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Japan Pharmaceuticals and Healthcare Report Q3 2011
Business Monitor International, June 2011, Pages: 106
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.
The Analysts View: Japan's pharmaceutical market is entering a period of low-single digit growth. Demand for medicines will be supported by an ageing population, a high prevalence of chronic diseases and a welldeveloped network of prescribers, pharmacies and hospitals. However, the market will be constrained by anticipated austerity measures, affecting the public and private medical services sectors. We are increasingly positive about the generic drug sector and negative with regards to patented drugs.
Headline Expenditure Projections
- Pharmaceuticals: JPY9,549bn (US$109.5bn) in 2010 to JPY9,654bn (US$109.7bn) in 2011; +1.1% in local currency terms and +0.2% in US dollar terms. Our forecast has been revised down from Q211 due to macroeconomic factors and additional analyst intervention.
- Healthcare: JPY 39,347bn (US$451bn) in 2010 to JPY39,568bn (US$450bn) in 2011; +0.6% in local currency terms and -0.4% in US dollar terms. Our forecast has been revised down from Q211 due to macroeconomic factors and additional analyst intervention.
- Medical Devices: JPY 2,755bn (US$31.6bn) in 2010 to JPY2,814bn (US$32.0bn) in 2011; +2.1% in local currency terms and +1.2% in US dollar terms. Our forecast has been revised down from Q211 due to macroeconomic factors and additional analyst intervention.
Business Environment Rating: Characterised by high rewards and low risks, Japan’s pharmaceutical market remains the most attractive in Asia Pacific. The country scores highly for its preference for branded products, well-developed distribution sector, and large and ageing population. Drawbacks include increasing demand for generic medicines and relatively low healthcare spending as a percentage of GDP.
Key Trends & Developments:
- Following the Tohoku earthquake and tsunami, The Analysts determined that efficiencies needed to be realised in Japan's healthcare sector. We expect the government to further encourage the uptake of generic medicines. These products offer significant cost savings compared with originator brands, which have traditionally enjoyed strong demand from doctors and patients. Companies that will benefit from increased prescribing of generic medicines include Indian firms Ranbaxy Laboratories and Lupin, and domestic players such as Sawai Pharmaceuticals, Nichi-Iko Pharmaceutical, Towa Pharmaceutical, Nippon Chemiphar, Fuji Pharma and Taiyo Pharmaceutical.
The Analysts Economic View: Economic data for March 2011 has confirmed the negative effects of the recent earthquake and tsunami. The forecasts we made shortly after the crisis appear to be playing out right on cue, with consumer confidence falling, the trade surplus narrowing and price pressures increasing. We have also seen some repatriation of overseas equity holdings as expected, which has underpinned local bond yields. We stress, though, that long-dated Japanese government bonds (JGBs) are an extremely risky asset at these low yields given the macroeconomic shifts taking place at present, and we believe local equities hold more promise.
The Analysts Political View: Although the country's long-standing democratic credentials, lack of social tensions and stable security profile are all ratings-positive, its recent history of one-party dominance (and related nepotism) and recent turbulence in the upper echelons of government mean that the country fails to make the upper reaches of our global league table. Recent challenges to Prime Minister Naoto Kan's Democratic Party of Japan leadership in the aftermath of the Tohoku earthquake may lead to further short-term uncertainty, although we expect stability in the country's political system to be maintained.
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