Growth of Japanese pharma market curbed by price cuts and pro-generic policies

In Business Monitor International’s latest regional Business Environment Ratings (BER) matrix, Japan remains the leading pharmaceutical market in the Asia Pacific, out of the 17 markets surveyed.

Japan boasts a strong patented segment, which accounts for over 85% of the total market’s value, and pharmaceutical consumption in general is boosted by an aging population and traditionally high use of medicines. However, price cuts and the downward pressure on public finances will conspire to lower annual growth rates going forward, in combination with patent expirations and the government’s pro-generics stance.

In the meantime, there are three factors that stand in the way of Japan achieving anything other than meagre real Gross Domestic Product (GDP) growth over the coming decade: demographics; the fiscal burden; and the low return on investment, notes the BMI report (which was written before Japan’s current crisis as a result of the earthquake and tsunami). These closely related factors suggest real GDP growth will average just 1.2% per annum over the next decade, which will also dictate the amount of public finances available for pharmaceutical and healthcare spending. A fiscal crisis, which would lead to rising interest rates, is by far the most salient threat to growth, although it could be argued that an economic crisis could be a necessary evil and would trigger a boost in private sector growth dynamism.