Growth Opportunities for Japan’s Generic Drug Market

Japan’s generic drug market still lags behind that of the United States; Japan’s generic drug market share is around 10-15 percent, while the U.S. market share is closer to 50 percent. Japanese people tend to be very “brand conscious” and can view generic drugs as inferior to their brand name counterparts. However, as a result of gradual changes in Japan’s government policies and an increased awareness of medical costs by the elderly, Japan’s generic drug industry may soon begin to expand.

In the past, Japan’s government-run health insurance program had covered most medical costs for its citizens. But following increases in the patient’s share of medical costs in 1997 and again in 2003, some Japanese citizens are becoming more cost-conscious when it comes to their medical service options.

The Japanese government implemented a policy to encourage hospitals to prescribe generic drugs. Each generic drug prescription given to a patient will result in a 20 yen (US$0.20) “reward” to the hospital. Although many hospitals continue to prescribe mostly brand name drugs, a few hospitals have started moving towards generics and have begun seeing the benefits of this change. For instance, St. Mariana University School of Medicine began offering generics for all prescription drugs. While only about 20 percent of all patients have selected the generic option, the hospital has still managed to save well over US$1 million thus far.

A number of Japanese pharmaceutical companies are also beginning to expand their generic drug markets. Towa Pharmaceutical, one of the largest generic drug companies in Japan, has begun expanding their facilities and manpower in preparation for a larger generic market. For instance, Towa has nearly doubled their production capabilities through the expansion of two of the company’s plants. The company has also started regular recruiting and training programs in order to increase their medical sales representatives. Finally, Towa plans to improve and strengthen their quality assurance and post-marketing surveillance procedures. Another Japanese company, Nichi-iko Pharmaceutical, plans to have over 80 new generic drugs on the market by 2008.