Updated on 21 May 2013
Is Japan changing its attitude towards generic drugs?
The Japanese pharmaceutical market is the second largest pharma market in the world following on the close heels of the US. Although it records annual sales of approximately $64.5 billion (6.45 trillion Yen), only 6.6 percent of its prescription drug sales are contributed by generics. This scenario is gradually changing due to several reasons such as patent expirations of drugs, a rapidly aging demographic, wideranging government initiatives to reduce healthcare spending, and comparatively high reimbursement prices.
The hurdles that generics face
Although the Japanese pharma market is large and offers huge potential for generics, it comes with several challenges for generic companies. One of the main challenges is the outlook of people towards them. Individuals in Japan choose quality over price and this mindset remains ingrained in Japanese consumers across all industries, including the life sciences.
Less costly drugs are associated with lower quality in Japan and this means that generic drugs are generally regarded as inferior to their branded equivalent. Moreover, Japanese consumers only trust the brands they know (specifically, Japanese brands) and are skeptical about the efficacy and safety of drugs, particularly if they have been manufactured in countries such as China, India, which are notorious for their drug counterfeiting activities.
This attitude of the Japanese people have led the country's generic drug manufacturers to suffer from low public esteem and recognition in comparison with innovators. Furthermore, the Japanese believe that the reduction in out-of-pocket expenses in buying generics is not sufficiently high to justify switching away from the brand. Another major problem with this mindset among Japanese is that if patients still believe that generics are a lower quality alternative, it will take more than a relatively modest increase in cost to persuade them to switch to generics.
Generics do a balancing act between growth and hindrances
The Japanese governmnt is providing additional premiums for dispensing of generic drugs and is also planning to review its health insurance reimbursement. These initiatives are expected increase the demand for generics in the dispensing pharmacy market. Although the generic drug market has entered the growth stage, it has become more competitive with new entrants. Moreover, the drug price war in Japan has intensified with respect to long listed products (LLP). In December 2012 the Central Social Insurance Medical Council said that a new pricing system for generics would be introduced to help reduce their prices. This will apply where the replacement of long-listed products by generics does not happen within a pre-determined period after the patent expires.