• Japan’s government is building partnerships with the biopharma sector on COVID vaccines.
  • Though it does not have a home-grown COVID vaccine, Japanese society now benefits from the global industry’s ability to successfully turn years of research and investment in platform technologies such as mRNA into life-saving products to fight the pandemic.
  • But there is more that Japan could do to work together with the global biotech and life sciences sector to become a world leader – offering lessons for other countries.

Japan has a world-class technological base but without a predictable and welcoming policy environment for the biopharma sector to thrive, it falls short of becoming a biotech and life sciences world leader.

The limitations in competitiveness of its biopharmaceutical sector are highlighted by its lack of a home-grown COVID vaccine, due in large part to a policy environment that is sending the wrong signals to those who would invest in developing innovative medicines in Japan.

For example, Japan has made 56 changes to pharmaceutical pricing rules in recent years, creating significant uncertainty for local and international biotech companies. These changes have become increasingly abrupt and non-transparent, with limited prior notification or opportunities for public comment.

The implementation of multiple, overlapping rules has created a volatile market in which companies are repeatedly blindsided by major revisions in supply terms. This is part of a concerning trend by a number of governments to impose onerous requirements on health suppliers. Other examples include Canada’s revisions of its Patented Medicines Prices Review Board guidelines and the Republic of Korea’s opaque reimbursement practices.

While the Japanese government faces the challenge of sustaining its healthcare system in the face of both the COVID crisis and an ageing population, it has unusually singled out medicines as its primary target for what it sees as healthcare “savings.” 75% of cost savings delivered within the social security system are sourced from pharmaceuticals, even though they make up only about 20% of Japanese healthcare spending. Whatever the short-term fiscal benefits of this strategy, it has a chilling effect on Japan’s long-term investment climate in the risky and expensive biotechnology and life sciences space.

US-sourced Foreign Direct Investment (FDI) into Japan grew at only 16% between 2010 and 2019, whereas China saw growth of 97% and Singapore 180% over the same period, and Japan has the lowest inbound FDI stocks as a share of GDP in the OECD. Business investment in pharmaceutical R&D has fallen by an annual rate of 1% in Japan since 2013.

Business enterprise investment in pharmaceutical R&D.
Image: EIU

Any decision to increase investment in pharmaceutical research, clinical development or commercial capabilities in Japan would be closely scrutinized under current circumstances. The alternative is that Japan could fall further behind its neighbours in the global life sciences race.

Japan’s uncertain policy environment also undermines efforts to drive healthcare innovation to serve patients. A little over a decade ago, the government of Japan made great progress in improving the regulatory environment for new medicines. It successfully eliminated the “drug lag” that had prevented Japanese patients from accessing valuable medicines until many years after patients in the US and Europe.

The current volatility in Japan’s policy environment puts this progress at risk as new medicines and indications may only become available after being launched in more stable markets. The existing pipeline of new medicines in development is dominated by new technologies: not only advanced biologics, but gene and cell therapies. Japan’s current healthcare system struggles to value the benefits of these drugs and get them to Japanese patients after they are approved by its regulatory agency, the PMDA.

Japan’s increasing adoption of non-transparent cost-containment measures has other global consequences too. As every government is trying to build back better after COVID while simultaneously preparing for future threats, finding solutions for current and future health challenges will require an ever expanding portfolio of new medicines and vaccines that will take time and money to discover and develop.


What is the World Economic Forum doing about healthcare value and spending?

Each year, $3.2 trillion is spent on global healthcare making little or no impact on good health outcomes.

To address this issue, the World Economic Forum created the Global Coalition for Value in Healthcare to accelerate value-based health systems transformation.

This council partners with governments, leading companies, academia, and experts from around the world to co-design and pilot innovative new approaches to person-centered healthcare.

For example, the mRNA platform technology is a result of years of research as well as long-term, highly uncertain investment in the global biopharma ecosystem, which has led to life-saving products to fight today’s COVID crisis. But first Japan will need to balance its fiscal pressures more equitably across the healthcare sector, address the real inefficiencies in its healthcare delivery system, and promote its innovative life sciences sector all at the same time. Japan certainly has the means, and it has much of the technology to achieve this.

A good first step would be to bring all stakeholders together to discuss the best ways to achieve better healthcare while supporting a vibrant ecosystem for biotechnology research. This should include valuation and reimbursement processes that provide strong incentives for innovation, especially the most advanced technologies.

Any subsequent processes to implement reforms should be transparent and consultative. As the US and Japan strive to deepen cooperation in research and technology development in biotechnology, as announced in the recent US-Japan Joint Leaders’ Statement, our industry will continue to work collaboratively to create the conditions needed to deliver the best possible outcomes for patients and communities in Japan and globally.

BIO is working on a report to propose how Japan could do more to promote public health and become a leader in the innovative global life sciences sector.