Among pharmaceutical industry
insiders, it is known as the patent cliff.
Over the next two years, patents for many blockbuster brand-name drugs sold in Japan are set to expire. Astellas Pharma`s
patent on Lipitor, a cholesterol-lowering drug licensed from Pfizer, runs out
in 2011, while that of AstraZeneca`s Arimidex,
for breast cancer, is up the following year.
With patent protections gone, it is likely to throw the field wide open for
companies that make generic, or copycat, drugs. Those companies could
significantly build on their limited share of Japan`s $80bn pharmaceutical
market, the world`s second-largest, analysts say. “We expect the market to
accelerate,” says Alan Thomas, of IMS Japan, a pharmaceutical market research company.
The biggest of Japan`s generics makers could prosper. Morgan Stanley MUFG
predicts that net profits for Nichi-Iko Pharmaceutical, the largest generics
producer, will nearly double between 2011 and 2015, while Osaka-based Towa
Pharmaceutical`s net profits will jump 47 per cent. Credit
Suisse sees net profits for Osaka-based Sawai Pharmaceutical, the
second-biggest generics maker, gaining 25 per cent in the next two years.
It is not just the domestic groups that are well positioned. Swiss company
Novartis` generics unit Sandoz was among the
early wave of entrants. So was Indian drug maker Lupin, which acquired a
majority stake in Japanese generic drug maker
Kyowa Pharmaceutical Industry in 2007.
Last year, Teva, the world`s top generic drug maker,
formally stepped in through a tie-up with Japan`s Kowa,
and aims for 10 per cent of the market by 2015. France`s Sanofi-Aventis opted to partner Nichi-Iko last year.
Japan`s Daiichi Sankyo, Mitsubishi Tanabe Pharma
and Fujifilm have also said they will enter the fray. Credit Suisse predicts
groups such as these will have between 100 and 150 generic products by early
2013, allowing them to compete with homegrown generic drug makers.
Japan has not been an easy place for drugmakers to do business. Every other
year, the government dictates price cuts to keep its medical costs in check.
These cuts have made it harder for some drugmakers to recoup investments on
innovative products. They have also worked against the spread of generics: brands
win out over generics when there is little difference in price.
In June 2010, generic drugs were 22.4 per cent of
the market by volume, according to the Japan Generic Medicines Association. The
figure is low compared with the US, where generics account for more than 70 per
cent by volume.
The health ministry has set a target of 30 per cent market share by volume in March 2013. Wider generics use could help lower overall
spending on drugs, something the government is keen to do as the population
ages, says Ludwig Kanzler, a partner at consultancy McKinsey in Tokyo.
The National Institute of Population and Social Security Research has forecast
the number of people under 65 will nearly halve by 2055, leaving fewer workers
to pay taxes.
Few think the ministry will reach its target. “We aren`t optimistic,” says
Shuhei Hosokawa, of the Japan Society of Generic Medicines, an industry group.
Persuading doctors and patients could also take time. “I have never asked for a
generic drug and no doctor or pharmacist has ever recommended generics to me,”
says Haruo Hatakeyama, a 55-year-old Tokyo resident. “There`s a lack of awareness about generics here.”
New rules were designed to bring change. Last April, the government opted to
leave prices unchanged for some drugs still protected by patent, while cutting
prices for generics.
At the same time, more hospitals are shifting towards a flat-fee system, known
as Diagnosis Procedure Combination, or DPC. The transition attempts to do away
with the system in which doctors and hospitals are reimbursed for every
procedure they perform and drug they dispense.
To educate patients, the health ministry has printed posters and pamphlets,
hosted public seminars, and posted videos online that explain the benefits of
generics.
Japan`s national health insurance agency has issued cards with “generic drugs,
please” on them so patients can ask for generics without having to challenge
the authority of doctors. “You will see higher penetration of generics as the
government becomes more assertive,” says McKinsley`s Mr Kanzler.
