Cross-cultural communication （24）
24）The Globalization of Japan's Pharmaceutical Industry
In the last ten years or so, the globalization of Japan's pharmaceutical industry has been progressing at an accelerating pace. In this article, I would like to explain this topic to you.
Pharmaceuticals are needed equally all over the world as a means of treatment. Also, as is common knowledge in the industry, the more products you can manufacture cheaply and sell in large quantities, the more profit you will make. Therefore, it can be said that the pharmaceutical industry was originally destined to become globalized. In fact, from the 1960s to the 1980s, the pharmaceutical industries of the United States and European countries like Germany and Switzerland were successful in exporting drugs around the world. At that time, the Japanese pharmaceutical industry was only doing business in Japan, having acquired patents from these major overseas pharmaceutical companies. Nevertheless, in Japan during the period of rapid economic growth, the country's universal health insurance system was becoming more and more comprehensive year by year, and the number of medical institutions was increasing accordingly. In addition, the Japanese people's desire for better medical care was a factor that made the industry a viable business.
In the same way as other Japanese industries that gained strength during the period of rapid economic growth, several pharmaceutical companies also built up their strength during this time, and were able to allocate a reasonable amount of money to research, and in the 1990s, they developed a small number of new drugs that were also accepted internationally. For example, this includes pravastatin from Sankyo Pharmaceutical (at the time) and donepezil from Eisai Pharmaceutical. Therefore, despite the collapse of the bubble economy, the Japanese pharmaceutical industry in the 1990s can be said to have been a relatively stable industry that was still on the rise. The first thing to cast a shadow over this stability was the “inappropriate” business practices of the Japanese pharmaceutical industry, which were pointed out by the American pharmaceutical industry at the Japan-US Structural Conference. This included the kind of hospitality that was common at the time, such as pharmaceutical companies entertaining doctors and providing financial support for academic society activities. As a result, the Japanese pharmaceutical industry was forced to globalize from within.
However, the claims of the American pharmaceutical industry, which acted as the champion of justice, seem a little far-fetched to those of us in the generation who know the history (born in 1951). Do you really think that Japanese people don't know about the UJ (at the time) research funding scandal involving the American pharmaceutical company? In the 1960s, UJ provided huge research funds to research institutes at various American universities, which were famous for their research into septic shock, and obtained results showing the effectiveness of their own steroid drugs, and even their large-scale administration. These results were recognized by the American academic community, and Harrison's textbook of internal medicine at the time included a description of the treatment of septic shock, including the name of the drug. However, about ten years later, the results of a follow-up study conducted at multiple research facilities overturned these results. The results of this follow-up study were also published in the New England Journal of Medicine, which is the most frequently cited reference in Harrison's textbook of internal medicine, and of course the description in Harrison's textbook of internal medicine was also removed. There have been several similar incidents that I know of, and if you include the ones I don't know about, there must have been countless cases.
Let's get back to the main topic. The internal globalization that was forced upon us by the American pharmaceutical industry's complaints was followed in the 2000s by a full-scale push towards external globalization. This time, the first issue was the impasse in new drug development. The patent for a new drug expires after about 10 years, after which the sale of generic drugs by other companies is allowed. In the US, the market share of the original drug then drops to 10%. In Japan, it doesn't get that low, but it does drop to half quickly. Therefore, each company is burdened with the fate of having to develop a new drug that sells every 10 years. However, no matter how much money is poured into development, it is impossible to do so, and since the 2000s, pharmaceutical companies around the world, not just in Japan, have been stuck in a dead end when it comes to developing new drugs. Therefore, if they want to make a profit with the few drugs they have, their only option is to sell them around the world.
Another factor is the saturation of the Japanese drug market. Japan's prescription drug market is said to be the second largest in the world after the US, and the number of elderly people requiring prescriptions is increasing. However, compared to other countries, there are many pharmaceutical companies in Japan, and competition within the country is also fierce. In addition to this, there is also the entry of foreign pharmaceutical companies aiming to capture the world's second largest market. For this reason, it is no longer possible to make a profit just from the domestic Japanese market.For these reasons, globalization has become essential for Japanese pharmaceutical companies.
Let's take a case study using Takeda Pharmaceutical Company, the largest pharmaceutical company in Japan. Takeda Pharmaceutical Company made its foray into the US market in the 1980s, when Kunio Takeda of the Takeda family was president, and at the same time succeeded in developing several large-scale new drugs. From around 2000, the prostate cancer drug leuprorelin acetate and the diabetes drug pioglitazone made considerable profits in the US. Lansoprazole, a stomach medicine, and candesartan, an antihypertensive drug, did reasonably well in the US, but recorded considerable sales in Japan. However, the patents for these drugs began to expire around 2010, and there was no sign of any strong new drugs to replace them.
The management team, who felt a sense of crisis about this, acquired the Swiss pharmaceutical company Nycomed in 2011 for a price of 1 trillion yen. The acquisition price was so high that Takeda's stock temporarily dropped. Nycomed was strong in the Eastern European market, and Takeda's aim was to dramatically increase the sales of Takeda products, including generic drugs, in Eastern Europe. Looking at global industry trends since the acquisition, this acquisition seems like a reasonable move, regardless of whether the acquisition price was appropriate or not. However, another problem arose in relation to this large-scale acquisition. Due to the rapid globalization that followed the acquisition, the percentage of non-Japanese employees at Takeda exceeded 50%. In addition, as there was no management talent available to run the European operations, the next CEO has been confirmed as a Frenchman with extensive experience in global management in the pharmaceutical industry. When I was working in Paris in the mid-1990s, there were only a few Takeda employees posted to Europe. Therefore, I have to say that this decision was not so much appropriate as inevitable.
Other major Japanese companies are also trying to prolong their existence until they can develop the next new drug by forming joint ventures or acquisitions with major generic drug manufacturers in Israel and India. In addition, mergers between major domestic companies have become more noticeable in the past 10 years. At the same time, of course, they are also promoting globalization.
In this way, I think there is no doubt that the globalization of the Japanese pharmaceutical industry will continue to progress. At this time, if you do not handle cross-cultural communication within the company and at sales destinations well, you cannot hope for success as a company. This is where cross-cultural communication skills come into play.
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