Healthcare Biotechnology Food Page  1   2   3    History The Second Largest Market Following the United States    The Japanese pharmaceutical market is the second largest in the world following the United States. While high growth (over 11 percent) is anticipated up to 2005 in the U.S., the forecast for the Japanese market is that there will be continued sluggish growth of slightly over 2 percent. While there are two types of pharmaceutical drugs, - prescription drugs that must be prescribed by a physician, and over-the-counter (OTC) medication which can be freely purchased at a pharmacy -.prescription drugs account for 90 percent of the pharmaceutical drugs in the Japanese pharmaceutical market. Many major Japanese pharmaceutical companies, such as Takeda, Sankyo Co., Ltd, and Yamanouchi Pharmaceutical Co., Ltd., are involved in manufacture and sales that center on prescription drugs, with a portion of their manufacturing and sales devoted to OTC drugs. However, while the market for OTC drugs is relatively small, it requires huge advertising expenditures. Profitability is therefore low, and it is thought that much of such sales result in deficits.    Although there are major pharmaceutical companies like Taisho Pharmaceutical Co., Ltd., who are recording high profitability while unfolding their business around OTC drugs, the majority of pharmaceutical companies whose business is focused on OTC are midsize firms or smaller. Taisho Pharmaceutical is the undisputed leader in terms of OTC pharmaceuticals, with SSP Co., Ltd. in second place. Taisho Pharmaceutical has a 40 percent share of the health drink market, and its combination cold remedies have a share that is just under 30 percent. As in the case of Taisho Pharmaceutical, there are many OTC pharmaceutical majors that are exhibiting high performance through health drinks and combination cold remedies. The Pillars of System Reform: Revision of the Price of Medicine and Separation of Dispensing and Prescribing Functions    There has been stagnant growth of the Japanese pharmaceutical market since 1990 caused by the promotion of healthcare reforms by the Japanese government. Reforms are being advanced by the government in order to curtail increasing national healthcare expenditures. There are two pillars to the government's reform: NHI price revision and the separation of dispensing and prescribing functions. The NHI price revision aims to bring the price of pharmaceuticals closer to actual market prices by revising officially-fixed prices for medicinal drugs.    In the past, hospitals made a profit through the difference in the officially-fixed and actual price of pharmaceutical drugs. The difference was a result of the fact that such drugs were sold to hospitals, etc. at a price under the officially-fixed price (hospitals billed the government for NHI reimbursements according to the officially-fixed price). What this means is that underwriting organizations and the government were paying excess fees for medical treatments.    With today's massive government budget deficits, there is no room to continue to allow such wasteful spending. The government therefore came out with two measures. One was to make, as a fundamental rule, a revision (lowering) of NHI pharmaceutical prices once every two years, so that the officially-fixed prices of pharmaceutical drugs would become as close as possible to actual prices. The second was to advance the separation of the dispending and prescribing functions at medical facilities in order to eliminate the over-prescription of medication. Reorganization, Centering on Prescription Drug Manufacturing, Becoming Active    The separation of dispensing and prescribing functions is a move towards advancing a "division of labor" in which hospitals will handle the treatment of patients and the prescription of pharmaceuticals, while pharmacies will handle sale to patients. It aims to place a brake on the administration of large amounts of drugs by cutting pharmaceutical drug earnings from hospital finances.    As a result, a reorganization of domestic pharmaceutical companies, centering on those that handle prescription drugs, is becoming active. Film packing of medicine for colds at the plant of Zenyaku Kogyo Mitsubishi-Tokyo Pharmaceuticals, Inc. merged with Welfide Corporation in October 2001 and became Mitsubishi Pharma Corporation. Chugai Pharmaceutical Co., Ltd. merged with Nippon Roche K.K, a subsidiary of Roche (Switzerland), in October 2002, while Daiichi Pharmaceutical Company acquired the pharmaceutical business of Suntory Limited, a major liquor and beverage manufacturer.    Taisho Pharmaceutical, the largest OTC pharmaceutical company in Japan, announced a business merger with Tanabe Seiyaku Co., Ltd. in 2001 that was later retracted. However, it tied a comprehensive alliance with Toyama Chemical Co., Ltd. in August 2002, and integrated the sale of prescription pharmaceuticals in April 2003.