Japan’s Push to Generics Means Added Challenges for Many Pharmaceutical Companies

In its latest effort to rein in spiraling healthcare costs for its aging population, Japan plans to help Japanese producers of generic drugs construct factories in Asian countries where labor costs are lower than in Japan. The move is part of a broader push by Japanese policy makers to encourage the production of more non-patented pharmaceutical products at lower costs. The new policy focus creates market opportunities for generic drug makers operating in the region.

But as Japan continues to ease regulations and barriers to generics, obstacles are growing for companies specializing in originator drugs to penetrate the Japanese market. Generic drugs in Japan sell for 40%-50% less than branded drugs. With an eye toward containing healthcare costs, the government is targeting 80% generic penetration by 2020.

Japan has long been a bastion of patented drug consumption, with a strong and innovative pharmaceutical industry. But branded products are increasingly vulnerable. Patent challenges are on the rise in Japanese courts, affecting not only Japanese companies, but international pharmaceutical companies and their Japanese subsidiariesas well.