Diving into Japan's Health Market with a Global View

Takahiko Iwaya
President and Representative Director
Sanofi K.K.

March 2024

Global healthcare company Sanofi celebrated its 50th anniversary in 2023. Sanofi is one of the world's largest pharmaceutical companies, offering products such as ethical drugs for many therapeutic areas including immunological diseases, congenital and rare diseases, oncology, diabetes, cardiovascular diseases, and internal medicine as well as vaccines.

In this interview, Takahiko Iwaya, President and Representative Director of Sanofi K.K., provides insights into the prospects and potential of the pharmaceutical market in Japan and the appeal of investment in Japan from the perspective of drug discovery and research as well as development.

The pandemic highlighted the critical role of the pharmaceutical industry in addressing not only the surge in vaccine demand but also the myriad of unmet medical needs across the globe.

Iwaya shared insights on the shifting landscape, noting, "In the past, drug discovery was principally carried out for conditions such as cardiovascular diseases and diabetes that affect a large number of patients. Recently, however, target diseases have been subdivided into more finely grained categories, and more effective drugs are required. " Iwaya further elaborates on the complexities of modern drug development. "Drug development has always been a very time-consuming process, from the research to the commercialization phase, and now that medical needs have become more specific, the development period is even longer, and the probability of reaching the commercialization point is lower, so a very large investment is required," he points out. This has prompted strategic changes within the industry, particularly for Sanofi.

"To ensure the ability to make these large investments without compromising our financial stability, we scaled up Sanofi through repeated mergers and acquisitions, aiming to become a mega-pharmaceutical company operating with global capital," Iwaya shares. Moreover, the focus on unmet medical needs has reshaped the landscape of drug development. "Increasingly specific medical needs have made it more difficult for companies to develop new drugs in-house so they have started growing innovative seeds by co-developing drugs with venture companies and others. This is clearly the direction in which the pharmaceutical industry has been going over the past few years," says Iwaya.

Iwaya highlights Japan's appeal as a destination for pharmaceutical investment, pointing to its unique national systems as a significant benefit. "Japan has a sophisticated health insurance system that ensures all citizens have access to necessary medical services at any time," he explains. This, coupled with the country's stable socio-political conditions and mature infrastructure, underpins a strong foundation for pharmaceutical investments, even in the face of a rapidly aging population.

On the topic of market access and drug approval, Iwaya highlights Japan's global leadership. "In terms of market access to new drugs, Japan arguably leads the world. Japan's process for bringing new drugs to market, following regulatory approval, is among the fastest globally, once they obtain regulatory approvals," he explains. This efficiency is attributed to the government's proactive approach, including its investment in expanding the workforce of drug reviewers, which could enable faster approvals than seen in other countries.

Japan's Ministry of Health, Labour and Welfare provides subsidies for the stable supply of medicines which covers manufacturing facilities, support for labor costs and research support for drug development to pharmaceutical companies that are striving to increase production of prescription drugs in short supply. In addition, pharmaceutical companies and local governments have signed numerous comprehensive cooperation agreements, and there is an active movement toward cooperation between pharmaceutical companies and the government.

Discussing the government's approach, Iwaya sheds light on the specific forms of aid provided to the industry: " The Japanese government and the private sector are both eager to provide more support, such as establishing public-private partnership funds, to encourage investment in biotech ventures," he says. This support is indicative of a broader governmental and societal push towards fostering innovation and backing startups and ventures within the biotech sphere.

Iwaya also emphasizes the critical nature of collaborative relationships. "It is very important for foreign companies to build partnerships not only with the national government but also with local governments such as prefectures and municipalities," he points out. Reflecting on Sanofi's experience of reinvesting in the SSP, the consumer healthcare division of Sanofi Japan Group, Narita Plant located in Chiba Prefecture, Iwaya illustrates the value of local support: "The understanding of and cooperation from the local authorities in practical matters such as hiring local employees was a crucial factor." He also acknowledges the role of organizations like JETRO in facilitating these collaborative efforts, providing "a broad spectrum of consulting services, including information on prefectural incentives and opportunities to meet with local government figures."

Reaffirming his earlier points, Iwaya further emphasizes Japan's standout features within the global healthcare landscape.

"There are not many healthcare markets in the world that can rival Japan in terms of a highly developed insurance system, excellent standard of education, and such a stable socio-political situation," he states.

Amidst an aging population, controlling medical and drug costs has been a challenge for the government, which aims to keep both under control. "However, there has been vigorous debate on this matter, leading to a shared understanding within the government that regulating drug prices might undercut the motivation for research and development and innovation, which are vital to the pharmaceutical industry," he explains.

Iwaya then highlighted the appeal of Japan as a research and development hub. "The government's commitment to fostering investment in the healthcare sector, along with its focus on strengthening companies' drug discovery capabilities and innovation, stands out as a key advantage for Japan as a destination for investment," he concluded.