Industry Trend Analysis - Pricing Environment To Become More Challenging - APR 2017


BMI View : Drug pricing will be a decisive factor shaping the commercial opportunities for multinational drugmakers in Japan. Given the importance of the issue, we expect the pharmaceutical industry to actively adjust their strategies and lobby the Japanese authorities, particularly with regard to the introduction of an annual price revision and the use of the special re-pricing rule on top - selling pharmaceuticals. Foreign exchange effects will further affect the performance of multinational drugmakers in the country with a gradual weakening of the yen , as expected by BMI's Country Risk team , potentially weighing on revenue growth.

Japan's business environment will become increasingly challenging for multinational drugmakers over the coming fiscal years. For the full year of 2016, company results diverged sharply, with Switzerland-based Roche reporting a year-on-year (y-o-y) increase of 15% in revenues even as Sanofi saw a sharp 25% fall in its sales. Notably, this has not slowed company activity, with Eli Lilly launching Taltz (ixekizumab) for psoriasis and psoriatic arthritis, while Merck & Co launched its anti PD-1 therapy, Keytruda (pembrolizumab), in February 2017. The continued launch of new products is a central factor underpinning our forecast for low-single-digit expansion of the Japanese markets, though risks are decidedly to the downside. We are currently forecasting medicine sales in Japan to rise from JPY11,730bn (USD107bn) in 2016 to JPY13,969bn (USD109bn) by 2026, with a compound annual growth rate of 1.7% in local currency terms and 0.1% in US dollar terms.

Pricing Reforms To Dominate Fiscal Year

Mixed Performance For Firms
Japan: Multinational Drugmaker Revenues For Full Year (USDmn)
Source: Company financial results

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