The Changing Economics of Medical Technology (1991) / Chapter Skim
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10. Japan's Pharmaceutical Industry Postwar Evolution
10. Japan's Pharmaceutical Industry Postwar Evolution
Pages 155-168
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From page 155... ...
By identifying opportunities and limitations within particular time phases, these factors have, in effect, provided a map of the commercial direction Japanese and non-Japanese companies have taken over the past 45 years. This "environment-to-industry" analysis provides the framework for a review of the three distinctive historical phases of pharmaceutical industry development since World War II and the evolution of a likely fourth phase in the 1990s.
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From page 156... ...
In addition to these procedurally oriented mechanisms of patent law, regulatory control, and trade protection, the Japanese government proceeded to institute measures that gave its drug industry what it needed most: domestic supply and production capability. Immediately following the war, the Occupation Administration had established a semigovernmental organization charged with procuring and supplying raw materials to pharmaceutical producers at frozen prices on a carefully rationed basis.
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From page 157... ...
Another consequence was the creation of a new, more complex network of relationships that all but assured continued government underwriting of domestic demand. In Japan physicians play a larger role than in the United States.
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From page 158... ...
Even so, that period was significant, for it consolidated the base for an industry takeoff. Under a shell of protectionist trade policies, Japanese companies acquired manufacturing facilities, raw materials, pharmaceutical products, government-guaranteed demand, and other critical elements that positioned them for dramatic growth.
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From page 159... ...
This contributed to a transformation within the pharmaceutical industry that benefitted the Japanese a great deal but did very little for the foreign sector. A steady stream of new products derived from domestic higher priced "me togs" and licensed-in new agents from abroad, intertwined with physician dispensing, government-sponsored demand via the NHI system, and expanded R&D capability created an increasingly profitable and increasingly research-competent Japanese drug industry.
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From page 160... ...
This legislation was timely, for Japanese companies had acquired by 1976 the basic technology, R&D capability, and financial strength to generate major discoveries needing protection from infringement. The fact that the Japanese were then the beneficiaries of a product patent law suggests that its timing was not accidental.
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From page 161... ...
Also, in 1985 new guidelines were issued on Good Manufacturing Practices, Good Licensing Practices, and preclinical data, and action was taken to facilitate the transfer of registration approvals to foreign companies. Although many earlier problems persist, they will be addressed and possibly resolved in ongoing, bilateral, and multilateral discussions involving the United States, the European Economic Community (EEC)
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From page 162... ...
Given the increased capital investment in new discovery facilities made by domestic companies in the 1980s as well as the fundamental shift to discovery itself, it is natural to expect leading Japanese companies to generate excellent product portfolios in the 1990s.
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From page 163... ...
A pattern to these business activities clearly emerged in the 1980s. The leading expansionist Japanese companies focused first on drug development and on obtaining regulatory approval abroad.
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From page 164... ...
In Japan small and medium-size pharmaceutical companies that cannot afford major drug discovery operations will be squeezed by the interrelated dynamics of health care cost containment and new products from the leading research-based companies. Whether induced by government administrative guidance or by marketplace reality, these small and mediumsize pharmaceutical companies might initiate merger activities, Japanese style, to gain the capital base required for survival.
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From page 165... ...
The leading Japanese companies gradually will step up their globalization efforts, primarily in the United States and Europe, initially by learning how to prosecute a drug development and registration program and later through integrated manufacturing, marketing, and sales operations. Even while continuing to form strategic alliances with foreign companies, Japanese industry will, in the long term, seek to establish fully owned subsidiary operations in major pharmaceutical markets overseas.
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From page 166... ...
Clearly, these factors created a pharmaceutical industry in Japan that can deal from a position of strength based on its considerable financial resources and research capabilities. But at the same time, it can be argued that Japan's innovative capacity would have developed sooner if governmental policies had made the domestic market more open to competition from foreign research-based companies and if adequate product patent protection had been in place earlier.
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From page 167... ...
Globalization of the Japanese Pharmaceutical Industry. New York: Nomura Research Institute.
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