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Japan Pharmaceuticals and Healthcare Report Q3 2009
Business Monitor International, July 2009, Pages: 99
The Japan Pharmaceuticals and Healthcare Report provides industry professionals and strategists, corporate analysts, pharmaceutical associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Japan's pharmaceuticals and healthcare industry.
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, the author 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 the 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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