Domestic pharmaceutical market size is said to be about 6.9 trillion yen at the ex-manufacturer level, and about 10.8 trillion yen in terms of drug price. While the market size of non-prescription drugs is slightly declining, that of ethical drugs is on the rise, accounting for about 90 % of the whole market.
One of the major characteristics of the pharmaceutical industry is its high profitability. During an 11-year-period from 2001 to 2011, operating profit margin, which indicates profit of the core business, was average 5.3% for all industries, while 17.9% in the pharmaceutical industry, at least triple in the amount compared to the all industry average.
The other unique feature of the pharmaceutical companies lies in its long history. Shown below are founding years of companies. Among all, Mitsubishi Tanabe Pharma has the longest history of 335 years. In general, long history since foundation is noted not only in the Japanese companies but also in foreign companies.
Sales of ethical drugs decline after their patents expire and when marketing of less expensive generic versions with the same active ingredient is ensued. In the United States where universal health insurance coverage is not implemented, it is often the case that 90% of branded products are replaced by generic versions in only one or two years. In Japan, thanks to universal health insurance coverage and the physicians’ preference for branded products, decline rate of sales is not as dramatic as in the U.S. However, even in Japan, the patent expirations would increasingly affect the makers of new drugs in the future because the government aims; to cut back on the medical expenses; to promote generic drugs to be more prevalent; and to hammer out a plan to lower price of long listed products which remain higher priced than generic versions. Penetration of generic drugs is bringing the “patent cliff” to the surface also in Japan.
Foreign pharmaceutical companies are increasing their presence year after year in Japan. The share of foreign pharmaceutical companies in domestic shipments of ethical drugs increased from 18.6% in 1991 to 36.2% in 2011, 20 years later. In terms of the origins of drugs containing new active ingredients approved in Japan, products of foreign origin account for about 84%, while those of Japanese origin, about 16%, indicating an outstanding number of new drugs brought in to Japan by foreign companies.
Definition of pharmaceutical industry
Classification of pharmaceutical industry
Definition of drugs
Distribution structure of drugs
Pharmaceutical market size in Japan
Regulation of related laws
Related industry groups
Long history and family management
Difficulty of new drug development
Structural risk peculiar to the pharmaceutical industry, “Patent cliff”
Disclosure of pipeline
Low penetration of vertical integration
Changing business environment
Companies striving for structural reform
Differences between Japanese and foreign companies
Characteristics of Labour market
Concentration of major companies in member countries of the Organization for Economic Co-operation and Development (OECD)
Reference: Comparison with the U.S. and European countries