This is a best prospect industry sector for this country. Includes a market overview and trade data.
Last Published: 9/6/2018

Overview

Japan continues to be one of the largest pharmaceutical markets in the world despite the more challenging business landscape due to demographics. According to the latest official figures from the Ministry of Health, Labour and Welfare (MHLW)’s Annual Pharmaceutical Production Statistics, the Japanese market for prescription and nonprescription pharmaceuticals in 2017 totaled $95 billion (up 2.3 percent from 2016 in yen terms). More than 90 percent of the total market consists of prescription pharmaceuticals. Imports of foreign pharmaceuticals accounted for approximately 38 percent of the total Japanese market in 2017. The total market share of U.S.-origin pharmaceuticals, i.e., including local production by U.S. firms and U.S.-owned compounds licensed to Japanese manufacturers estimated to be approximately 20 percent. The market is expected to remain one of the largest due to continued demands for drugs from Japan’s aging population. According to IQVIA, the world’s largest contract research organizations, immunosuppressive agents, diabetes treatment agent and anti-tumor agents exhibited showed year-on-year high growth in 2017 in terms of therapeutic category. IQVIA projected that growth in these areas will be driven by next-generation biotherapeutics. However, due to more challenging pricing environment, it projected that Japan is likely to be the only one of the world’s major pharmaceutical markets to register a negative compound annual growth rate (CAGR) between -3% and 0% in 2018-2022. 

On the product approval front, MHLW has been taking steps to improve the regulatory environment and to expedite the review process. For example, in 2015, MHLW introduced the “Sakigake” designation scheme, a Japanese version of an equivalent to the U.S. FDA’s Breakthrough Therapy (BT) designation to accelerate the time to market for innovative drugs. See http://www.mhlw.go.jp/english/policy/health-medical/pharmaceuticals/140729-01.html for further information about the Sakigake. In 2017, MHLW introduced the “Conditional Early Approval” system for drugs that treat serious diseases for which there are limited treatment options, and drugs that are difficult to conduct clinical trials due to the limited number of patients. Once eligible, the product will be placed on the priority review pathway.  Please see http://www.pmda.go.jp/files/000222439.pdf for further details about the Conditional Early Approval system.

While these fast-track alternatives are a welcome development, it is important to note that so far, only a handful of drugs and diagnostic devices have received approval under the "Sakigake" and "Conditional Early Approval" process. The vast majority of products continue to be processed through the normal review procedures of the Pharmaceutical and Medical Device Agency (PMDA). In JFY 2018, the PMDA is aiming to complete the review of 80% of new drugs (which are considered standard products) in 12 months and nine months for priority products at the 80th percentile (up from 70% in JFY2016). In 2017, PMDA was the second fastest among the world’s six major regulators to approve new drugs.

Contrary to the positive developments on the regulatory approval side, pricing remains a challenge due to strong fiscal pressures by the Japanese government to contain health care that continues to increase as a result of Japan's rapidly aging population. These pressures can be seen in the most recent reimbursement price revision from 2018 where MHLW implemented a series of measures that undermine Japan’s pro-innovation environment. In particular, MHLW made drastic changes to the Price Maintenance Premium (PMP) system implemented in 2010 which provided a predictable and stable pricing environment for innovative drugs thru the life of the patent. MHLW amended the eligibility criteria of the PMP system to reduce the number of innovative drugs covered under the system. In addition, MHLW created a new company criteria to limit the number of companies that can receive the full premium. As a result, the number of products that received the PMP designation fell by approximately 33% in JFY 2018 from two years ago. 

Regardless of these cutbacks on PMP designations, the Japanese government estimates that Japan’s social welfare spending will continue to grow, reaching 190 trillion yen in JFY 2040, about a 57% increase from 121.3 trillion yen in JFY 2018. As such, the pressure to contain healthcare spending remains strong. In June 2018, GOJ approved the 2018 Basic Policy on Economic and Fiscal Management and Reform, known as “honebuto”. This year’s honebuto again underscored the need to contain social welfare spending. Although no numerical targets were included, the honebuto specifically called for additional modifications to the reimbursement pricing mechanism. For example, the honebuto calls for the use of economic evaluations, such as Cost-Effective Analysis (CEA), upon the reimbursement price listing of new drugs. It also stated that the reimbursement price revisions will be conducted on all products in JFY2019 in conjunction with the planned consumption tax increase in October and JFY2020, and the scope of the “off-year” revision scheduled for JFY2021 will be decided by the end of 2020. This move from the biennial reimbursement price revision to the annual revision will have significant impacts to pharmaceutical companies.


Unit: USD thousands

 

2015 

2016

2017

2018 (Estimated)

Total Local Production

56,344

61,223

60,694

59,480

Total Exports

  1,268

  1,613

  1,464

  1,538

Total Imports

33,226

33,226

36,198

37,284

Imports from the U.S.

  5,713

  5,713
(Estimated)

  6,878
(Estimated)

  7,084

Total Market Size

88,302

95,856

95,428

95,227

Exchange Rates

121.05

108.66

112.10

112.10

Total market size = (total local production + imports) – exports
Data Sources:
Total Local Production:  GOJ Ministry of Health, Labor and Welfare (MHLW)
Total Exports:  MHLW
Imports from U.S.:  MHLW
Import figures from U.S. for 2016 and 2017 are unofficial CS Japan estimates.

Figures for 2018 unofficial CS Japan estimates. 


Leading Sub-Sectors
Biotechnology
Over the last thirty years, the estimated size of the Japanese biotech-based economy grew rapidly from $221.3 million in 1986 (at the exchange rate of 112.10 yen to the dollar) to $3.2 billion in 1991 and to $29.8 billion in 2016. In 2017, it further grew by 3% to $30.7 billion, according to the Nikkei Biotechnology & Business, a leading industry publication. Within the biotech economy, the healthcare/pharmaceutical industry segment is the largest sector with $1.6 billion (or a proportionate weight of 65.9% of the total). Within that sector, therapeutic antibody drugs and Fc (fragment crystallizable) fusion protein drugs have been the two largest drivers for growth and this trend is expected to continue for the coming few years. Also, increased business opportunities around regenerative medicine and nucleic acid drugs have begun to emerge in 2017, following the enactment of two regenerative medicine related laws in late 2014. In order to further support Japan’s biotech economy, the Ministry of Economy, Trade and Industry (METI) implemented programs to bolster Japanese medical ventures and supported the launching of a new Japan Healthcare Venture Summit that was held at BioJapan 2017. Biotech-based economy/industry is an integral part of the Abe Administration’s growth strategy as captured in the “Growth Strategy 2017 – Society 5.0”.  GOJ Cabinet Office is also expected to soon release its growth strategy for other sectors such as biomaterials.
 
Opportunities

BioPharma Expo 2018
June 27 - 29, 2018
Tokyo Big Sight

INTERPHEX JAPAN
June 27 - 29, 2018
Tokyo Big Sight

BIOtech Japan
June 27 - 29, 2018
Tokyo Big Sight

BioJapan 2018
October 10 – 12, 2018
Pacifico Yokohama

Medical Japan 2019*
February 20 – 22, 2019
Intex Osaka

CPhI Japan 2019
March 18 -20, 2019
Tokyo Big Sight

* A U.S. Trade Fair Certification-endorsed event.


Web Resources
Ministry of Health, Labor and Welfare (MHLW)
Pharmaceutical and Medical Device Agency (PMDA)
Pharmaceutical Research and Manufacturers of America
The Japan Pharmaceutical Manufacturers Association
The Federation of Japan Pharmaceutical Wholesalers Association (JPWA)
Pharmaceutical and Medical Device Regulatory Science Society of Japan (PMRJ)
The Pharmaceutical Society of Japan (PSJ)
Japan Generic Medicines Association (JGA)
Japan Bioindustry Association (JBA)


CS Japan Contact

Pharmaceutical and Medical Device
Mr. Hiroyuki Hanawa, Senior Commercial Specialist
Hiroyuki.Hanawa@trade.gov

Biotechnology and Regenerative Medicine
Mr. Chris Y. Ono, Senior Commercial Specialist
Chris.Ono@trade.gov

Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.



Japan Biopharmaceuticals Trade Development and Promotion