Abstract
In 2009, the value of Japan’s pharmaceutical market is expected to only
grow marginally, as price cuts
and the growth of generic substitution
impact pharmaceutical expenditure. By the end of the year, BMI is
estimating the value of the pharmaceutical market to be US$69.2bn. Growth will
also remain sluggish in
2010 and 2011 before the market contracts in real
terms in 2012, due to the impact of government
austerities coupled with
wider economic difficulties. By 2013 we expect the drug market to reach a
value
of US$69.3bn, representing a CAGR of 0.11% between 2008 and
2013.
In June 2009 – in what could prove a positive development for
the pharmaceutical sector – Japan
deregulated the OTC drug market
allowing sales of consumer health products in convenience stores and
supermarkets. This represents the most major change to the regulation of
pharmaceutical sales in almost
half a century, with the government
significantly reducing the qualifications needed to sell over-thecounter
(OTC) drugs. Previously only qualified pharmacists were allowed to sell
medicines of any type.
The pharmacy sector is understandably nervous about
the new laws. Japan has over 40,000 convenience
stores, all of which are
now potential competitors. Furthermore, convenience stores frequently operate
24
hours a day, giving them an extra advantage over drug stores. However,
crucially, a licence is still
required to sell OTC drugs. Therefore
commentators believe that it will be difficult for many convenience
stores
– which rely on low-cost unskilled and part-time staff – to gain
qualified staff at low enough prices,
yet chain operators may find these
obstacles easier to overcome.
March trade data have suggested that the
current slump in Japanese exports may be bottoming out after
exports rose
on a seasonally adjusted month-on-month (m-o-m) basis for the first time since
May 2008.
Having registered nine consecutive months of seasonally adjusted
m-o-m declines – during which a
record contraction of 11.2% m-o-m
was posted in December 2008 – March saw shipments rise by 2.2%.
This
bodes well for drugmakers. Although this sector is generally more resilient
than other industries,
Japanese drug firms have been suffering of late.
Takeda, the country’s largest pharmaceutical company,
has recently
recorded a more than 30% drop in profits in 2008 as a result of the global
financial crisis and
weakening consumer sentiment. Other key problems
include the US government’s determination to cut
medical insurance
costs. Meanwhile, the promotion of generic use in the EU has also hit overseas
sales of
patented products.
In BMI’s Business Environment
Ranking matrix for Q309, Japan has retained pole position. The maturity
of
the market, as well as its size due to high per capita expenditure and the
preference for patented drugs,
will ensure that the market retains its
attractiveness for foreign investors.
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