Policy Research Institute page Japan's Presence in the Pharmaceutical Market Analysis of Overseas Sales Share of Japanese Companies

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The size of Japan's ethical pharmaceuticals market was overtaken by China in 2013 and is now the third largest single country in the world, with its share continuing to decline. Under such circumstances, some of Japan's major pharmaceutical companies are making efforts to increase the ratio of overseas sales for the sake of their survival and development. We report here on our research into the trends in the overseas sales ratios of Japanese companies, differences with European and U.S. companies, and the share of Japanese nationals in the global pharmaceutical market.

Positioning of the Japanese market in the world

According to IQVIA's World Review Analysts, the Japanese market was the second largest single country in the world after the U.S. before 2012. However, it was overtaken by China in 2013 and is now the third largest market in the world. In addition, looking at the share of the Japanese market in the world since 2010, it was 11.6% in 2011, but has continued to decline since then, reaching 6.9% in 2018 ( Figure 1 ).

Fig. 1 Trends in market shares of each country in the world
Source: Copyright© 2020 IQVIA. Prepared by the Pharmaceutical Industry Policy Institute based on IQVIA World Review Analyst 2010-2018 (All rights reserved)

Changes in Overseas Sales Ratio of Japanese, U.S., and European Companies

Under these circumstances, some pharmaceutical companies headquartered in Japan (Japanese companies) are making efforts to increase the share of their sales overseas to better ensure their survival and development.

For example, looking at the eight largest Japanese companies*1, seven companies increased their overseas sales ratio compared to 2010 and 2018 ( Figure 2 ).

Figure 2: Overseas Sales Ratio of Eight Major Japanese Companies
Source: Prepared based on information from DATABOOK2019, SPEEDA, and each company's annual securities report

In terms of total sales (domestic + overseas), 6 of the 8 companies increased compared to 2010, but only 2 companies increased domestic sales, while the remaining 6 companies decreased domestic sales, indicating that many companies are compensating for the decrease in domestic sales by increasing overseas sales.

The overseas sales ratios of the eight largest U.S. companies and the eight largest European companies*2 (or the ratio of sales outside Europe for European companies) are also shown in Figures 3 and 4. The percentage of sales outside the U.S. varied from 20% to 60% for U.S. companies. A simple average of the overseas sales ratios of the eight largest Japanese, U.S., and European firms shows that Japanese and European firms are increasing their overseas sales ratios, while U.S. firms are decreasing their ratios.

Figure 3: Percentage of Sales Outside the U.S. by Eight U.S. Companies
Source: DATABOOK2019, SPEEDA, and each company's annual report.

Figure 4: Percentage of Sales Outside Europe by Eight European Companies
Source: same as Figure 3

Global Sales Share of Japanese Companies

The IQVIA World Review Analyst surveyed the top 100 companies in terms of global sales to determine their share of the global market by nationality. We conducted a survey of the global market share of the top 100 companies by company and nationality ( Fig. 5 ).

Figure 5: Annual change in share of global market by nationality of the Top 100 companies in global sales
Source: Copyright© 2020 IQVIA. Prepared by the Pharmaceutical Industry Policy Institute based on IQVIA World Review Analyst 2010-2018 (All rights reserved)

From 2010 to 2018, the share of Japanese companies in the overall global market was 9.1% ($69.466 billion) in 2011, but has continued to decline since then, reaching 5.4% ($58.083 billion) in 2018. One reason for this is the decrease in the number of Japanese companies in the Top 100 (from 20 in 2010 to 12 in 2018). The main reasons for this can be attributed to the relatively low growth rate of Japanese companies compared to the growth of the global market and the increase in the number of Chinese companies in the Top 100 (from 0 in 2010 to 7 in 2018) due to the expansion of the Chinese market and other factors. The number of U.S. companies in the Top 100 also decreased from 30 to 23, but their sales increased (from $259.03 billion in 2010 to $368.685 billion in 2018). Although the number of companies decreased due to mergers, changes in corporate nationality, and other factors, the overall sales of U.S. companies increased due to the significant sales growth of several U.S.-based biopharmaceutical companies. In addition to the aforementioned China, India (4 companies in 2010 → 9 companies in 2018) is another country that saw an increase in the number of companies in the Top 100.

Share of sales by country (region) by company nationality

The nationalities with the highest global market shares in 2018 were the United States, Switzerland, the United Kingdom, Japan, and Germany, in that order. Figure 6 shows the share of sales in major countries by company nationality*3. while U.S. and European companies had a higher share in their home country than in other countries, they also gained share in other countries, Japanese companies had a prominent share in Japan, indicating that they were more dependent on domestic markets than companies in other top-ranking countries The Japanese firms had a prominent share of the Japanese domestic market, indicating that they are more dependent on the domestic market than firms in other countries. Note that the analysis in Figures 5 and 6 based on IQVIA World Review Analysts does not include overseas sales from royalty income, but Figures 2, 3, and 4 based on each company's annual securities report and annual report do. Some Japanese companies license their products to Western companies that have global sales networks and receive profits in the form of royalties. Although some companies are successful in this regard when viewed individually, when viewed as a whole, Japan's position as a source of licenses to global companies is diminishing*4.

Figure 6: Share by country (region) by company nationality
Source: Copyright© 2020 IQVIA. Prepared by the Pharmaceutical Industry Policy Institute based on IQVIA World Review Analyst 2010, 2014, 2018 (All rights reserved)

Summary

We have confirmed the positioning of the Japanese market and Japanese companies in the world. As the Japanese market becomes less important in the world, major Japanese companies are increasing their overseas sales ratio year by year, but we found that even the top companies in terms of global sales are still highly dependent on the domestic market compared to major European and US companies.

Considering that the Japanese market will continue to be affected by the policy of curbing the growth of healthcare costs for the sake of sustainable social security, Japanese pharmaceutical companies will need to increase their overseas sales and strengthen their global presence in order to continue to grow, or even survive, in the future. In order to do so, Japanese pharmaceutical companies will need to increase their sales overseas and strengthen their global presence. To do so, they must effectively implement multifaceted measures, such as developing new drugs that are in demand worldwide, expanding their corporate scale and pipelines through M&A, securing pipelines through licensing in/out, and securing royalty revenues.

( Eriko Hashimoto, Senior Researcher, Pharmaceutical Industry Policy Institute)

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