Indian cos eye Japan as next generic export market as margins decline in US, EU

Bangalore-Increased price erosion and market saturation in US, EU and Asia-Pacific countries have forced Indian pharma majors to look at Japan, which is the world's second largest market for generics after US. Companies plan to cash in on the lucrative generics space as a logical progression in their international forays.The top 25 Indian companies in the country are looking at a strategic entry into Japan through acquisition, collaboration or entry through distributors. These companies including Micro Labs, Bal Pharma and Biocon from Karnataka are keen to leverage the advantage of an early entry into Japan.Rising healthcare costs, ageing population and high cost of drug development in Japan will offer Indian generic majors an opportunity, stated TS Sampath Kumar, Senior Advisor, Japan External Trade Organization (JETRO). Among the companies which have entered Japan are Lupin and Zydus via acquisition in 2007. Lupin has a majority stake in Kyowa Pharmaceutical Industry Co Ltd (Kyowa), a leading Japanese generics company ranked amongst the top 10 generic companies. It has also received approvals from the Ministry of Health & Labour Welfare, Japan (MHLW) for 10 products. Zydus obtained a 100 per cent stake Nippon Universal Pharmaceutical Ltd. Dr Reddy's and Aurobindo export active pharmaceutical ingredients (APIs). If Indian companies enter Japan through the acquisition route, it would help bridge competencies and flatten the learning curve faster. Japan, which is known for innovation, expects its customers to constantly offer valued added options in the development and supply agreements. Therefore it may not be easy for Indian pharma companies to trade in the region, stated RS Iyer, pharma consultant. It is a complicated market with challenges including long gestation period, reluctance in the supply chain management to shift from existing practices and language. Therefore, perseverance is needed to build up a strong business relationship with constant two-way communication, stated Archana Dubey Mitra, associate vice president, API & Exports, Bal Pharma Limited.The price offering is the main attraction and this ensures market sustainability which is key for exports to thrive. Karnataka companies are looking at the value-added generic formulation space. Approvals are being sought and plans being worked out to open up an office to tackle the supply chain strategies and practices in Japan, stated sources, who did not want to be named. Of the 50 generic players in Japan, there are only three foreign companies, Mylan, Hospira and Sandoz. The top five companies are Japanese majors. Between 5 and 20 ranked companies are in the large and medium sized generic producers. Companies ranked from 21 to 50 slot are the small units finding it difficult to survive. This is where Indian companies looking at Japan can tap a possible acquisition route, stated sources.In spite of a strong generic production base in Japan, global recession has resulted in huge infrastructure cost. A recent legislation encourages prescription of generics over patent drugs. 'Yakka Kijun' or National Health Insurance (NHI), which sets the drug price standard, has allocated 9 per cent of Goss National Income (GNI) valued at Yen 36,129 billion for healthcare expenses a 6 per cent increase over last year.In 2008, Japanese generics market was valued at Yen 440 billion. A growing ageing population has created a demand for CAD, CNS, diabetes and osteoporosis generics. If Indian companies qualify on quality and time line deliveries, they can make it big in Japan, added sources.