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opportunity for Indian generics in Japan

Helped by the government, the generic drugs business in Japan, the world’s second largest pharma market, is set to grow by 9% from the current less than 5% in the next 3-4 years.Indian generic makers see a huge opportunity as the generics market in Japan is poised to witness strong annual growth of around 9% in 2009-2013 on the back of strong government support and largely untapped nature. Leading Indian generic players, including Ranbaxy, Lupin, Zydus Cadila and Dishman, have already entered the Japanese pharma market.

Japan promises to be one of the most lucrative generic markets in the world. Between 2005 and 2008, the Japanese generics market grew at a CAGR of around 7.5% to register ¥ 333 Billion (US$ 3.5 Billion) in revenue, according to “Japanese Generic Market Forecast to 2013”, a new research report by RNCOS – an industry research firm. Currently, generics accounts for just 5 per cent of the Japanese drug market but the market size is likely to grow many folds. The government officials with a view to bring down healthcare costs are encouraging doctors to prescribe generics to the patients.

Other factors such as a large number of patent expiries and the largely un-penetrated nature of the market are also contributing towards the market growth. Japan’s per capita expenditure on healthcare is comparable to that of many western countries. Moreover, the country’s share of total health expenditure dedicated to drugs is very high. The government therefore has come up with reform measures and programmes to support the generics sales and investments made by the global giants in this sector, the report said.

The Japanese Ministry of Health, for example, announced a programme two years ago to increase generic drugs market share from 17% to more than 30% by 2012. Besides, the government introduced a generic substitution system in which pharmacists are allowed to substitute generic drugs if doctors do not specify that a brand name drug is to be dispensed.

Despite this huge opportunity, the generics are facing a number of other challenges. Generic drugs are still regarded as cheap, low quality alternatives of branded drugs in Japan. Both physicians and patients are skeptical about their safety and efficacy. A number of awareness and educational programmes, however, are expected to increase the awareness of generic drugs in the future. At present, the generics market in Japan is dominated by domestic manufacturers. The top six manufacturers accounting for 56% of the total market in 2007. But opening up of the market and introduction of a number of generic-friendly reforms is attracting a number of foreign players in the market.

Ranbaxy Laboratories, now a subsidiary of Daiichi Sankyo, was among the first Indian company to foray into Japan. Ranbaxy set up a 50:50 joint venture with a local company, Nippon Chemiphar, in 2005. Ranbaxy has launched five products in the Japanese market, led by voglibose, clarithromycin and amlodipine, in therapeutic segments such as diabetes, anti-infectives, anti-allergics, anti-fungals and hypotensives. Of this, voglibose and clarithromycin are among the top-selling generic brands in Japan. In 2007, Ranbaxy earned nearly $30 million revenue from the Japanese market. But following its acquisition by Daiichi, Ranbaxy stopped the JV with Nippon, in 2008.

Lupin is another Indian player that has been keen get into the generic space in Japan. In October 2007, Lupin acquired Kyowa Pharmaceuticals to enter Japan. Sales of Kyowa have grown over 21 per cent during the past year and it ranks as the eighth-largest generic player in Japan, according to Lupin.

The Ahmedabad-based Zydus Cadila entered the Japanese market in 2006 with the acquisition of Nippon Universal Pharmaceutical. Nippon has a network of more than 4,000 hospitals and clinics across the country. Zydus plans to launch at least five to six products every year in Japan.

Similarly, Dishman Pharmaceuticals and Chemicals, another Ahmedabad-based company, entered Japan through a joint venture, Dishman Japan, in association with Azzurro Corporation, a 30-year-old marketing firm.

Several other Indian generic players including Biocon and Dr Reddy’s have set their eyes on this high-value market.

So, the generic makers see a huge opportunity to make investments into the country as the global financial crisis is not reaping enough margins to the generic manufacturers in the European countries. Generic companies can set high prices and reap high margins in less intense competition and the unexploited nature of the Japanese generics market.



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