Future Of The Japanese Pharma Industry

Through its pricing and reimbursement policies, the Japanese government holds the key levers to the future medical and contribution potential of the pharmaceutical industry, says a study published last week, The Contribution of the Pharmaceutical Industry in Japan, written by the Boston Consulting Group and sponsored by 68 company members of the Pharmaceutical Research & Manufacturers of America, the Japan Pharmaceutical Manufacturers Association and the European Business Council Pharmaceutical Committee in Japan.

The government can encourage innovative, high-risk research over incremental improvement, it says, by for example awarding substantial price premiums to innovative treatments. But if it sets price premiums which discourage innovative research, companies may become unable to take on the necessary risks, effectively blocking therapeutic progress, it warns. If the cycle of innovation is disrupted, the potential cost to society will be enormous, says the study, adding that there is a risk of being trapped with today's higher-cost and less effective solutions.

Health care costs in Japan rose from 4.1% of national income in 1960 to 6.5% in 1992, yet pharmaceuticals have made only a minor direct contribution to this rise. Since 1970, drug expenses have declined steadily as a proportion of health care costs, from over 50% to under 30% today. A government analysis of health care delivery cost increases since 1960 found that drugs' share of this growth fell to below 5% in the late 1980s.