Healthcare

January 2003

Sankyo Co. has formed business alliances to develop and sell new drugs with Fujisawa Pharmaceutical Co., Novartis AG of Switzerland and Glaxo-SmithKline Plc of the U.K. in the past two months alone. This is indicative of the shortage of new products at Sankyo. The drugmaker's domestic patent on Mevalotin, an anti-hyperlipidemia drug that is the firm's biggest moneymaker, expired last October, and other drugmakers are preparing to release low-cost generic versions of the drug. It will take Sankyo several years to debut another mainstay medicine developed in-house that will be able to make up for the expected decline in sales resulting from the expiration of exclusive rights to Mevalotin. This has encouraged the firm to acquire the rights to develop and market products belonging to other companies. It takes a drugmaker about 10 years to obtain permission to manufacture a new drug that appears to offer promise. A firm is able to recoup the outlay involved in developing a new drug, which run from tens of billions of yen to as much as 100 billion yen a year, only once a product is released. Restructuring is imminent not only for midsize drugmakers but also for major companies, with the world's largest pharmaceuticals market, the U.S., likely to be the proving ground for Japanese drugmakers. Major Japanese makers are all moving quickly to extend their reach in the U.S. market. The domestic market is leveling off due to moves to curb the cost of offering care under the auspices of public medical insurance programs, while foreign-based firms are expanding their market share in Japan by introducing new drugs which have proved successful overseas. Against this backdrop, Japanese drugmakers cannot expect their domestic sales to grow sharply. Many major Japanese drugmakers saw their prescription drug sales in the October-December 2002 period fall from a year earlier due to a reduction in the prices paid for drugs prescribed as part of the public medical insurance scheme. At the same time, U.S. firms Pfizer Inc. and Novartis and AstraZeneca Plc of the U.K. saw their sales grow in Japan. There are now nine foreign-based firms among those companies listed as the top 25 drugmakers in Japan in terms of sales. The U.S. is a new world for Japanese pharmaceuticals makers. Eisai Co. will double its roster of medical representatives in the U.S. to about 500 by the end of next year and spend 7.7 billion yen on its research base in the country. However, U.S. sales will not provide immediate support for Japanese drugmakers. There also are misgivings about the possibility of slower growth in the U.S. market. In response to growing criticism of overly high medicine prices, the U.S. government is encouraging the use of inexpensive generic drugs. The market, which has previously posted double-digit growth rates, will not expand as rapidly as before. Many Japanese drugmakers have been careful about mergers and acquisitions, since expanding the scale of operations alone will not necessarily boost R&D capability. However, changes in the U.S. market may prompt major European and U.S. drugmakers to beef up their offensive in the Japanese market, the second largest in the world. Japanese makers plan to finish their own reform programs in two to three years, after which they will give fuller consideration to full-scale M&A deals. If the business environment grows harsher, it will be difficult for them to stick to this timetable. (January 30, the Nihon Keizai Shimbun)

Drugmakers are increasingly marketing adapted or innovated versions of existing drugs to increase patient convenience and safety. Drugmakers have thus far worked to develop drugs with new effects, but with a global shortage of new products, R&D costs are squeezing profits at some companies. By improving ease of use and other benefits rather than just efficacy, the drugmakers hope to boost sales of existing treatments. Innovations include attaining the same effect with less frequent dosage and making drugs premixed so mixing does not have to be done at pharmacies. Takeda Chemical Industries Ltd. recently increased the potency of ingredients for a prescription drug to treat ulcers, reducing the number of granules needed in each capsule, which are now smaller and easier to swallow. Mitsubishi Pharma Corp. redesigned its hypertension pills to make them easier to break in half. The pill comes in 5mg and 10mg sizes, but doctors often prescribe 2.5mg doses, forcing patients to cut them in half. Hypertension pills affect the heart and thus proper dosage is crucial. Tanabe Seiyaku Co. and Terumo Corp. on Jan. 8 announced the joint development of a premixed high-calorie solution for intravenous injection. It already contains glucose, amino acids, electrolytes and vitamins, eliminating the danger of error or contamination during on-site mixing. (January 22, the Nihon Keizai Shimbun)

Major U.S. and European drugmakers will seek approval to import products enjoying strong demand in Japan, including treatments for mental, bone and joint diseases. As foreign firms contest the world's second-largest market after the U.S., Japanese drugmakers will likely find it difficult to counter the growing competition since there are few major drugs in their pipelines until about 2005. U.S. drugmaker Wyeth will seek official approval to import its antidepressant. The drugmaker claims the drug, which targets only substances related to depression in the body, produces few side-effects. Global sales of the product totaled some 1.5 billion dollars in 2001. Wyeth filed for permission to sell its rheumatism treatment in Japan last year, aiming to begin marketing it this year. Eli Lilly & Co. is also preparing to seek a license for its antidepressant. Banyu Pharmaceutical Co. plans to import an anti-inflammatory and analgesic agent, which boasts the second-highest sales in the world. Pfizer Inc. is planning to do the same for its urinary incontinence treatment. France's Sanofi-Synthelabo SA intends to debut its hypertension treatment. The drugmaker is trying to catch up with Switzerland's Novartis International AG and Germany's Boehringer Ingelheim GmbH, which lead the market for this type of drug. Most U.S. and European companies usually market their products in Japan after establishing them in their home markets. The growth of the U.S. drug market is slowing, and with patents for many of their drugs expiring, U.S. and European companies are introducing major products into the Japanese market, which is estimated to be worth 6 trillion yen. (January 5, the Nihon Keizai Shimbun)