Globalisation and Change in the Japanese Pharmaceutical Industry,

Transcription

1 Globalisation and Change in the Japanese Pharmaceutical Industry, August 2011 Workshop on British and Japanese Enterprise: Technology, Knowledge, Culture, and the Challenges of Globalisation Maki Umemura Cardiff University

2 Japanese pharmaceutical performance in context Leading global pharmaceutical firms, by pharmaceutical sales Source: Scrip Pharmaceutical Company League Tables, IMS Midas

3 Japanese pharmaceutical performance in context Leading global pharmaceutical firms, by pharmaceutical sales Source: Scrip Pharmaceutical Company League Tables, IMS Midas

4 Japanese pharmaceutical performance in context 2007 Source: Yūka Shōken Hōkokusho [Annual Securities Report] Tokyo Ōkurashō Insatsukyoku,, various years

5 Pharmaceutical Production: (in trillions of 2005Yen) Source: Ministry of Health and Welfare, Yakuji Kogyo Seisan Dotai Chosa Tokei, various years. Yakugyo Keizai Kenkyujo, Yakuji Nenkan, various years (1952, 1957).

6 Second largest market since the 1960s Value of pharmaceutical production, in millions of dollars Source: OECD, Gaps in Technology, 1969; OECD, OECD Health, various years

7 Imports and Exports: (in billions of 2005yen) Source: Ministry of Economy, Trade and Industry, White Paper on Trade, various years.

8 Japanese pharmaceutical performance in context Source: OECD, International Trade by Commodities Statistics

9 Few of the leading global products are by Japanese firms Top 10 global products, 2009 Source: IMS Health Midas, December 2009

10 Existing scholarship suggests Many explanations: Late entry Chandler Poor government policy Anagawa, Howells and Neary, Reich Lack of R&D/research environment Collins, Nakayama, Low Organisational culture Nakane, Kneller, Vogel, Anchordoguy A combination of these -- along with medical infrastructure and medical culture/ practice

11 Pressures in the 1990s In addition to the pressures of foreign governments to open the Japanese market, several factors prompted change in the Japanese pharmaceutical industry came from several areas: Participation in the ICH (International Conference on the Harmonisation of Technical Requirements for Registration of Pharmaceuticals for Human Use) Reforms to the distribution sector Introduction of several laws that encouraged/facilitated entrepreneurship

12 Japanese pharmaceutical firms in the 1990s Following exposure to global markets, Japanese firms exhibited: Increasing R&D orientation Dismantling of traditional Japanese practices Unprecedented industry consolidation Emerging biotechnology sector Growth of generics sector

13 R&D Expenditure and R&D/sales: FY (percent; in billions of 2005 Yen) Source: Statistical Survey Department, Statistics Bureau, Ministry of Internal Affairs and Communications, Survey of Research and Development (Kagaku Gijutsu Kenkyu Chosa Hokoku), various years.

14 R&D/Sales US-Japan comparison Source: Statistical Survey Department, Statistics Bureau, Ministry of Internal Affairs and Communications, Pharmaceutical Research and Manufacturers of America. Pharmaceutical Industry Profile 2008, 53.

15 Reforms to the distribution sector Previously highly fragmented, uncompetitive Supply chain linking manufacturers to patients involved two intemediaries: wholesalers and physicians Retail price maintenance of pharmaceuticals since 1951 limited competitive pressures on wholesalers 1991 Government prohibited retail price maintenance in pharmaceuticals, dissolving the relationships between wholesalers and manufacturers Wave of consolidation, from 434 in 1987 to 126 by 2007; top three firms comprise 70% of market

16 Encouragement of entrepreneurship Entrepreneurship was limited due to inflexible labour markets, underdeveloped capital markets Bankruptcy laws offer limited protection to entrepreneurs, high capital requirement for incorporation. Government measures post 1990s: Laws that encouraged the establishment of small to medium size enterprises at the regional level Laws that promoted technology transfer

17 Some growth of bioventures Number of bioventures in Japan Source: Japan Bioindustry Association, Baiobenchā Tōkei Chōsa Hōkokusho [Statistical Survey on Bioventures], (Tokyo: Japan Bioindustry Association, 2010).

18 But still rather limited in comparative perspective... Profile of biotechnology firms in the United States, Europe and Japan, 2009 (in millions of US dollars) Source: Japan Bioindustry Association, Heisei 22 nendo Jigyo Hokokusho [Report on Activities, 2010] (Tokyo: Japan Bioindustry Association, 2010), Ernst & Young, Beyond Borders: Global Biotechnology Report (London: Ernst & Young, 2011), 39, 40, 48.

19 Quite a lot of change, but The Japanese market remains unattractive to many pharmaceutical firms because of: Annual drug price reductions Undeveloped infrastructure for R&D Drug lag

20 Growth of generic sector Non-existent generics sector prior to the 1990s Growth from the late 1990s onwards: Ex : 10.8% to 23.0% of prescription drugs dispensed (in volume) However, still lower than US, Britain, Germany, where generics account for more than 70% of drugs dispensed Competitive environment fuelled by foreign entry and M&A activity

21 Lack of infrastructure Fewer qualified reviewers Ex. PMDA: 250 vs FDA: 2,300 (2005) Belated implementation of quality standards Late adoption of clinical trials procedure Drug lag, 12 th in 1994, 28 th in 2004 Drug approval times, much improved from the mid-1990s (>35 months), but still slower than the United States and Europe

22 Japanese firms expand into foreign markets Number of Japanese firms expanding overseas Source: Yano Research Institute, reprinted in JPMA, Databook 2009, 2009.

23 Conclusion As the Japanese pharmaceutical market opened up to global competition in the 1990s, the industry experienced a transformation: Industry consolidation by both manufacturer and distributors across keiretsu loyalties, with domestic and foreign rivals Emergence of biotechnology sector, growth of a generics sector Undeveloped infrastructure that disincentivised R&D also prompted Japanese firms to look beyond the domestic market for growth. Leading Japanese firms resembled foreign counterparts, as they pursued R&D, production, and sales in different locations, and responded to regimes where rewards to innovation were greater.

24 Leading Japanese vs global pharmaceutical firms Top Three Pharmaceutical Firms in Global and Japanese Markets, 2010 (in millions of US dollars) Source: IMS Health, Company Annual Reports.