Japan has a health-spending problem, and part of the cure could be generic drugs. However, the big name brand makers, including some European companies, are fighting to protect their turf.
Drug costs account for more than 20% of the country’s total medical expenses (21.1% out of ¥37.4 trillion in 2010), and reducing this burden has become a cornerstone of Japan’s health administration policy. With forecasts of a shrinking tax base — supporting the 40% of the Japanese population that will be 65 or older by 2060 — the task for the Ministry of Health, Labour and Welfare takes on new urgency.
“We are pursuing measures to reduce drug costs and promote the use of generic drugs in order to [more] effectively use limited medical funds,” says Naoki Masukawa, specialist in the ministry’s Health Policy Bureau.
In April 2013, the ministry released a five-year plan to expand the use of generic medicines to 60% by 2018. Called the “Roadmap for the further promotion of the use of generic medicines”, the plan aims to bring Japan’s use of generics in line with that of European countries such as France and Spain. However, levels would still pale in comparison with the United States, which has already achieved a 90% substitution of generic drugs.
Shuhei Hosokawa, secretary general of the Japan Society of Generic Medicines, believes that the move towards no-brand medicines is inevitable in Japan, where average per-capita medical costs of around ¥300,000 could balloon to as much as ¥1 million by 2025.
“At that stage, there would no longer be any reason for not introducing generics,” he says, noting that no-brand medicines can cost up to 50% less than the original patented drugs.
According to the ministry, generic drug usage had jumped to 46.9% as of September 2013, compared with 39.9% in 2011. In an industry where drug sales are expected to rise by ¥1.4 trillion by 2022, many predict that generics will contribute the lion’s share.
Sanofi is one foreign company aiming to seize upon that business opportunity. This despite initial hiccups in 2010, when Sanofi entered into a joint venture with Nichi-iko Pharmaceutical, a leading Toyama-based generic drug-maker. “We didn’t understand the market,” admits Minoru Inabayashi, corporate officer and Key Account Business Unit head.
Inabayashi and his colleagues have worked out their problems and are now aiming to expand the generic drug business. It’s part of the Paris-based head office’s global diversification strategy, which also targets areas such as rare diseases and vaccines, as well as consumer health products and animal healthcare. Sanofi has established manufacturing and development bases for original patented drugs, but is also looking to take advantage of its strengths in distribution. When dealing in generics, for example, Sanofi possesses the resources to provide information to physicians and pharmacists through an established network of medical representatives (MRs).
Some generics firms have a very limited number of MRs. But Sanofi’s ability to exploit an existing and knowledgeable workforce is proving to be an advantage in an industry where market growth can be impeded by concerns about a stable supply, quality control and access to information.
Among the Japanese population, some people remain hesitant about using no-brand medications. One survey of Japanese pharmacists reveals that only 32% of their patients would be fine with using generic drugs, 15% would not — and 42% are undecided.
Sanofi collaborated with Nichi-Iko to create generic medicines to protect against strokes and Alzheimer’s disease. But the 2013 launch of the antihistamine fexofenadine SANIK® illustrated Sanofi’s business credibility. The drug projected the most significant implications for generics’ future in Japan. In creating the product, Sanofi had pursued a generic for the original drug Allegra® while its patent was still valid.
Fexofenadine SANIK® was the first Japanese example of what is referred to as “authorized generics”, and other companies are expected to follow in Sanofi’s footsteps by releasing similarly developed drugs. Authorized generics are seen as one way for an original drug maker to control the quality and availability of its generic replacements as patents expire.
Sanofi expects its generic business to grow to ¥300 billion in the next five years, in part due to this strategy.
Lingering doubts about generic drugs are seen as good news for major manufacturers such as Boehringer Ingelheim (BI) Japan, a company not looking to enter the generics market. The firm promotes a vision of “value through innovation”, and views generics as a discount-driven market.
“We like to control our destiny and serve patients,” says Masao Torii, BI’s representative director and Japan president. “That is our basic philosophy.”
The development of drugs and other treatments do not come cheaply or easily. Some estimates cite development costs of around ¥100 billion per new drug and a success rate of only one in 30,000 compounds.
Torii estimates that his company is typical in spending around 20% of sales revenue on R&D. Innovation clearly costs money, but the pay-off is that a company can continue to influence the market for an original drug during the life of the patent.
Torii cites the case of Prazaxa®, approved in 2011 in Japan, as the first oral anticoagulant alternative in over 50 years. “We have not only been helping stroke prevention in elderly patients, but also rewrote the market paradigm with this innovatory drug,” says Torii.
For now, Japanese patients gain by choosing from amongst the competition promoted by these two different business models. But the government really has no choice — healthcare is becoming overwhelmingly expensive. The Health Ministry has already tilted in favour of generics and wants more non-Japanese firms to get involved.
“We want non-Japanese generics makers to actively enter the market, especially if they can maintain the high-quality levels demanded by Japanese users,” says Masukawa.
That means generic drugs are here to stay, and likely to take an increasingly larger share of Japan’s lucrative medical market.© Japan Today