Japan, one of the world’s richest business markets, once had a reputation as a difficult business environment for some foreign companies. So why have many of the world’s best-known life science companies successfully expanded into Japan in recent years?
From Finland to Israel, from Australia to Portugal, from the U.S. to the U.K, small and large corporations have realized that Japan’s aging society represents opportunities in health sciences, while the country has loosened several key policies, regulations, and laws to open the door for foreign investment. Today, in pharmaceuticals and medical devices, in health care services and regenerative medicines, non-Japanese firms are learning from Japan’s markets before the aging trend arrives elsewhere in the world.
Japan’s citizens already are the world’s oldest, with the United Nations reporting that 27 percent of its population is over age 65. In contrast, the U.S. figure is only 15 percent. However, the trend toward an older society will reach Europe and North America over time. A concurrent decline in Japanese birth rates means the country also faces a shortage of caregivers, a situation that offers more opportunities for technology and innovations to replace or substitute for human workers.
Meanwhile, Japan already features the world’s second largest markets in pharmaceuticals and medical devices, behind only the United States. This intersection of aging, depopulation, and rich markets creates a laboratory for how the rest of the world will handle the economic and societal changes of aging.
The Japanese government has focused on these challenges and the opportunities. Led in part by Prime Minister Shinzo Abe and his “Abenomics,” the country has implemented widespread changes in health-related policies, regulations, and laws. National Strategic Special Zones, which are selected regions that offer eased regulations and tax benefits, are encouraging creation of innovative drugs and medical devices. While Japanese companies and universities are seeking foreign partners, the government is actively promoting foreign investment and other business from non-Japanese companies. In pharmaceuticals, Japan has eased some regulation, sped approval times, and passed laws that promote the development of orphan drugs, drugs that are developed to address rare diseases but remain commercially undeveloped because of limited potential for profitability. The field of regenerative medicine is attracting special interest worldwide to Japan.
“Nowhere else in the world has all that,” says Colin Lee Novick, managing director of CJ Partners, a Tokyo-based consultant for regenerative medicine companies and other firms. Novick spends much of his time with companies interested in opportunities created by Japan’s recent regulatory reforms. To demonstrate the reality of the changes, Novick remembers how some foreign companies were once intimidated by Japanese pharmaceutical and biotech regulators. Today, he said, regulatory staffs have been expanded and attitudes seem more supportive of new business, especially through increasing levels of feedback and more face-to-face consultations with regulators. In terms of helping non-Japanese companies, the government agency that controls pharmaceuticals and medical equipment “has become much more approachable. It’s almost jarring how different they tend to be,” says Novick, who has witnessed the changes happening in the past few years.
One preferred method to enter or expand in Japanese health science markets is for non-Japanese health care or pharma companies to partner with domestic firms. Since the government sped up approvals for drugs and medical equipment, such licensing deals and partnerships are rampant.
The list of non-Japanese companies collaborating to enter or expand in Japanese markets includes some of the best known in life sciences. For example, Lonza of Switzerland is partnering with the iconic Nikon. Israel’s Pluristem is working with Sosei and collaborating with Fukushima Medical University. In health equipment and services, the famous Dutch electronics giant Philips is joining a “hospital to home” movement for aging citizens – while also partnering with universities in Nagasaki and Kobe. In the pharma world, the list of companies targeting expansion in Japan include Germany’s Bayer, Portugal’s Hovione, and Finland’s Orion. Superstar U.S. firms like Pfizer, Merck, and Eli Lilly also are interested and partnering with various Japanese universities.
Yes, some challenges remain in Japan, although they are less daunting now in the life sciences than in the past. Overall, the message from these and other examples is that any health sciences company not considering the intriguing, complex opportunities of Japan’s current and future markets – and the lessons they offer for the rest of the world – may be left behind in the increasing competitive global economy.
Find more at Japan.go.jp/abenomics.