Pharmaceutical supply chain in Japan sees squeezed margins

Pressures felt in Japan as a result of the country’s aging population, drug price revisions and patent expiries have compelled pharmaceutical industry leaders to rationalize their sourcing and distribution, and increase operational efficiency, according to a new report by GBI Research, which states that market competition has led to a monopoly being held by a few wholesalers, who effectively control the country’s pharmaceutical distribution market.

GBI Research’s analysis shows that supply chain participants in Japan still follow a traditional route, whereby drugs manufactured by pharmaceutical companies are distributed solely through wholesalers to patients via retailers. Drug prices are fixed and controlled by the government; however, the price at which the manufacturer sells the drug to the wholesaler depends on negotiations between both parties. Similarly, pharmacy margins depend on negotiations between the wholesaler and pharmacy. All key players in the supply chain suffered losses due to revisions to National Health Insurance (NHI) drug prices in 2010, which demanded they compromise on profit margins.

Negative impact of price quotation system