A rapidly aging population has burdened the healthcare system both in terms of funding and facilities and is of great concern for the Japanese government. To ease spending on healthcare, the government has slashed payments made to medical institutions. This has pushed the use of generic drugs, which in turn will help reduce expenses incurred by patients and improve public finances for medical insurance.

Japan's Ministry of Health, Labor and Welfare is focused on increasing generic drugs usage to around 30 percent by 2012. The Japan Generic Medicines Association estimates that generic drugs sales accounted for less than 10 percent of pharmaceutical sales by value and only a quarter of the pharmaceutical sales by volume in 2011. The share of generics in the pharmaceutical market is about 21 percent, which is lower than in other countries.

The government has set a goal to increase this share to 30 percent or more by 2012. To meet the goal, they are promoting the use of generics by revising prescription and dispensing practices, and by providing incentives to pharmacies that frequently prescribe generics. With these measures, the generics market is expected to grow, and many foreign generic manufacturers are entering the market to take advantage of the emerging opportunities.

Pharma market overview

According to IMS Health, the pharmaceutical market in Japan - the second-largest pharmaceutical market in the world - was about $120 billion in 2011. The hospital sector comprised 39 percent and general practitioners comprised 24 percent of the market, while the others category comprised the remaining 37 percent. The hospital sector and the general practitioners space recorded growth in the range of six-to-seven percent in 2011. (Read BioScience firms queue up for Japan market)