Ja­pan of­fers growth op­por­tu­ni­ties in gener­ics & biosim­i­lars

BioSpectrum (Asia) - - Bio Content - Priyanka Ba­j­pai priyanka.ba­j­pai@mmac­tiv.com

De­mo­graphic pres­sures on health­care costs in Ja­pan are driv­ing a po­lit­i­cal agenda that will ben­e­fit play­ers with lower costs so­lu­tions. Gener­ics are an ob­vi­ous route, but Ja­pan’s sta­tus as a highly-de­vel­oped econ­omy with a pharma in­dus­try that leads in in­no­va­tion opens other pos­si­bil­i­ties, par­tic­u­larly in the longer term for the biosim­i­lars seg­ment. In fact, an over­whelm­ing 59 per cent of do­mes­tic re­spon­dents be­lieve biosim­i­lars will be the fastest grow­ing sec­tor, ac­cord­ing to CPhI Ja­pan 2018 re­port. The Japanese pharma econ­omy is in a state of tran­si­tion to­wards greater open­ness, po­ten­tial re­wards for early in­ter­na­tional movers were cited as an­other key fac­tor in the rapid shifts pre­dicted in 2018. CPhI fore­casts 2018 will be a trans­for­ma­tive year for Japanese pharma as the mar­ket evolves to­wards growth in gener­ics, biosim­i­lars and in­creased in­ter­na­tion­al­iza­tion.

Ja­pan is the third largest pharma mar­ket glob­ally. Ac­cord­ing to a Glob­alData sur­vey, the phar­ma­ceu­ti­cal sec­tor is fore­cast to reach $72 bil­lion by 2021, rep­re­sent­ing 17 per cent growth be­tween 2011 and 2020. Yet, in the past, the mar­ket has not been an easy ac­cess for many in­ter­na­tional com­pa­nies. This is ac­counted by a his­tor­i­cally in­su­lar do­mes­tic mar­ket as well as im­per­vi­ous en­try bar­ri­ers, lead­ing to lesser op­por­tu­ni­ties.

How­ever, times are chang­ing now and Ja­pan’s Pharma econ­omy is in a state of tran­si­tion to­wards greater open­ness. 2018 could be a trans­for­ma­tive year for the Japanese pharma mar­ket, ac­cord­ing to a new re­port from CPhI 2018, with strong growth evolv­ing from el­e­vated use of gener­ics, biosim­i­lars and in­creased in­ter­na­tion­al­iza­tion. Ja­pan’s do­mes­tic mar­ket is look­ing in­creas­ingly at ex­ports, and in­ter­na­tional com­pa­nies are seek­ing op­por­tu­ni­ties to in­vest in and ac­cess the large, well-funded health­care sys­tem.

For the past ten years, Ja­pan has been able to sus­tain the growth curve in pharma in­dus­try. Ja­pan’s de­mo­graphic pro­file, with a rapidly age­ing pop­u­la­tion, pro­vides con­sid­er­able growth po­ten­tial for in­no­va­tive drug­mak­ers given the grow­ing de­mand for chronic disease medicines, along with broad ac­cess to health­care. The reg­u­la­tory regime is amongst the most ro­bust glob­ally, with a well-

de­vel­oped drug ap­proval process and one of the strong­est in­tel­lec­tual prop­erty pro­tec­tion sys­tems. In ad­di­tion, Ja­pan’s mar­ket ex­pen­di­ture - both on a per capita and ab­so­lute ba­sis - is among the high­est glob­ally, in­di­cat­ing a strong pref­er­ence for and an abil­ity to pay for high qual­ity medicines. Fur­ther com­pound­ing drug­maker op­por­tu­ni­ties in Ja­pan is the high level of ur­ban­i­sa­tion, mean­ing a high level of ac­cess to ad­vanced health­care fa­cil­i­ties. With the keen in­ter­est of in­ter­na­tional world to en­ter into the do­mes­tic mar­ket, Ja­pan is spear­headed to de­velop into an ac­qui­si­tioned en­vi­ron­ment.

Chal­lenges

Patent ex­piry, an­nual price cuts, gener­ics tak­ing holdJa­pan is fac­ing a se­ries of chal­lenges. To add on to the list of prob­lems is the grow­ing fund­ing gap. It is es­ti­mated that if the sit­u­a­tion is not put in con­trol, this gap will rise to around $160 bil­lion by 2020 and $370 bil­lion by 2035 (ac­cord­ing to Deal­lus Con­sult­ing).

Ja­pan’s gov­ern­ment spends $93 bil­lion on phar­ma­ceu­ti­cal an­nu­ally. The phar­ma­ceu­ti­cal mar­ket is highly frag­mented, with over 1,000 com­pa­nies, hun­dreds of which are very small en­ter­prises sell­ing tra­di­tional Chi­nese medicines.

Sim­ply in­creas­ing the coun­try’s in­surance pre­mi­ums will hardly make an im­pact as it will

dam­age sec­tors be­yond pharma by in­creas­ing labour costs and re­duc­ing com­petive­ness. With al­ready high co-pay­ment rates at around 30 per cent, there is lit­tle scope for fur­ther ex­pan­sion. Few re­cent ex­am­ples of the im­pact of these changes on the strate­gies of pharma com­pa­nies are: Re­cent cuts to Op­divo from Ono Phar­ma­ceu­ti­cal and Gilead’s So­valdi and vol­un­tary re­duc­tion in Merck’s can­cer ther­apy, Keytruda.

Ja­pan has long been a great spot for patented drug con­sump­tion, with a strong in­no­va­tive pharma in­dus­try, but as an impending patent cliff has loomed, many com­pa­nies are now forced to re­con­sider their long- and medium- term strate­gies.

Op­por­tu­ni­ties

Be­cause of nu­mer­ous chal­lenges, Ja­pan’s pharma mar­ket holds a dearth of op­por­tu­ni­ties. Through di­verg­ing strate­gies, in­no­va­tive big pharma can step into the mar­ket and in­vest in its pipe­line and grow ex­ports. Op­por­tu­ni­ties for both Japanese and in­ter­na­tional generic com­pa­nies are clear, es­pe­cially with the grad­ual shift of pub­lic at­ti­tude from cul­tural scep­ti­cism of generic medicines. Many Ac­tive Phar­ma­ceu­ti­cal In­gre­di­ent (API) and generic fin­ished dosage sup­pli­ers have recog­nised this po­ten­tial and have ac­knowl­edged the unique needs and chal­lenges of the Japanese mar­ket. Ja­pan gov­ern­ment is com­mit­ted to trans­form its phar­ma­ceu­ti­cal land­scape from an in­ter­nally-fac­ing mar­ket to a global one.

Gener­ics Mar­ket and gov­ern­ment ini­tia­tives pro­mote in­vest­ments

Once con­sid­ered one of the most im­ma­ture gener­ics mar­kets, Ja­pan has launched a se­ries of re­forms since 2007 to cope up with the chal­lenges. This re­sulted in gener­ics reach­ing 60.1 per cent in the sec­ond quar­ter in 2016 in Ja­pan, up from 18.7 per cent in 2007 (Re­search and Mar­kets).

In or­der to re­duce the health­care ex­pen­di­ture bur­den, in­clud­ing a bur­geon­ing na­tional bud­get deficit the Japanese gov­ern­ment is pro­mot­ing the use

“There are sev­eral sig­nif­i­cant fac­tors we need to take into ac­count con­sid­er­ing the busi­ness land­scape in Ja­pan- from in­vest­ment or reg­u­la­tory per­spec­tive. Japanese gov­ern­ment is now proac­tively start­ing to en­hance and sup­port the pharma com­pa­nies by pro­vid­ing suf­fi­cient grants and pro­vid­ing a con­sult­ing sys­tem. How­ever, there is a lot of scope for im­prove­ment. There are very few ven­ture capi­tols to sup­port start-up com­pa­nies. This is a big chal­lenge that needs spe­cial at­ten­tion.” - Dr Mi­noru Ono, Pro­fes­sor and Chair­man, De­part­ment of Car­diac Surgery, Grad­u­ate School of Medicine, The Univer­sity of Tokyo

of gener­ics as a cost-con­tain­ment tool. To that end, the gov­ern­ment in May 2017, stated that it would boost the use of generic drugs from 56 per cent to more than 80 per cent by Septem­ber 2020.

● From De­cem­ber 2016, the Min­istry of Health, Labour and Wel­fare has started re­view­ing drug prices an­nu­ally in­stead of once ev­ery two years, based on the dif­fer­ence be­tween the ac­tual mar­ket price and the of­fi­cial price.

● Al­though in­creas­ing generic sub­sti­tu­tion and yearly pric­ing re­views are likely to re­strict growth in the Japanese phar­ma­ceu­ti­cal mar­ket in the fu­ture, the gov­ern­ment is also work­ing to re­duce long reg­u­la­tory pro­cesses faced by phar­ma­ceu­ti­cal in­dus­try in or­der to ex­pe­dite the ap­proval of prod­ucts and im­prove ac­cess to novel ther­a­peu­tics. This will not only at­tract for­eign com­pa­nies but also pos­i­tively in­flu­ence the health­care mar­ket.

● PMD Act: The rev­o­lu­tion­ary 2014 re­vi­sion of Ja­pan’s key­stone phar­ma­ceu­ti­cals law (re­named PMD Act) for phar­ma­ceu­ti­cal and med­i­cal de­vices was the big­gest gov­ern­ment ini­tia­tive. Ja­pan now boasts to have a faster and smoother drug ap­proval process as com­pared to both Europe and the US. This has brought a pos­i­tive change in the ap­proach of in­ter­na­tional com­pa­nies to­wards the Japanese mar­ket, and have trig­gered a num­ber of part­ner­ships, li­cens­ing deals, and re­search col­lab­o­ra­tions in Ja­pan with ex­ist­ing busi­ness there.

● Two-week re­stric­tion pol­icy: Ja­pan gov­ern­ment has in­tently abol­ished many un­favourable rules that it once fol­lowed. The ‘two-week re­stric­tion’ pol­icy per­mit­ting doc­tors only to write a pre­scrip­tion of two weeks as a safety pre­cau­tion, as Ja­pan was not a part of global clin­i­cal tri­als, has now been ren­dered in­valid. This was a ma­jor de­ter­rent to the Japanese mar­ket.

“We are con­stantly work­ing with other Asian coun­tries, on a mul­ti­tude of re­search top­ics. In­ten­tion is to fa­cil­i­tate knowl­edge ex­change be­tween doc­tors and pro­fes­sors from these coun­tries, while col­lab­o­rat­ing and con­tribut­ing to ar­eas of mu­tual in­ter­est. Data se­cu­rity and pri­vacy is also a key con­sid­er­a­tion – es­pe­cially when it in­volves shar­ing of elec­tronic or pa­tient doc­u­ments de­ployed in the sys­tem, if they have to be shared across bor­ders.” - Soichiro Sasago, Direc­tor for Pol­icy Plan­ning, Min­istry of Health, Labour and Wel­fare, Ja­pan

Favourable mar­ket for biosim­i­lars

Ja­pan is con­sid­ered an emerg­ing mar­ket for biosim­i­lars as the up­take for some prod­ucts is now at par with gener­ics. It is well known that bi­o­log­ics have gained sig­nif­i­cant trac­tion in the phar­ma­ceu­ti­cal in­dus­try for the past cou­ple of years. It is es­ti­mated that by 2020, biosim­i­lars will com­prise 27 per cent of the phar­ma­ceu­ti­cal mar­ket, gen­er­at­ing a pre­dicted rev­enue of $290 bil­lion. Glob­ally, there are more than 700 biosim­i­lars ap­proved or in the pipe­line. This is driv­ing their up­take across the world and Ja­pan is prov­ing to be a par­tic­u­larly lu­cra­tive mar­ket for biosim­i­lar mak­ers.

Ja­pan’s age­ing pop­u­la­tion, cou­pled with less strin­gent reg­u­la­tory en­vi­ron­ment than other coun­tries could be the rea­son be­hind such a strong mo­ti­va­tion for the early up­take of biosim­i­lars. The first biosim­i­lar in Ja­pan was ap­proved in 2009, and to date, the Phar­ma­ceu­ti­cals and Med­i­cal De­vices Agency (PMDA), has given the go ahead for 10 biosim­i­lars.

The vol­ume shares of biosim­i­lars sug­gest that in the next five years Ja­pan could be­come a key mar­ket, closely fol­low­ing the EU’s lead. The over­all out­look for biosim­i­lars looks good for Ja­pan. As a de­vel­oped coun­try, they have large ac­cess to af­ford­able prod­ucts, an es­tab­lished reg­u­la­tory en­vi­ron­ment, good en­gage­ment with pay­ers in favour of biosim­i­lars and a high pres­ence of biosim­i­lars in the phar­ma­ceu­ti­cal mar­ket.

Japanese glob­al­i­sa­tion

Com­pa­nies are now fol­low­ing a dif­fer­ent ap­proach to en­hance strong dis­tri­bu­tion and sales ca­pa­bil­i­ties.

Takeda, the coun­try’s largest pharma com­pany, has been in ac­quis­i­tive mood re­cently, and is one of the main lead­ers in spear­head­ing a more global out­look from Ja­pan’s pharma sec­tor. Takeda has bought its stem cell ther­apy part­ner TiGenix for $626 mil­lion, with the sug­ges­tion that fur­ther ac­qui­si­tions could fol­low.

Takeda’s re­cent joint part­ner­ship with the man­u­fac­tur­ing scale of Teva Phar­ma­ceu­ti­cals, one of the world’s largest gener­ics com­pa­nies is an ex­cel­lent ex­am­ple that show­cases how com­pa­nies are en­ter­ing into new ven­tures to im­prove their sales prow­ess and dis­tri­bu­tion re­la­tion­ships.

Sim­i­larly, Dai­ichi Sankyo has part­nered with Am­gen to com­bine its com­mer­cial scale with Am­gen’s emerg­ing biosim­i­lars port­fo­lio in the Japanese mar­ket. Maruishi, a smaller Japanese com­pany, fo­cuses its en­er­gies on a fi­nite set of hospi­tal call points along the sur­gi­cal con­tin­uum, where it has a mar­ketlead­ing po­si­tion in anes­the­sia and post-sur­gi­cal pain. Maruishi lever­ages this tar­geted com­mer­cial scale and ex­per­tise to be­come a “part­ner-of-choice” for in­no­va­tors lack­ing such in­fra­struc­ture, as ev­i­denced by its Japanese com­mer­cial­iza­tion part­ner­ship with Faron Phar­ma­ceu­ti­cal for Faron’s acute res­pi­ra­tory dis­tress syn­drome as­set, Trau­makine.

Global drug de­vel­op­ment part­ner­ships

A more re­cent trend that has come up as a re­sult of gov­ern­ment ini­tia­tives is that the big pharma in Ja­pan has started to in­creas­ingly look to part­ner with in­ter­na­tional firms for co-de­vel­op­ment of novel ther­a­pies.

Strate­gic al­liances: New name of the game

The Ja­pan phar­ma­ceu­ti­cal in­dus­try has great po­ten­tial. As Japanese pharma mar­ket is in a state of tran­si­tion and is more open to new strate­gies to boost global in­flux, po­ten­tial re­wards for early in­ter­na­tional movers can­not be ig­nored. How­ever, this can­not be achieved with­out an ap­pro­pri­ate strat­egy in place. Part­ner­ship with do­mes­tic firms – tak­ing ad­van­tage of lo­cal knowl­edge as well as tech­ni­cal ex­per­tise – ap­pears a bind­ing strate­gic move. The po­ten­tial for di­rect en­try and even ac­qui­si­tions can­not be dis­counted in the medium term which will make this land of ris­ing sun, a hub of growth for pharma com­pa­nies.

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