Tokyo's policy push for generics an added draw.
Leading Indian drug makers such as Ranbaxy, Lupin, Zydus Cadila and Dishman, which forayed into Japan in the past three years, have emerged as important players in the generic or copycat drug business of patented medicines in that market, the second largest in the world.
The Japanese drug market, second after the US with a size of $74 billion, has a small generic segment, worth 5 per cent of the total in value terms and 17 per cent in volume terms.
While only three of the world’s top 15 generic drug makers — Mylan Laboratories and Hospira of the US and Novartis’ generic arm Sandoz — could corner some share of this market, Indian companies have established a strong presence.
According to analysts, Indian players have already cornered about 10-15 per cent of the $3 billion generic market in Japan, which is estimated to grow manifold in the coming years due to health reforms.
“The current size of the generic market in Japan is very small, but now the Japanese government is encouraging doctors to prescribe generics to cut healthcare costs. This will help Indian companies, which entered that market early to tap the opportunity,” said Ranjit Kapadia, a senior industry analyst.
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Most of the 50-plus generic drug makers in Japan are small-scale and medium-scale companies and about 10 are large-scale players.
India’s largest drug maker, Ranbaxy Laboratories, was the first Indian company to test the Japanese waters through a 50:50 joint venture with a local company, Nippon Chemiphar, in 2005. Ranbaxy has five products in the 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. Ranbaxy earned about $28 million revenue from that market in 2007.
However, the company severed its ties with Nippon last year following the acquisition of Ranbaxy by Japanese drug major Daiichi Sankyo.
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 Kamal K Sharma, managing director of Lupin.
“It is very difficult to establish presence in the Japanese market, as manufacturing and other quality norms are very stringent. Therefore, it is necessary to have a manufacturing base in that country,” he said in a recent interview with Business Standard.
Industry sources said the future for generic drugs in Japan looked promising. To reduce healthcare costs and increase generic penetration, the Japanese Ministry of Health had announced a programme two years ago to raise the share of generic drugs from 17 per cent to more than 30 per cent by 2012. The government has 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.
Besides, since most pharmacists are currently reluctant to substitute generic drugs for branded ones because of lower profits in the generic segment, pharmacists are being offered incentives if they stock and dispense a certain volume of generic drugs.
Zydus Cadila entered the Japanese market in 2006 and followed by acquiring Tokyo-based, privately-held Nippon Universal Pharmaceutical, which reaches more than 4,000 hospitals and clinics across the country. Its plan in Japan is to feed at least five to six products every year to the portfolio and build a basket of 40-50 products over the next few years.
Another Ahmedabad-based company, Dishman Pharmaceuticals and Chemicals, floated a joint venture, Dishman Japan, in association with Azzurro Corporation, a 30-year-old marketing firm known well in the Japanese pharmaceutical market.
With generic margins eroding in the US and Europe, Indian drug makers are increasingly looking at the Japanese market. Many large and medium-level Indian companies are looking there in a big way. These include major players such as Dr Reddy's Laboratories and Biocon.