Term Paper: Japanese-American Biopharmaceutical Industry

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[. . .] The objective of such harmonization is a more economical use of human, animal and material resources and the elimination of any unnecessary delays in the global development and availability of new pharmaceuticals while maintaining safeguards on quality, safety and efficacy, and sustaining regulatory obligations to protect public health. This mission is embodied in the Terms of Reference of the ICH.

Limitations and Delimitations

This problem is limited by the extent to which the United States and Japan choose to continue to permit the extensive interval of time from which pharmaceuticals are available in the United States to when they are available in Japan.

This problem is delimited by the extent to which the United States and Japan choose to cooperate in reducing or eliminating the extensive market delays between these two pharmaceutical superpowers.

The limitations of the primary dilemma include the extent to which American or Japanese citizens are delayed or limited in their access to life-enhancing or life-saving pharmaceuticals that are available in other areas. The delimitations of the problem include the extent to which governmental regulatory, trade, and international market restrictions are delimited or facilitated between the American and Japanese pharmaceutical markets.

Chapter 2

Review of the Literature work by L.G. Thomas III entitled The Japanese Pharmaceutical Industry - The New Drug Lag and the Failure of Industrial Policy, created in 2001, provides a comprehensive discussion of the industrial policies and domestic ecosystems that have contributed to the "new drug lag," a condition defined as the availability of pharmaceuticals in the United States many years before they are available in Japan.

A review by Jeffrey K. Liker, John E. Ettlie, and John C. Campbell entitled Engineered in Japan: Japan Technology-Management Practices discusses the attempts by the Japanese pharmaceutical industry to catch up to the United States despite its distinction of being one-fourth its size as well as a lag in the research and development of new products. This review emphasizes the best practices of the most successful organizations in the Japanese pharmaceutical industry.

A work by Michael R. Reich entitled Why the Japanese Don't Export More Pharmaceuticals: Health Policy as Industrial Policy provides detail regarding a number of policies that currently exist in Japan. The country has the second largest single-county market for pharmaceutical products in the world but is one of the lowest exporters among the major producer countries, with approximately 3% of total production contributed to exports for most of the postwar period. Imports continue to surpass exports by a three-to-one ratio. This review demonstrates how domestic public policies nurtured and promoted the Japanese pharmaceutical industry and created a domestic focus through a highly regulated market with prices established and regulated by the government. Health policy has served as implicit industrial policy. In the 1980s, the Japanese pharmaceutical industry emerged as a global competitor as a result of changes in Health Policy combined with modified business strategies.

The review Government Deregulation and R&D Intensity in the Japanese Pharmaceutical Industry: A Non-parametric Approach by Tetsuji Yamada, Tadashi Yamada, Nita Thacker, and Chang-Gun Kim demonstrates how recent developments and progress in the deregulation of the Japanese pharmaceutical industry by the Japanese government has led to its rising competitive status in the global pharmaceutical marketplace. Furthermore, the gradually increasing efforts by the Japanese to intensify its research and development (R&D) efforts have vastly improved Japan's status as a contributor to new pharmaceutical products and the technologies that give rise to these developments.

A review by Andrew McConaghie entitled Sun rising on new Japanese Pharma - How western companies are breaking in and Japanese companies are branching out from a $5 billion market provides a detailed analysis of the import and export functions of the Japanese pharmaceutical industry. Its status as the world's second largest pharmaceutical market has, until recently, been largely impenetrable to the efforts of foreign pharmaceutical organizations. As Japan's market reforms begin to take effect, and both American and European pharmaceutical companies review their efforts in Japan, the country's homegrown companies are simultaneously seeking to transform themselves into truly global competitive firms with significant opportunities for imports and exports.


1990 SRI International Report



This research study and analysis of Japanese efforts to expand into the international pharmaceutical market was conducted during May, June, and July 1990. The work was assumed to supplement the significant research conducted by SRI staff concentrating on Japan's domestic pharmaceutical market, to be subsequently published in our report Japan at the Crossroads. The latter report is basic to any true understanding of the scope and depth of current Japanese pharmaceutical internationalization attempts.

We have drawn on various sources of information to complete this report, including trade and business literature, standard reference works, business annual reports, and direct contact with a number of firms, including almost all 36 companies listed in Table 1 (found at the end of this report due to its length). Another significant source of information is decades of international pharmaceutical industry experience that consultants in the SRI Health Industries Practice contribute to this effort.

In this connection, we wish to acknowledge with thanks the interest in and support of our work demonstrated by Japanese and American executives alike. We especially wish to recognize Mr. Shiro Yamasaki, an official of the Japanese government that has been assigned to a post in New York.

This report reflects a "best-effort" attempt at profiling, interpreting, and forecasting Japanese pharmaceutical industry efforts to internationalize, identified from a U.S. perspective. To the extent possible within the budget constraints for this study, we have verified the data and information in this paper for accuracy and effectiveness; however, SRI does not assume any liability for errors or omissions in the report. Readers that identify such discrepancies are cordially invited to bring them to our attention.

We believe that this report documents and analyzes the current stage of Japanese pharmaceutical internationalization efforts to a more detailed extent than reports available from any other source. It is not the definitive report on the subject, for such an analysis cannot yet be written. Japanese internationalization efforts in the pharmaceutical industry only extend back 25 years - a very short time by Japanese measures - so the story is still unfolding. Because of existing industry economics, it is our view that companies from Japan are among the very few and select types of firms that have any chance at all of 'successfully breaking into the ranks of the top 25 pharmaceutical multinational corporations (PMNCs) in the world during the long-term future. Accordingly, Japanese moves and contributions to science and technology as well as management practices in the pharmaceutical field merit close scrutiny.

PMNCs" is the term for firms with 1989 dose-form pharmaceutical sales, primarily of Rx products, in excess of $250 million and with a minimum of 25% of such sales coming from captive marketing and distribution operations in at least 25 countries outside their home country, including such operations in several of the major pharmaceutical markets. This definition at present excludes all Japanese firms with the possible exception of Fujisawa.


The United States offers a relatively open and generous business environment and numerous opportunities in the large and diverse pharmaceutical sector. Accordingly, after several decades of half-hearted attempts at pharmaceutical internationalization in Southeast Asia, Europe, and North America, Japanese firms with pharmaceutical interests have clearly concentrated their overseas efforts on the United States.

Japanese firms face severe obstacles in entering and penetrating the U.S. pharmaceutical market. In addition to high entry barriers for this industry, Japanese firms must also manage and overcome specific internal weaknesses (see figure I in the Conclusions section of Chapter V). Nevertheless, as a result of the strategic philosophy underlying the objectives of Japanese firms, many Japanese companies that are now established in the United States in some way may rise as formidable competitors to the PMNCs. History has already demonstrated that these firms are resilient and tenacious.

The current situation in the United States is that some 40 to 50 Japanese firms with pharmaceutical interests already exist in the country; however, half of them perform only liaison and information-gathering activities. After examining the entry and penetration status of 36 small, medium, and large firms (provided in Table I), we have drawn a series of conclusions, including the following:

One-half of the 36 firms are among Japan's "top 30" in pharmaceutical rank, and one-third of the firms are nonpharmaceutical in nature.

Thirteen firms are engaged in BMC (bulk medicinal chemicals) business, and ten companies are actively marketing pharmaceutical dose-form specialties in the United States through their own organizations, and one-half are in the prescription drug business, and one-half are in the over-the-counter business.

We estimate that Japanese penetration of the U.S. dose-form business is 1.4%, equal to 1% of the Rx business and 2.4% of the OTC business, based on SRI narrow product universe definitions. The combined sales volume… [END OF PREVIEW]

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