In Japan, the number of patients with cancer and other diseases is expected to increase as the number of elderly people increases, and the size of the life science market is on the rise. In addition, there have been major innovations in research and drug discovery to treat cancer and dementia, and the digitalization of healthcare is accelerating.
Life Science Attractive Markets
In this report, we focus on the following five attractive markets in the life science industry:
In Japan, the pharmacy dispensing costs account for 7.6 trillion JPY of the steadily increasing national healthcare costs due to the aging of the population. In response to this, the government is working to encourage NHI drug price reductions and curb rising drug costs. At present, NHI price revisions are carried out every two years, but in his speech on October 26, 2020, Prime Minister Suga emphasized that he plans to revise NHI prices every year. Although the domestic pharmaceutical market has been shrinking due to price reductions resulting from these NHI drug price revisions, sales of new drugs, such as anti-cancer drugs, have been expanding against the backdrop of the increasing number of cancer patients due to the aging of the population. The pharmaceutical market in FY 2019-20 was 11.8 trillion JPY, showing a significant positive growth from the previous fiscal year, and Japan continues to remain a large pharmaceutical market (See Figure 6).
Biopharmaceuticals, mainly antibody drugs, are expected to drive the domestic pharmaceutical market in the future. The domestic sales of biopharmaceuticals have been increasing year by year, reaching as much as 1.4 trillion JPY in 2016. While biopharmaceuticals account for about 30% of total pharmaceutical sales worldwide, in Japan, the figure is still only about 10%, leaving enough potential for growth. On the other hand, the domestic market for biosimilars, also known as follow-on biopharmaceuticals, was still small at approximately 18.4 billion JPY in 2016. However, this market is also expected to expand rapidly in the future, as the patents of biopharmaceuticals that are currently at the top of the sales rankings will expire one after another by around 2020, making it possible to sell biosimilars.
Looking at the players in the domestic biopharmaceutical market, at the end of 2016, more than 70% of domestically licensed biopharmaceuticals were foreign companies, making them the leaders. In biosimilars as well, four of the ten products approved in Japan by July 7, 2017 were from foreign companies, indicating a remarkable entry of foreign companies into the market. Recently, the Danish biotechnology company Genmab, which specializes in the development of antibody drugs for cancer treatment, established a Japanese subsidiary in January 2019 in order to build its own development and marketing system. Similarly, other foreign companies are also building clinical development and marketing systems for therapeutic drugs and indications in Japan.
On the other hand, Japan’s top pharmaceutical manufacturers are performing well through acquisition of overseas companies and formation of business alliances. Takeda Pharmaceutical Company acquired Ireland’s Shire for more than 6 trillion JPY in January 2019, and then merged it with Takeda in August 2020 to strengthen its rare diseases business. It is now planning to launch 14 new products by 2024. Astellas Pharma, which has strengths in new drug development, is expanding its business in the cancer domain and developing a drug for the treatment of prostate cancer in collaboration with Pfizer (U.S.). Daiichi Sankyo also partnered with AstraZeneca (U.K.) in 2019, making the anti-cancer drug field its core business. Another example is of Eisai, which partnered with MSD (U.S.) in 2018 in the field of anti-cancer drugs, and is also working with Biogen (U.S.) for the development of drugs for dementia. It is expected that open innovation by Japanese and overseas companies will continue to accelerate further in the future.
As of 2016, Japan's medical equipment market accounted for approximately 8% of the world's total, making it the second largest in the world after the U.S. In FY 2019-20, the domestic medical equipment market was worth approx. 4.3 trillion JPY, of which imports accounted for more than 60% (See Figure 7).
Many foreign companies, including the medical equipment market leader Medtronic (U.S.), have established bases in Japan, indicating that they see it as an important market. As part of this drive, in September 2017, Medtronic opened an innovation center in Kawasaki as a strategic base for the entire Asia region, where it carries out product development and advanced trainings for the Group companies. Johnson & Johnson (U.S.) opened the Tokyo Science Center, a training facility for medical technology, in 2014, and GE Healthcare (U.S.) announced its collaboration with Daiwa House Industry for the commercialization of regenerative medicine in October 2018. It is expected that foreign companies will continue to enter the Japanese market, where demand for medical equipment continues to increase with the aging of the population, and collaborate with Japanese companies in the future.
Foreign companies have already captured a large share of the Japanese market in all areas. For example, Medtronic Japan (U.S.) has the largest share of the Japanese market for cardiac pacemakers (market size 36.8 billion JPY), followed by St. Jude Medical (U.S.). Foreign companies also have a leading share in many other fields, including hip prostheses (market size: 56.7 billion JPY), gastrointestinal endoscopic instruments (market size: 51.6 billion JPY), and spinal fusion systems (market size: 35.1 billion JPY).
In Japan, where the population is aging rapidly and the rise in social security expenses is putting pressure on public finances, there is an urgent need to reduce medical expenses and nursing care insurance benefits. Under such circumstances, the healthcare industry is shifting its focus from treatment to prevention and health promotion. When categorizing medication into three phases: “prevention”, “diagnosis and treatment”, and “prognostic monitoring”, the market size of the “prevention” phase was 6.8 trillion JPY (FY 2015-16), which is relatively small at present (See Figure 8). However, the government is driving the growth of preventive healthcare, including the establishment of the Next-Generation Healthcare Industrial Council in 2013, to create a market and foster industrial development in the field of extending healthy life expectancy.
Within the preventive healthcare market, the proliferation of smartphones and wearable devices has increased the awareness and willingness of people to use ICT-based digital healthcare services. As part of its measures for prevention and health promotion, the government is promoting the introduction of excellent private-sector services, such as strengthening incentives for individuals and insurers, and supporting the matching of insurers and businesses through the "Data Health and Prevention Service Expo". As a result, the demand for digital healthcare services is expected to grow, creating new business opportunities. In particular, the Japanese market is expected to grow with domestic and foreign startups aiming to develop digital healthcare services in Japan, as well as with foreign companies from countries/regions like Europe, U.S., China, and India where preventive healthcare services are advanced.
It is hoped that advances in regenerative medicine will enable fundamental cures for diseases that are difficult to treat with conventional techniques such as surgery and medication. Japan's basic and applied research in regenerative medicine is among the best in the world, as demonstrated by the case of Professor Shinya Yamanaka of Kyoto University, who was awarded the Nobel Prize in Physiology or Medicine for his iPS cell research in 2012. iPS Academia Japan, which was established by Kyoto University to disseminate its iPS cell-related inventions throughout the world, has licensed out its patents to companies globally. It is anticipated that these companies with access to the technology will enter the Japanese market and bring about further innovation in the country.
At the same time, due to the fact that the practical application of regenerative medicine in Japan is less than in Western countries, the Pharmaceutical Affairs Law was amended in 2014 to revitalize the medical industry. The legal system to promote regenerative medicine is now in place in Japan, including the setup to expedite approvals for regenerative medical products that are expected to be the result of iPS cell research. The Forum for Innovative Regenerative Medicine (FIRM) is leading the promotion of industries surrounding regenerative medicine. It is building a platform to link universities and public research institutions with companies and establishing a new framework with peripheral industries in order to provide one-stop service, from R&D for product commercialization to clinical trials, approval, and domestic and international dissemination.
In 2015, the German pharmaceutical company Bayer Yakuhin established its office within the International Science Innovation Building, a newly established site for industry-government-academia collaboration within Kyoto University. In addition, Pfizer (U.S.) and AstraZeneca (U.K.) are working with Japanese pharmaceutical companies in a project set up by the National Center for Cancer to develop new drugs based on genetic research. Many other foreign pharmaceutical companies have also started partnerships with cutting-edge research institutions, and it is expected that they will act as the impetus for the growth of the regenerative medicine market in Japan.
Due to the practical application and spread of regenerative medicine using iPS cells, the domestic market is expected to expand from 9 billion JPY in 2012 to 1 trillion JPY in 2030 and 2.5 trillion JPY in 2050 for regenerative medicine and cell therapy products alone, which are made by processing iPS cells. Furthermore, if we include reagents, culture media, automatic culture equipment, and other peripheral industries, the market is expected to expand from 26 billion JPY in 2012 to 1.55 trillion JPY in 2030 and 3.8 trillion JPY in 2050 (See Figure 9).
（5）Nursing care services
By 2025, the population of the late elderly (aged 75 years and older) is expected to swell to 22 million, or a quarter of the total population. The "2025 problem" is looming, with concerns about a sharp increase in social security expenses for medical and nursing care. Under these circumstances, opportunities to enter the nursing care business are expanding. According to the MHLW, the nursing care market has increased year by year from 3.6 trillion JPY in FY 2000-01, when the Nursing Care Insurance System was introduced, to over 10 trillion JPY for the first time in FY 2016-17. Furthermore, by FY 2025-26, the government estimates that it would grow to about 15 trillion JPY on a planned basis, indicating that the nursing care market is growing at a rapid pace (See Figure 10).
The advantage of the nursing care business is that there is little risk that cash flow will deteriorate due to bad debts and other factors. In this area, the country becomes a receiver, where 90% percent of the remuneration is paid by the National Health Insurance Organization. In addition, it is easier to generate recurring clients than in general business. If the quality of nursing care facilities and visiting nurse services is satisfactory, it is highly likely that the clients will continue to use the service. Also, as Japan is an aging society, the number of users is certain to increase over time, making it difficult for the market to dry up even if more players enter the market.
Recently, foreign investment funds are increasingly entering the domestic nursing care market. In 2013, Healthway Medical Group, a medical service provider in Singapore, acquired a Japanese paid nursing home for the elderly, and in 2016, CVC Capital Partners, a major European fund, acquired Hasegawa Holdings, which is engaged in the senior housing business.
Life science market to expand due to aging population and digitalization
Supporting the healthcare industry nationwide while promoting data utilization
In this report, we focus on the following five government initiatives in the life science industry:
（1）Data Health Reform Promotion Project
（2）Utilization of medical big data based on the Next-Generation Medical Infrastructure Act
（3）Efforts for unmet medical needs
（4）Premium for new drug development
（5）Support to foreign companies investing in regional areas
Life Science Report
2. Government Initiatives
3. Attractive Markets
- Business Expanding
- Biotechnology & Lifescience
- Yokohama city
Freyr Solutions, a major U.S. CRO company, establishes a Japanese subsidiary, rapidly promoting business development and employment in Japan with a view to globalization
- Business Expanding
- Biotechnology & Lifescience
FathomX Pte Ltd, a Singaporean company that researches AI-based mammography diagnostics, launches joint research with the National Cancer Center (NCC)
- Business Expanding
- Biotechnology & Lifescience
MIMEDX, the largest manufacturer of therapeutic biologics in the U.S. and a leader in the field of advanced wound care, establishes a Japanese subsidiary in Tokyo
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