October 11, 2005

Japanese generic drug manufacturers have reported a lukewarm performance for the 2004-05 fiscal year, at a time when regulatory reform is slowly improving the sector's long-term outlook. In a new report, generic drugmakers' trade association JGPMA claims that its members' revenue increased 6.1% in the year to JPY302.9bn (US$2.66bn). Meanwhile, according to IMS Health, Japan's retail drug sales are currently some 4% higher year-on-year.

Japan's generics market has traditionally been smaller than its Western peers, due to poor consumer acceptance and the combined prescribing and dispensing system, which has proved lucrative for many Japanese doctors. However, the government has introduced fresh incentives for generic prescribing, and local generics companies have invested heavily in promotional campaigns and product-development since 2003. Accordingly, the JPGMA notes that operating profits for member companies declined 6.7% in 2004-05 to JPY30.7bn (US$269mn).

According to the JPGMA, Japanese generics makers spent more than JPY20bn last fiscal year on R&D — an increase of nearly 8%, and equivalent to 6.9% of sales. Significant expenditure was also earmarked for improvements in manufacturing and hiring more sales representatives.

Meanwhile, a new health ministry report could ease the dispensing of drugs that have marketing approval in the US or European Union (EU). Although the recommendations could be considered something of a breakthrough, the new proposals are evidence of regulators' cautious approach to allowing foreign clinical trial data to support submissions in Japan. At present, the reform only envisages allowing clinical trial doctors to accept documentation from foreign manufacturers and wholesalers of products classified as "investigational."

At the very least, however, suppliers could be permitted to use Japanese translations approved in the US and Europe. The report also recommends that procedures for reporting ADRs in multi-centre clinical trials and obtaining new indications be streamlined.

While the reform plans will be welcomed by large research-based companies, they cannot be expected to benefit generics makers in the immediate term. Although the plans are an encouraging measure of the direction of reform, little account is taken of the urgent need for cutting red tape and encouraging lower-cost drug use, at a time when Japan is burdened with the developed world's fastest-ageing population.