technical Transfer Act(1986), Prescription Drug User Fee Act (PDUFA [1992])and Collaborative Research and Development agreements(CRADA [1986]). In 2005, the Pharmaceutical Researchand Manufacturers Association (PhRMA), representing theUS pharmaceutical industry, invested US$40 billion and thegovernment (NIH) US$30 billion in R&D, and thus estab-lished the country as a world leader in life sciences. This kindof state level infrastructure should serve as a useful referencenot only for Japan, but for other countries too.

2.2 Future predictionsAn analysis of the Japanese market reveals that it faces thefollowing interesting realities (Figure 1). The Japanesepharmaceutical market is worth US$60 billion, but the

Exp

ert O

pin.

Dru

g D

isco

v. D

ownl

oade

d fr

om in

form

ahea

lthca

re.c

om b

y N

yu M

edic

al C

ente

r on

12/

07/1

4Fo

r pe

rson

al u

se o

nly.

Kobayashi

Expert Opin. Drug Discov. (2006) 1(3) 207

domestic multinationals such as Takeda, Astellas,Daiichi-Sankyo and Eisai have sales of ∼US$ 20 billion inoverseas markets (chiefly the US), equivalent to ∼ 30% ofthe Japanese market.

On the other hand, the foreign member companies ofthe PhRMA and European Federation of PharmaceuticalIndustry Associations (EFPIA) account for US$20 billion(∼ 30%) of the US$60 billion Japanese pharmaceuticalmarket.

These two trends are likely to continue increasing.Which slope on the graph of Figure 1 will rise more sharply

– that for the foreign company holdings in the Japanesemarket, or for the increase in overseas sales by Japanesefirms? This will be highly interesting to watch.

Also of concern is the clear contrast in the survival potentialof Japanese firms [2]. Those with highly globalised R&Dproductivity can potentially develop overseas markets (in theWest) and globalise further, whereas those with low R&Dproductivity cannot, and will lose their Japanese market toforeign firms (Figure 1). The strategy for survival depends noton institutionalised strategy, but on the leadership and deci-sion making by the respective top management. Delaying thedecision on whether to become affiliated with anothercompany or to transfer to a generic company is to be avoidedat all costs.

3. Regulatory environment and R&D productivity in Japan

3.1 Regulatory environmentIn the US, the FDA implemented PDUFA in 1992 and iscurrently preparing the PDUFA-IV (for 2007). This act is thevery prototype of industry–government collaboration. How-ever, in Japan, a Japanese-style PDUFA was finally initiated12 years later in April 2004 in conjunction with the inaugura-tion of the Pharmaceutical and Medical Devices Agency(PMDA) [3]. User fees in Japan are payable for consultationsand reviews and, therefore, differ from the US, where they arepayable for the review, product and establishment, but the

Table 2. Comparison of user fee budget among several drug agencies.

Japan US UK France (including device) EMEA

Staff number 292* 2,600 436 950 248

User feeContribution(billion yen)

6.0* 32.0 6.6 6.7 10.2

GovernmentAppropriationTotal budget of agency

25 46 0 34 30

User feeMarket sales

0.1 0.2 0.5 0.4 0.12

*Total of Ministry of Health, Labour and Welfare, Government of Japan. Headquarters (review, safety). Source: A Miyajima. Pharmaceutical and Medical Devices Agency. Drug Discovery And Development Summit in Japan. April 24, 2006.EMEA: European agency for the evaluation of medical products; PMDA: Pharmaceutical and Medical devices agency.

US FDA

Application fee

Product fee

Covered activities

Safety information

PMDA

Guidance for peri-authriation matters

Stabilising review system

Review process

Establishment fee

Application fee

Contribution

Figure 2. Availability of 100 top global medicines in Japan(as of March 2006). Of the top 100 global medicines, > 25%are not available in Japan.Source: IMS Health [101].

Available in Japan 31

Not availablein Japan 69

Exp

ert O

pin.

Dru

g D

isco

v. D

ownl

oade

d fr

om in

form

ahea

lthca

re.c

om b

y N

yu M

edic

al C

ente

r on

12/

07/1

4Fo

r pe

rson

al u

se o

nly.

Perspective on the drug discovery and market landscape in Japan: can it compete in the worldwide arena?

208 Expert Opin. Drug Discov. (2006) 1(3)

fundamental objective of ‘acceleration of reviews andapprovals’ is common (Table 2).

The consequence of such reform delays is that of the100 leading drugs available globally, 31 have not yet beenapproved in Japan, and Japanese patients are thus denied thebenefits of these new drugs. However, it is also importanthow many breakthrough and innovative drugs withoutalternatives are among these 31 drugs (Figure 2).

Simultaneous global developments are called for to ensurethat patients worldwide can equally enjoy the benefits of newdrugs, but the following problems come to mind:

• The cost effectiveness of clinical trials in Japan has to besolved, through such measures as providing the trial cen-tre infrastructure and giving better incentives toinvestigators.

• The assessment of Asian clinical trials – Mongolian Asians,who are genetically similar, should preferably be integratedas a subpopulation.

These problems cannot be solved singlehandedly, either byindustry, academia or government; instead, all-out initiativesunder a collaborative leadership are required.

3.2 R&D productivity linked to industry–government–academia collaborationThe author hopes to see a shift in focus back to the R&D pro-ductivity of Japanese firms. As shown in Table 3, there havebeen < 10 international blockbusters of Japanese origin(> US$1 billion) in the past decade. Japanese firms fulfilling thecritical mass criteria of US$10 billion revenues and a

competitive in the global sphere. However, the key to successlies in the selection of the therapeutic areas as well as thebalance of R&D investment on basic research versus research offirst-in-class versus research for best-in-class.

In turn, ‘R&D productivity’ refers to the cost-effectiveuse of resources. ‘Resources’ refers to ‘personnel’, ‘money’and ‘products’; for example, the External Drug Discoverysection that now forms a vital part of the research activitiesof pharmaceutical companies. As capitalist organisations,pharmaceutical companies invest ‘money’ and academia,and venture companies offer ‘personnel’ and create‘products or technologies’, which are returned to thecapitalists or pharmaceutical companies and become usefuldrugs and pharmaceutical technologies for the nation. Therole of the government and Diet (Diet in Japan refers toCongress in the US and parliament in the UK) is to supplythe financial support, deregulations, new acts and so on tofacilitate this cycle.

4. Expert opinion

Pharmaceutical R&D is an area with very many duplicationsstemming from inter-firm competition and inter-stateadministrative differences. It is true that many of the numerousdifferences between regulatory authorities in the scientificinterpretations have been solved by the ICH. The author wouldalso like to recommend the World Drug Agency for the promo-tion of simultaneous global developments [2]. The details shall beset out later, but in any event, a mechanism could be establishedvia this agency whereby investigational new drugs clinical trialnotifications that are agreed by the World Drug Agency asacceptable to be registered simultaneously in all areas for all clini-cal usage and that are good clinical practice-compliant shall alsobe accepted by the authorities in all areas. The authorrecommends this as a cost- and time-effective measure that willalso eliminate duplication (Figure 3).

Table 3. FDA-approved Japan-originated products (2005).

Trade Name

Company Registered Therapeutic

Mevalotin Sankyo 1989 Hypolipidaemia

Floxin Daiichi 1991 Antibiotics

LUPRON Takeda 1992 Anticancer

Takepron Takeda 1992 Antiulcer

Prograf Fujisawa 1992 Immunosuppresant

HARNAL Yamanouchi 1993 Dysuria

Blopres Takeda 1997 Antihypertension

Pariet Eisai 1997 Antiulcer

Actos Takeda 1999 Antidiabetic

Aricept Eisai 1999 Alzheimer’s

Olmesartan Sankyo 2005 Antihypertension

Rozelem Takeda 2005 Insomnia

Source: Japan pharmaceutical manufacturers association (JPMA).

Figure 3. Drug Discovery And Development Summit inJapan 2006.EMEA: European Agency for the Evaluation of Medical Products;ICH: International Committee on Harmonization; PMDA: Pharmaceutical andMedical Devices Agency.

ICH

WDA

PMDAFDA

EMEA

WDA

Japan

USA EU

Exp

ert O

pin.

Dru

g D

isco

v. D

ownl

oade

d fr

om in

form

ahea

lthca

re.c

om b

y N

yu M

edic

al C

ente

r on

12/

07/1

4Fo

r pe

rson

al u

se o

nly.

Kobayashi

Expert Opin. Drug Discov. (2006) 1(3) 209

Bibliography1. TAUZIN B: Opening remarks. American

Cancer Society. American Cancer Society University, Tokyo Graduation Ceremony (June 2006).

2. KOBAYASHI T: Japan’s pharmaceutical and technology market landscape. Drug Discovery and Development Summit, Japan (April 2006).

3. MIYAJIMA A: The objectives and goals of Japan’s pharmaceuticals and medical devices agency. Drug Discovery and Development Summit, Japan (April 2006).

Website101. http://www.imshealth.com

Offers information solutions for pharmaceutical and healthcare industries.

AffiliationToshi Kobayashi PhDTechnical Representative, PhRMA(USA), Japan Office, Room 202, Toto Building, 5-1-4 Toranomon Minato-ku, Tokyo 105-0001, JapanTel: +81 (0)35 408 1061;Fax: +81 (0)35 408 1062;E-mail: toshi.kobayashi@phrma-jp.org.

Exp

ert O

pin.

Dru

g D

isco

v. D

ownl

oade

d fr

om in

form

ahea

lthca

re.c

om b

y N

yu M

edic

al C

ente

r on

12/

07/1

4Fo

r pe

rson

al u

se o

nly.