Sensing increasing generic opportunities in Japan, the ministry of commerce is planning to set up an India-Japan pharma alliance, through the Brand India programme, proposed by the India Brand Equity Foundation.
The India Brand Equity Foundation (IBEF) is a trust established by the Department of Commerce, ministry of commerce and industry, to promote and create international awareness of the ‘Made-in-India’-labelled products in the overseas markets.
The proposed alliance will be formed in association with the Pharmaceutical Export Promotion Council (Pharmexcil). “We may set up this alliance next month. We are interacting with the Japanese associations and it may take some time for both sides to understand and agree on various proposals,” PV Appaji, DG, Pharmexcil told FE.
“We see a lot of potential through this proposed alliance to boost the Indo-Japanese pharma trade,” he added. Indian exports to Japan increased from $79.63 million in 2010-11 to $151.69 million in 2011-12, representing a YoY growth of 90.49%, according to CMIE/DGCIS.
Indian companies, such as Lupin Pharma, Orchid Pharma, Dr Reddy’s Laboratories, Aurobindo Pharma, Neuland Labs and Zydus Cadilla, have forayed into the Japanese market, which was earlier a closed market for generic companies.
The opportunities lie in the area of active pharmaceutical ingredients (APIs), intermediaries and herbal extracts.
Lupin is one of the few global generic majors and the only Indian pharmaceutical player having a significant presence in Japan, which contributes 15% to Lupin?s consolidated revenues. Says Ramesh Swaminathan – president finance & planning, CFO, Lupin, Lupin entered the Japanese market just over five years ago with its acquisition of Kyowa Pharmaceutical Industry, one of the most profitable generic companies in Japan.
Almost all Japanese citizens are covered through National Health Insurance (NHI), which is funded by the government. Increased health insurance burden has propelled the government to promote the adoption of generic medicines in the market. These measures have resulted in creating strong growth opportunities for generic pharmaceutical players.
As one of the measures, the Japanese government introduced a fixed fee-based system at designated hospitals known as DPC Hospitals. Of the total $110-billion market, the DPC market contributes about $11 billion, of which the injectables market alone accounts for $9 billion.
The number of hospitals has been increasing consistently over a period of time, from 359 in 2006 to 1,449 hospitals in 2011. DPC hospitals cover over 35% of all hospital beds (representing 17% of the total hospitals nationwide).
The DPC hospitals are managed under a `fixed-rate’ payment reimbursement system providing incentives to use generics. This has resulted in higher generic penetration in DPC hospitals at approximately 12% in value terms compared to about 9% overall.
“Over the past four years, Lupin has implemented a number of operational and margin optimisation measures like price re-negotiations, API variations and utility cost improvements that have resulted in significant improvement in our margins and, hence, our profitability in the Japanese market. The gross margin has improved by close to 10% since integrating Kyowa?s business, despite two biennial price cuts imposed by the NHI,” he said.
Japan is one of the leading pharmaceutical markets in the world; however, the share of generics has been low. Public perception is the key factor for such a low share. However, the government has played a vital role in promoting generic drugs across the country by spreading awareness regarding benefits and quality. Good promotional activities have largely benefitted Japanese generics market, says an RNCOS report.
Japan is the world?s second largest pharmaceutical market, estimated to be $97 billion as per IMS. There is low penetration with only about 23% of Japanese prescription drug sales by volume contributed by generics as compared to 70% by volume in the US. Besides, a rapidly ageing demographic profile, there are comparatively high reimbursement prices. In the first year of listing, price of generic drugs are set at 70% of the innovator price. The price of the generic drugs does decline faster than for innovator products, but not as fast as in other countries such as US.
Some of the recent Indian forays into Japan include Fujifilm Corporation and Dr Reddy’s Laboratories signing an exclusive partnership for generic drugs business and establish a joint venture in Japan. Aurobindo Pharma, which has the largest dedicated facility for APIs in Vizag, has renewed its focus towards the Japanese API market, by having two dedicated manufacturing blocks only for this market.
