GENERICS
Japan’s generics market challenges foreign API makers In-country trading firms play a major role in assisting the import of active pharmaceutical ingredients JEAN-FRANÇOIS TREMBLAY, C&EN HONG KONG
J
apan is legendary for its focus—many would say obsession—on producing high-quality products. When it comes to sourcing active pharmaceutical ingredients (APIs), Japanese generic drug firms are equally exacting with the requirements that they place on their suppliers. “We need to custom-manufacture for Japan actives that we already sell in the U.S. and Europe,” said Portia Lin, vice president of marketing and sales at the Taiwanese custom drug manufacturer ScinoPharm, at the CPhI Japan trade show held in Tokyo last The Japanese government is encouraging the use of generic month. “Japanese customers often demand an extra purification drugs to contain health care costs as its population ages. step, but they agree to pay for it.” Japan is attractive for foreign API makers. The country ranks as ment achieve its goal of increasing the market share of generic the world’s third-largest single-country pharmaceutical market. drugs to 80% by 2020, Hakoda said. With total drug sales of $78 billion in 2015, the country is also poScinoPharm’s Lin confirmed that trading companies play a tentially a major market for generic drug manufacturers. key role in Japan’s API market. For instance, about 70% of the The Japanese government is strongly encouraging the wider use Taiwanese firm’s annual turnover of $12 million in Japan goes of generic pharmaceuticals by patients, and generic drug prices are through Itochu and other trading firms, she said, because Japamuch higher in Japan than in the U.S. and Europe. But foreign firms nese customers don’t have the confidence to deal with foreign seeking to secure contracts in Japan can expect a host of unique suppliers on their own. In addition, trading firms often provide practices not encountered in other countries, to the point where the logistical and regulatory capabilities that allow foreign API many API makers go through Japanese trading firms with which makers to sell in Japan. they have to share a portion of their margins. Despite being encouraged by the government to enter the Japa“ ‘Ask Itochu.’ This is what I would tell foreign companies that nese market, foreign API makers face multiple hurdles in securing want to sell APIs in Japan,” said Kenji Hakocontracts there. It takes years of relationda, chief operating officer of Itochu’s pharship building to secure a new customer, said maceutical division. The giant trading firm, Marcel Hogerheide, head of account manhe said, advises Japanese generic drug management and business development for ufacturers on which foreign API makers Europe and Asia at Hovione, a Portuguese suit their needs. “The Japanese customers API maker. The long courtship is not nectrust us,” he boasted. And Itochu can introessarily a bad thing. “It’s sensible to know The market for active pharmaceutical duce foreign suppliers to Japanese firms your partner,” he said. ingredients in Japan is attractive because that otherwise wouldn’t take their calls. To be competitive in the country, a forprices and profits are higher in Japan than in “It’s hard for foreign firms to have meetings the U.S., but there are pitfalls: eign supplier must convince a potential at Japanese companies, to learn what projcustomer that it can offer the highest qual▸ It takes a long time to get the first ects they’re working on,” he said. ity consistently, Hogerheide added. It also contract. The graying of Japan’s population is a helps to have unique capabilities, such as ▸ Japanese producers are competitive, major force behind the government’s proa proprietary spray-drying technology in even with a higher cost base. motion of generic pharmaceuticals to paHovione’s case, he said. ▸ Quality requirements are exacting, and tients and doctors. About 55% of the drugs And when a customer is ready to order, customers may even demand an additional that patients use in Japan are generic, coma foreign supplier must address Japan’s purification step not required by customers pared with 90% in the U.S., Hakoda said. regulatory apparatus. Yasushi Usuda, Hovin other countries. “Doctors’ fees can’t really go down, nor ione’s Osaka-based regional sales manag▸ Regulatory documents must be translated can hospital running costs, so the easiest er, noted that foreign API suppliers must into Japanese, and mistakes can be costly. way is to reduce drug costs,” he explained. secure a manufacturing and sales license By supporting the import of foreign APIs as well as a wholesale distribution license. Source: Interviews with managers of API firms present at CPhI Japan into Japan, Itochu is helping the governMoreover, all APIs sold in Japan must be
30
C&EN | CEN.ACS.ORG | MAY 16, 2016
CREDIT: JEAN-FRANÇOIS TREMBLAY/C&EN
What you need to know before entering Japan’s API market
tested at analytical labs within Japan, Usuda added. Documents submitted in a drug master file must be translated accurately into Japanese, Usuda stressed. A bad translation can cause compliance problems when the manufacturer is unaware of discrepancies in the Japanese version. “A bad translation can even harm your reputation if authorities interpret it as an intent to mislead,” he said. Hovione avoids the problem by back-translating into English documents that it had translated into Japanese and then comparing the versions, Usuda said. Furthermore, companies that don’t have an office in Japan must submit all of their documents to Japan’s Pharmaceuticals & Medical Devices Agency via an “in-country caretaker,” Usuda explained. Even foreign API makers with a Japanese office may not be able to handle their affairs without such an agent, Usuda said. In the case of Hovione, for example, he noted that though the firm opened an Osaka office a few weeks ago, it hasn’t yet hired a licensed pharmacist in Japan, as required by authorities.
“Doctors’ fees can’t really go down, nor can hospital running costs, so the easiest way is to reduce drug costs.”
NEED A DRUG SUBSTANCE SPECIALIST?
—Kenji Hakoda, Itochu’s pharmaceuticals division Teaming up with a Japanese trading company greatly eases the process of selling APIs in Japan. For instance, the trading firm can be the in-country caretaker that handles most of the regulatory requirements, Usuda said. And ScinoPharm’s Lin noted that trading firms can supply logistical services such as repackaging materials for use in Japan, performing quality controls in the country as required by Japanese authorities, and providing local warehousing services. Selling APIs in Japan may be challenging, but the country potentially offers higher profit margins than other markets, Lin said. For instance, when a drug goes off patent in the U.S., its price typically drops by 90%. By contrast, in Japan, drug prices are regulated and come down slower. The generic version of a drug is priced at 65% of the originator’s during the first off-patent year, and prices drop relatively slowly in following years, she said. Partly owing to these higher domestic prices, Japanese API makers can stay in business despite being burdened by higher costs than their foreign competitors. Riku Kataguchi, a manager of sales and business development at the Toyama-based firm Tateyama Kasei, told C&EN that the company, which has traditionally focused on supplying APIs to innovative firms, is currently expanding production capacity in Toyama to supply Japan’s generic drug market. A Japanese firm like Tateyama can compete, he said, because local customers normally prefer to buy from a local manufacturer whenever practical. And to be cost-competitive, Tateyama makes extensive use of complex intermediates imported from abroad in the APIs it manufactures in Japan. If success in the Japanese market were simply a matter of offering acceptable quality at lower costs, foreign API suppliers would have an easy time building market share in the country. But owing to complex regulatory hurdles and the higher requirements of Japanese buyers, foreign firms find it challenging to expand their operations in the profitable market. On April 1, Israeli drugmaker Teva Pharmaceutical Industries apparently solved that problem by forming a generic drug joint venture in Japan with Takeda Pharmaceutical. Most other foreign companies are likely to continue leaning on Japanese trading firms for years to come. ◾
YOUR COMMITTED API PARTNER Development through commercial production www.pcas.com
An Employee-Owned Company
We manufacture high purity chemicals & deliver them globally New Buchwald Ligands & Catalysts
O O
PCy2 OMe
tBu
Me
O
Me
Me Me
PPh
H2N
Pd
OMs
tBu
15-1105
ł VPhos
46-0392
ł MeCgPPh
New Chiral Ligands (H3C)3C C(CH3)3
SiPh3
C(CH3)3
O
O
P
P O
H
OH
N C(CH3)3
SiPh3
S
96-0070
15-0340
SpiroSAP Ligand Kit
(R)-TiPSY
Contact us at
[email protected] MAY 16, 2016 | CEN.ACS.ORG | C&EN
31
