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Utilization of the ASEAN region to secure the stable supply of pharmaceutical products in Japan

To improve the soundness of healthcare finances, the Japanese government has been taking various countermeasures, such as a promotion of the use of generic drugs, price reduction of pharmaceutical products and the revision of the medical fee system etc. However, due to the spread of new coronavirus COVID-19 pandemic, the government is expected to develop higher level of medical services to the people.
While digital health development will contribute rapidly more efficient and advance technology of healthcare services and welfare, it is important for pharmaceutical companies to ensure a stable supply of medicines with the highest priority on quality and to reduce costs.
  • Target market
    Japan, USA, Other countries
  • Business category
    Pharmaceutical, Biopharmaceutical, Regerative medicine
  • Business function
  • Keyword
  • Author
    "Kazuyuki KASHIBA" of "CM Plus Corporation"
  • Availability
    Membership

Detail

* This article was originally authored in Japanese, and then translated into English. To read the original version in Japanese, click "医薬品の安定供給面におけるアセアン地域の活用".

1)Introduction
 To improve the soundness of healthcare finances, the Japanese government has been taking various countermeasures, such as a promotion of the use of generic drugs, price reduction of pharmaceutical products and the revision of the medical fee system etc.  However, due to the spread of new coronavirus COVID-19 pandemic, the government is expected to develop higher level of medical services to the people.

 While digital health development will contribute rapidly more efficient and advance technology of healthcare services and welfare, it is important for pharmaceutical companies to ensure a stable supply of medicines with the highest priority on quality and to reduce costs.


2)Countermeasures under discussion
 In U.S.A., while more than 50% of finished products and more than 70% API(Active Pharmaceutical Ingredient) used in the U.S. are manufactured overseas, there are concerns about quality assurance in China and India, which supply 12 percent and 19 percent of the APIs, respectively.

 And it is also said that weakness of supply chain in the U.S. pharmaceutical supply chain, which relies on overseas facilities, are contributing to the shortage of drugs under the COVID-19 pandemic.

 Regarding the supply chain of pharmaceutical products, several bills have been submitted that include contents such as giving tax incentives to domestic manufacturing companies and gradually reducing reimbursement of Chinese medicines by public insurance programs.

 In Japan, about 55% of API & intermediate of Ethical pharmaceutical products (currently listed at about 17,000 NHI prices) are imported with imports from China and India in large proportion.

 In response to the Indian government's restriction on exports of 26 APIs and preparations in March this year (Restrictions were lifted on 24 drugs except acetaminophen, an antipyretic painkiller, on April)  the Japanese government is considering measures to ensure a stable supply of these products.

 The Japanese government is also soliciting public support for Domestic Investment Promotion Grants for Supply Chain Measures (JPY 220 billion) [*1] and Support for Overseas Supply Chain Diversification, etc., mainly in Southeast Asia (JPY 23.5 billion)

 On April 30, the JPY3billion FY2020 supplementary budget from the Ministry of Health, Labor and Welfare (MHLW), as a subsidy for the cost of the factories ,has passed the Diet as a measure to support companies that try to manufacture APIs and other products in Japan that are highly dependent on foreign countries.

 In addition, MOHW will select necessary products to keep stable supply from more than 500 products nominated by 58 medical associations and decide the countermeasure for stable supply.


3)Utilization of ASEAN region
 Pandemic is a global scale event and worldwide countermeasure is required. In the short term, the increasing API and product inventories, the diversification of API sources, and in-house API manufacturing are all part of the short term response, but in the long term and from a global perspective, developed countries are expected to play a role in supporting developing countries as well as to respond to their domestic problems .

 In the medical field in developing countries, it is a challenge to develop infrastructure and foster the pharmaceutical industry, including medical insurance systems and securing the number of healthcare professionals.

 Generally, the development step of pharmaceutical industry in a country may be as follows
(1) Import of finished products > (2) Local production through technical transfer and API import > (3) Local production using local API > (4) Export of locally manufactured products. 
 For example, in recent years, Vietnam has been actively investing in manufacturing equipment to improve quality in stage (2). Indonesia seems to be in the step (3), the state-owned Kimia Pharma is in the process of conducting a project to manufacture APIs.

 In any case, human resource development is a core element for developing pharmaceutical industry and advanced countries including Japan is expected to pay the role.  

 Therefore, manufacturing of API and/or finished product in the ASEAN region may be one of the options as a measure to secure the stable supply of pharmaceutical products in Japan ,including the countermeasure to avoid risks from natural disaster in Japan. Global business expansion of Japanese company (alone or with local partners) by supplying locally manufactured products to Japan and surrounding countries, or technology transfer by excellent engineers in Japan (including post-retirement employment) will contribute to solve the problems (securing API, development of pharmaceutical industry, training technical person, improvement of trade balance etc.)in developing countries. This is also important for the realization of practical sustainable management of Japanese companies.

 To realize business expansion in ASEAN region, various methods and steps are possible, including such as Japanese company alone, joint venture with local companies(including M&A) or contract manufacturing to Japanese companies already operating in the ASEAN region (3).

 

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