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Japan’s Generic Drug Push

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Japan has historically been known for its reliance on brand-name drugs amongst doctors and consumers. 

For an ageing population, this dependence has raised concerns around medical expenses. Under the National Healthcare Insurance Scheme, most Japanese citizens only pay 10-30% out-of-pocket for medical expenses. In an effort to protect the viability of the country’s universal health coverage and curb costs, Japan has set generic drug targets.

In 2007 the target was set at 30% of all drugs sold to be generic by 2013. This was backed by financial incentives to hospitals, doctors and pharmacies. That target has been achieved and the target is now set at 80%. The Japanese government estimated that generic drugs reduced medical expenditure by about $17 billion USD in 2020.

A recent drug shortage

While the use of generic drugs has increased, there have been problems at a manufacturing level to keep up supply. In October 2023, an earlier than usual flu season created a drug shortage with the Japanese health ministry calling on hospitals to only procure the necessary amount of dry syrup form of oseltamivir phosphate.

That same month, the Japan Medical Association announced that over 90% of its approximately 3,000 clinics with in-house dispensaries were experiencing trouble accessing certain drugs. Health minister Keizo Takemi offered government incentives to drug manufacturers to increase their production of cold and flu medications.

Some industry groups blame the ongoing difficulties with drug shortages on the governments forcible shift to generic drugs.

The pricing problem

Every two years Japan performs scheduled price adjustments on pharmaceuticals as a way to reduce costs, but in the past five years this has become an annual occurrence. In 2023, which was meant to be an off-year for price reform, more than 2000 drugs were reduced in price – with generic drug providers seeing the biggest decreases. This heightens the already strong criticism from the industry on the government’s frequent pricing changes.

Japan is still finding an equilibrium between pushing for more generics and ensuring a sustainable supply, finding the balance remains a critical challenge for the nation’s healthcare system.

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