Analysis of new molecular entity trends from 2006 to 2015 in Japan

Abstract

Japan is one of the largest pharmaceutical markets in the world, and as such, pharmaceutical companies are intensively conducting research and development of new drugs in Japan. However, information on Japanese pharmaceutical market profiles is limited. In this context, we elucidated the market characteristics and trends of new molecular entities approved between 2006 and 2015 in Japan. Among antineoplastic and immunomodulating agents, the highest number was first approved in the United States, and for nervous system drugs, the highest number was first approved in Europe. The alimentary tract and metabolism and the musculoskeletal system were the therapeutic areas for which the most drugs were approved for the first time in Japan. Most of the musculoskeletal system drugs were developed by Japanese companies, and most of the antineoplastic and immunomodulating agents were developed outside of Japan. Using various performance indexes, such as market forecasts and significance of clinical benefits, we determined that the number of new molecular entities and market size increased and the number of drugs with significant clinical benefits decreased. These results suggest that new molecular entity innovation by Japanese companies has been decreasing and the government’s comparative method for pricing does not work well in Japan.

Keywords

Japan pharmaceutical market drug pricing system cost calculation method comparative method pharmaceutical companies

Introduction

Japan is one of the largest pharmaceutical markets, and as such, pharmaceutical companies are intensively conducting research and development (R&D) of new drugs in Japan. In 2014, Japan reportedly accounted for approximately 10% of global sales, which was the second largest share in the world.^1,2 Various differences have been reported between the current Japanese pharmaceutical market and markets of Western countries. The share of cardiovascular system drugs is relatively high among the top 100 drugs in the Japanese market, while that of antineoplastic and immunomodulating agents is relatively low.³ Because the Japanese drug pricing system has encouraged R&D of new antineoplastic and immunomodulating agents and nervous system drugs that are likely to sell well in the Western market as well as the Japanese market,^4–6 the Japanese pharmaceutical market for these drugs is regarded as becoming similar to the markets of Western countries.² However, because the research focus on new molecular entities (NMEs) in Japan is limited, it is essential to discuss the prognosis of the Japanese pharmaceutical market.

To consider the Japanese market prognosis, Japanese drug regulations must also be discussed. This is because, in Japan, health insurance coverage decisions and reimbursement prices are determined by the Ministry of Health, Labour and Welfare (MHLW) in consultation with the Central Social Insurance Medical Council, not by health insurance bodies.

The process for new drug pricing in Japan is described in Figure 1.⁷ After marketing approval has been obtained, pharmaceutical companies (applicants) submit an application for price listing in the National Health Insurance (NHI) system, and the first Drug Pricing Organization is established to discuss the appropriate pricing plan. The applicants can express their opinions at this point. A notification of the pricing plan will then be issued, and the drug price is fixed according to this plan. If the applicant objects to the pricing plan, the price will be discussed again at the second Drug Pricing Organization. Then, the pricing plan will be reported and approved at a general meeting of Central Social Insurance Medical Council, after which the price will be published in the NHI price listing quarterly.

Figure 1.

New drug pricing process in Japan.

The price calculation method for new drugs in Japan is described in Figure 2.⁷ If there are comparable drugs with similar efficacy, the daily drug price of the NME is matched to the daily drug price of existing comparable drugs from the viewpoint of ensuring fair competition in the market. If higher efficacy can be shown for the new drug compared with similar drugs, the following corrective premiums can be applied to the price: innovativeness premium, usefulness premium, marketability premium, child premium, and premium based on the SAKIGAKE designation scheme (see the Discussion for more information on this system). However, these corrective premiums are not applied to drugs with less novelty. If there are no comparable drugs with similar efficacy, the cost calculation method is applied, where costs (e.g., manufacturing, sales and general administration, operating profit, distribution and marketing, and consumption tax) are considered in setting the drug price.

Figure 2.

Price calculation method for new drugs in Japan.

This study quantitatively elucidated whether the Japanese pharmaceutical industry has developed over the past 10 years, and also evaluated whether there is still room for further development in the future. Various development indicators have been established for the pharmaceutical industry. In this study, we selected three indicators: the number of NMEs developed, market size forecasts, and the clinical innovativeness or usefulness of NMEs.

The number of new NMEs is typically used as an indicator of the development of the pharmaceutical industry.⁸ When applying for drug pricing, pharmaceutical companies have to submit a peak sales forecast based on the number of patients eligible for the new drugs. This forecast has been used to investigate the Japanese pharmaceutical market in several papers.^9,10 The indicator for clinical innovativeness or usefulness of NMEs is justified because NMEs are applied to innovative drugs. In this context, the main purpose of this research was to quantitatively present the characteristics and trends to grasp the current status of the Japanese pharmaceutical market, which will be the basis for further research.

Methods

Database used in the present study

The dataset for this study comes from publicly available information from the Pharmaceuticals and Medical Devices Agency website.¹¹ NMEs approved between 2006 and 2015 in Japan were selected as the drugs of interest. Data for predicted peak sales submitted by pharmaceutical companies, the applied price calculation method, and the companies’ base of operations (Japanese or global) were obtained from the Japanese Central Social Insurance Medical Council.¹²

Drug classification in the present study

The Anatomical Therapeutic Chemical (ATC) classification system, a pharmaceutical coding system maintained by the World Health Organization,¹³ was used to categorize the drugs included in the study (Table 1).

Table 1.

ATC classification system.

ATC codes	Therapeutic areas
A	Alimentary tract and metabolism
B	Blood and blood forming organs
C	Cardiovascular system
D	Dermatologicals
G	Genitourinary system and sex hormones
H	Systemic hormonal preparations, excluding sex hormones and insulins
J	Anti-infectives for systemic use
L	Antineoplastic and immunomodulating agents
M	Musculoskeletal system
N	Nervous system
P	Antiparasitic products, insecticides and repellents
R	Respiratory system
S	Sensory organs
T	Diagnostic medicines
V	Various
N/A	Not applicable

Trend analysis

Trend analysis was conducted to calculate the percentage change and number of drugs approved between 2006–2010 and 2011–2015. The change in the number of NMEs approved in Japan between the two periods and the associated predicted peak sales and ATC codes were investigated. We also investigated the percentage change of NMEs approved in Japan according to drug pricing method, the countries where approval was first obtained, ATC codes categorized by the companies’ base of operations (Japanese vs. global), and NMEs for which innovativeness or usefulness premiums were applied with the comparative method.

Results

Figure 3 shows the number of NMEs approved in Japan between 2006 and 2015. With one exception, the number of approvals increased annually between 2006 and 2015. To elucidate the relationship between the increase in the number of NME approvals and the size of the Japanese market, the number of NMEs approved was investigated for each expected peak sales amount.

Figure 3.

Number of NMEs approved in Japan between 2006 and 2015.

The number of NMEs approved in Japan according to predicted peak sales is shown in Figure 4. The number of NMEs approved in 2011–2015 generally increased, regardless of the market size, in comparison with the approvals in 2006–2010. The highest peak sales (1,190 hundred million yen) was predicted for one drug to treat hepatitis C, which was added to the drug price list in 2015. This was the only drug with estimated sales of more than 1,000 hundred million yen.

Figure 4.

Number of NMEs approved in Japan according to predicted peak sales.

The number of NMEs approved in Japan according to ATC code is presented in Figure 5. Compared to 2006–2010, the total number of NME approvals increased in 2011–2015, but the trend was different for each ATC category. The number of drugs in ATCs L, A, and B increased remarkably (N = 28 vs. N = 52, N = 16 vs. N = 35, and N = 9 vs. N = 19, respectively). In contrast, although the sample size is limited, the number of NMEs in ATCs C and H decreased (N = 9 vs. N = 5 and N = 5 vs. N = 1, respectively).

Figure 5.

Number of NMEs approved in Japan according to ATC code.

The number of NMEs approved in Japan according to drug pricing method is presented in Figure 6. The percentage of drugs priced using the cost calculation method did not increase between 2006–2010 and 2011–2015 (34% in both periods). Use of the comparative method also did not increase (66% in 2006–2010 and 65% in 2011–2015). Overall, no obvious difference was confirmed between either drug pricing system between 2006–2010 and 2011–2015.

Figure 6.

Number of NMEs approved in Japan according to drug pricing method.

Figure 7 presents the number of approved NMEs for which innovativeness or usefulness premiums were applied in the comparative method for pricing. These premiums are applied to products that are expected to have clinically significant effects. Therefore, it is considered that the application rate of the innovativeness and usefulness premiums in the comparative method is an index of the NMEs with novelty. The application rate of the innovativeness and usefulness premiums was 47% in 2006–2010 and 19% in 2011–2015. The application of these premium decreased obviously in the latter period.

Figure 7.

Number of NMEs in Japan priced by comparative method according to application or non-application of innovativeness or usefulness premiums.

The number of NMEs approved in Japan according to the countries in which approval was first obtained is investigated in Figure 8. The greatest share of drugs first approved in the United States was in ATC L (N = 44). The greatest share of drugs first approved in Europe was in ATC N (N = 14), and that first approved in Japan was in ATC M (N = 6). The number of NMEs approved in Japan according to ATC codes broken down by the company base of operations (Japanese vs. global) is provided in Figure 9. Most of the ATC M drugs were developed by Japanese companies (N = 10 out of 14), and most of the ATC L drugs were developed by global companies (N = 62 out of 70), which is consistent with the results seen in Figure 8.

Figure 8.

Number of NMEs approved in Japan according to the ATC codes and countries where they were first approved.

Figure 9.

Number of NMEs approved in Japan according to the ATC codes and company base of operations (Japanese vs. global).

Discussion

We investigated Japanese pharmaceutical profiles by focusing on NMEs approved in Japan between 2006 and 2015. Table 2 summarizes our evaluation of the Japanese pharmaceutical industry, as investigated in this study. The number of NMEs produced by the Japanese pharmaceutical industry has increased over the last decade, and the market size has also increased. However, our results suggest that approvals of highly innovative drugs have decreased, considering that the number of prices established by the cost calculation method and awarding of innovativeness or usefulness premiums during use of comparative method pricing has not increased greatly. One reason is thought to be that these pricing systems, including the submission of expected peak sales by pharmaceutical companies, do not seem to work well in Japan in the context of R&D of innovative drug.

Table 2.

Summary of Japanese pharmaceutical market evaluation using the performance indices defined in this study.

Performance index	Number of NMEs	Market size forecasts	Number of drugs with significant benefit
Results	↑ Increased	↑ Increased	↓ Decreased
Notes	None	Accuracy of forecast by pharmaceutical companies needs further discussion.	Cost calculation method and innovativeness or usefulness premiums in comparative method needs to be discussed to evaluate how these systems can encourage drug development in Japan.

The number of NME approvals increased between 2006 and 2015 (Figure 3), suggesting that the Japanese pharmaceutical industry has evolved over the last decade. However, it is necessary to evaluate the industry from multiple indicators, and it is difficult to conclude only from this result that the Japanese pharmaceutical industry has grown in recent years.

Then, we investigated the expected peak sales of each NME (Figure 4). Regardless of the market size, the number of NME approvals is increasing, suggesting that the number of NMEs in the Japanese drug market is expected to increase. In addition, the number of products whose expected peak sales amount is less than 30 hundred million yen has increased significantly, while the number of NMEs exceeding 30 hundred million yen has also increased. These results suggest that there seems to be a tendency of the polarization of NME approvals from drugs intended for the mass market to drugs targeted at niche markets. For example, in previous research, specifically on some ATC L and N drugs, this “from mass to niche market” trend was reported for the Japanese market, which is harmonized with global trends.^14,15

We also investigated the NMEs according to ATC classification (Figure 5). The increase in drugs in ATC L suggests that R&D on drugs with largely unmet medical needs is encouraged in Japan, which is the same as the global trend.¹⁶ The number of ATC A drugs increased because drugs for lysosomal diseases, such as Gaucher’s disease, have been newly approved and diabetes drugs having new mechanisms of action, such as dipeptidyl peptidase-4 (DPP-4) inhibitors and sodium-glucose cotransporter 2 (SGLT2) inhibitors, have been launched. ATC A is one of the therapeutic areas that include fatal and orphan/rare diseases.¹⁷ The trend from mass to niche markets was also confirmed for this disease area.

The cost calculation method and the innovativeness and usefulness premiums in the comparative method are considered to be applied to the drugs that are expected to be clinically meaningful. Therefore, it is considered that the application rate of the cost calculation method and innovativeness and usefulness premiums is also an index to evaluate the trend of innovative NME approvals. The application rate of the cost calculation method slightly decreased in 2011–2015 compared with 2006–2010 (Figure 6). The application rate of innovativeness or usefulness premiums decreased in 2011–2015 (Figure 7). These results suggest that the development of innovative NMEs has been decreasing in Japan.

The countries where NMEs are first approved and NME developers are based were also investigated (Figures 8 and 9). The main factors contributing to the location where NMEs are first approved tend to differ by therapeutic area and are considered mainly to be due to the development strategy of the company, which is reported to be affected partly by the location of its headquarters.¹⁸ In 2015, the MHLW formed the “SAKIGAKE Designation System” to lead the world in the practical application of innovative medical products in Japan.¹⁹ This new regulatory scheme is intended to encourage the conduct of R&D on new therapeutic products in Japan efficiently, especially in areas on which global pharmaceutical companies have been focusing.^20–24 When regulatory approval is obtained in Japan ahead of other countries, a premium based on the SAKIGAKE review designation is also applied.¹⁹ This is expected to encourage increased R&D by Japanese pharmaceutical companies, especially in therapeutic areas where contributions have been made mainly by global pharmaceutical companies, resulting in the Japanese pharmaceutical market becoming more comparable to the global market. Actually, several reports have showed an upward R&D trend, especially in oncologic drugs in Japan,^25–30 which is being accelerated through these schemes.

This research has some limitations. The perspectives obtained from this study must be regarded as preliminary because no statistical analyses were performed. The rationale of the performance indexes introduced in this research is limited, especially for the justification of the application rate of the cost calculation method and innovativeness and usefulness premiums in the comparative method, because the drug pricing system in Japan has been reformed and the environment has changed drastically. However, although preliminary, we believe that this is the first report revealing the 10-year trend of the NMEs approved in Japan by the total numbers and the numbers categorized by ATC codes, expected peak sales, applied pricing systems, countries of first approval, and company base of operations (Japanese vs. global), warranting further, more robust research.

Conclusions

The number of approvals of NMEs developed by the Japanese pharmaceutical industry has increased over the last decade, and the market size has also increased. However, the results suggested that approvals of highly innovative drugs have decreased, considering that the application of the cost calculation method and innovativeness and usefulness premiums in the comparative method has decreased.

Footnotes

Declaration of conflicting interests

The author(s) declared no potential conflicts of interest withrespect to the research, authorship, and/or publication ofthis article: Shoyo Shibata is an employee of Chugai Pharmaceutical Co., Ltd. However, his affiliation with the company did not influence the results or discussion in this paper. Daigo Fukumoto, Koken Ozaki, and Takeshi Suzuki have no conflicts of interest to disclose.

Funding

The author(s) received no financial support for the research, authorship, and/or publication of this article.

ORCID iD

Shoyo Shibata

Author biographies

Shoyo Shibata, PhD, MBA, RPh, is a student of the Graduate School of Business Sciences, Humanities, and Social Sciences at the University of Tsukuba. He received his PhD from Keio University in 2018 under the supervision of professor Dr Kanazawa Hideko and professor Dr Suzuki Takeshi. His research is in the area of regulatory science and health economics, analyzing the internal and external environments of the Japanese pharmaceutical industry to make policy recommendations based on its research.

Daigo Fukumoto, MBA, MSc, is a graduate student of the Faculty of Pharmacy at Keio University. His research is focusing on analyzing the drug pricing system of the Japanese pharmaceutical industry to make policy recommendations based on its research.

Koken Ozaki, PhD, is an associate professor of the Graduate School of Business Sciences, Humanities, and Social Sciences at the University of Tsukuba. He received his PhD from Waseda University in 2006 under the supervision of professor Dr Toyoda Hideki. His research is in the area of statistics.

Takeshi Suzuki, PhD, RPh, is a professor of the Faculty of Pharmacy at Keio University. He received his PhD from the University of Tokyo in 1986. His research is broadly in the area of pharmacology, neuroscience, cardiovascular science, and medical economics.

References

Shibata

Uemura

Suzuki

Comparative analysis between the top-selling drugs in the Japanese pharmaceutical market and those in the United States, the United Kingdom, France, and Germany.

Therapeut Innovat Regulat Sci 2016; 50: 221–227.

Shibata

Suzuki

The pharmaceutical market and drug development prognosis in Japan: current and future perspectives according to pharmacological classes. J Gener Med 2018; 14: 70–80.

Shibata

Fukumoto

Suzuki

, et al. A comparative study of the market configuration of the Japanese pharmaceutical market using the Gini coefficient and Herfindahl-Hirschman index. Therapeut Innovat Regulat Sci, 2020, in press. DOI: 10.1007/s43441-020-00122-6.

Shibata

Uemura

Suzuki

Factors that affect the acquisition of reward premiums for promotion of innovative drug discovery in Japan. Therapeutic Innovation & Regulatory Science 2016; 50: 56–65.

Shibata

Uemura

Suzuki

Impact of premium rewards for the promotion of innovative drug discovery on the Japanese pharmaceutical market: an analysis by therapeutic area. Therapeut Innovat Regulat Sci 2016; 50: 49–55.

Shibata

Uemura

Suzuki

Evaluating the effectiveness of repricing for market expansion in the Japanese drug pricing system. Therapeut Innovat Regulat Sci 2016; 50: 751–758.

Mamiya

Update of drug pricing system in Japan, https://www.mhlw.go.jp/content/11123000/000335166.pdf (2020, accessed 10 February 2020).

Kesselheim

Wang

Avorn

Defining “innovativeness” in drug development: a systematic review. Clin Pharmacol Therapeut 2013; 94: 336–348.

Shibata

Fukumoto

Suzuki

, et al. Analyzing upward deviation of actual vs predicted drug sales in Japan for a reasonable drug-pricing policy. Therapeut Innovat Regulat Sci 2020; 54: 544–551.

10.

Fukumoto

Tsuyuki

Suzuki

Drugs targeted for price cutting in Japan: the case of price revisions based on the divergence of official versus delivery prices. Therapeut Innovat Regulat Sci 2017; 51: 597–603.

11.

Pharmaceuticals and Medical Devices Agency. Safety alert & recalls/review reports/package inserts etc., https://www.pmda.go.jp/english/search_index.html (2020, accessed 10 February 2020).

12.

Ministry of Health, Labour and Welfare. Central Social Insurance Medical Council (in Japanese), https://www.mhlw.go.jp/stf/shingi/shingi-chuo_128154.html (2020, accessed 10 February 2020).

13.

World Health Organization. 2. Anatomical Therapeutic Chemical (ATC) Classification, https://www.who.int/medicines/regulation/medicines-safety/toolkit_atc/en/ (2020, accessed 10 February 2020).

14.

Shibata

Kawaguchi

Uemura

, et al. Emerging growth of orphan drugs for neurological diseases in Japan: potential benefits for both patients and pharmaceutical companies. J Regulat Sci 2016; 4: 7–13.

15.

Shibata

Noguchi

Matsushita

, et al. Can rare cancer drugs expect sales in Japan?: A prescription pattern analysis of drugs for chronic myelogenous leukemia and neuroendocrine tumor. J Regulat Sci 2019; 7: 1–9.

16.

Urquhart

Top product forecasts for 2020. Nat Rev Drug Discov 2020; 19: 86.

17.

Harada

Toriyabe

Ono

Survey of Japanese orphan drug program: factors related to successful marketing approval. J Clin Pharmacol 2020; 60: 117–124.

18.

Ryu

Reuer

Brush

TH.

The effects of multimarket contact on partner selection for technology cooperation. Strateg Manag J 2020; 41: 267–289.

19.

Ministry of Health, Labour and Welfare. Strategy of SAKIGAKE, http://www.mhlw.go.jp/english/policy/health-medical/pharmaceuticals/140729-01.html (2020, accessed 10 February 2020).

20.

Nagai

Ozawa

Regulatory approval pathways for anticancer drugs in Japan, the EU and the US. Int J Hematol Res 2016; 104: 73–84.

21.

Kondo

Hata

Ito

, et al. The current status of Sakigake designation in Japan, PRIME in the European Union, and breakthrough therapy designation in the United States. Therapeut Innovat Regulat Sci 2017; 51: 51–54.

22.

Muensterman

Luo

Parker

JM.

Breakthrough therapy, PRIME and Sakigake: a comparison between neuroscience and oncology in obtaining preferred regulatory status. Therapeut Innovat Regulat Sci 2020, in press. DOI: 10.1177/2168479019874062.

23.

Matsushita

Tachibana

Kondoh

The clinical innovation network: a policy for promoting development of drugs and medical devices in Japan. Drug Discov Today 2019; 24: 4–8.

24.

Kajiwara

Shikano

Considerations and regulatory challenges for innovative medicines in expedited approval programs: breakthrough therapy and Sakigake designation. Therapeut Innovat Regulat Sci 2019, in press. DOI: 10.1007/s43441-019-00019-z.

25.

Shibata

Matsushita

Saito

, et al. Anticancer drug prescription patterns in Japan: future directions in cancer therapy. Therapeut Innovat Regulat Sci 2018; 52: 718–723.

26.

Shibata

Wayama

Tsuyuki

, et al. An empirical study of the prescription pattern of drugs for hematological malignancies in Japan from 2010–2014. Biologic Pharmaceut Bull 2017; 40: 894–901.

27.

Shibata

Matsushita

Saito

, et al. Optimal anti-cancer drug profiles for effective penetration of the anti-cancer drug market by generic drugs in Japan. Therapeut Innovat Regulat Sci 2018; 52: 442–448.

28.

Shibata

Matsushita

Suzuki

, et al. Japan oncology market overview: current and future perspectives. J Gener Med 2019; 15: 104–114.

29.

Shibata

Uemura

Chiba

, et al. A comprehensive analysis of factors that contribute to conditional approval and all-case surveillance designations that subsequently lead to shortening of review times in Japan. J Regulat Sci 2016; 4: 1–9.

30.

Shibata

Matsushita

Tsukamoto

, et al. MO1-11-2 relationships between approved combination therapies and clinical data packages in anti-cancer drugs in Japan. Ann Oncol 2019; 30: mdz338–020.