Singapore, Oct 27, 2006: According to research firm Research and Markets, Japan is doing its level best to improve its drug approval processes and the regulatory laws.

Despite its prolonged economic troubles in recent years, Japan remains the world’s second largest pharmaceutical market, after the US. It also remains one of the less penetrable.

A strong and highly advanced domestic manufacturing industry, an opaque regulatory system and extensive cultural differences make the Japanese market a difficult and long-term prospect. There have however been recent signs that Japan is attempting to improve the drug approval process and move more into line with Western countries regarding regulatory laws.

Significant cuts in government reimbursement levels in recent years have affected the market for pharmaceuticals, already depressed by the country’s faltering economy, while recent court judgements have weakened the country’s intellectual property laws.

In April 2000, the Japanese government promised measures to streamline the regulatory process and to make that process more transparent to outsiders, a promise reaffirmed at the subsequent G8 summit. Much of this has been at the behest of the US and Japan’s leading supplier of pharmaceuticals.

The newly-created PMDA agency has been introduced in 2004, in an attempt to improve drug approval times and bring them more into line with their US and European counterparts. The market is therefore increasingly open to overseas products, and many domestic companies are being forced into measures such as mergers and expansion of R&D facilities in a bid to ensure survival in the marketplace.

In 2001, in an unprecedented move, Roche succeeded in negotiating the acquisition of Chugai and more recently, in 2003 Merck & Co. acquired 100 percent ownership of Banyu Pharmaceuticals. There is still a long way to go, however; Japan’s political system is not geared towards rapid reforms.

There is little immediate prospect of a Mutual Recognition Agreement between Japan and the worlds other major regulators, and backsliding on the part of Japanese regulators is feared by many. The introduction of a reference pricing system was abandoned in 1999, although many suspect it may re-emerge in the near future.

In addition to increased multinational activity, the creation of Astellas Pharma Inc through the merger between Yamanouchi Pharmaceutical and Fujisawa, and the proposed merger between two of Japan’s leading drug companies, Sankyo and Daiichi, promises to boost the domestic production sector and perhaps herald a new era for the industry, where the nation’s leading manufacturers are increasingly being forced to forge agreements with each other to enable them to compete with rivals from overseas.

The best future prospects in the Japanese medical sector are related to the care of the elderly. The number of people aged 65 and over will exceed 25 percent of the population over the next 20 years. April 2000 saw the introduction of Japan’s major new insurance system for care of the elderly. The initial annual cost of this scheme is estimated at $40 billion or around 15 percent of total healthcare expenditure.