The Japanese Pharmaceutical Industry: Its Evolution and Current Challenges (review)

The Japanese Pharmaceutical Industry is an ambitious, broad-ranging analysis of the postwar history of an industry whose eight per cent share of Japanese manufacturing understates its significance in terms of health and as a barometer for science-based innovation. Based on the author’s doctoral dissertation in economic history at the London School of Economics, this book by Maki Umemura constitutes one of a small number of comprehensive analyses of the Japanese pharmaceutical industry.

Similar English-language books have been published by L. G. Thomas and Takuji Hara.¹ Thomas focuses on the shortage of globally marketed drugs in Japan, attributing this to disincentives created by drug pricing policies of the Ministry of Health and Welfare (MHW), protectionist barriers against overseas drugs, anticompetitive effects of drug wholesalers being controlled by major pharmaceutical companies, prescription practices of Japanese physicians, and passivity among Japanese patients. Hara’s analysis is more micro-level and biomedically oriented. It centers on case studies of the discovery and development of seven successful Japanese drugs—studies focusing on the company scientists who led these efforts and the organizational and scientific milieu in which they worked.

Umemura’s analysis tacks between these two previous studies, and it is the most accessible. It avoids the profuse economic and trade-focused statistical analysis of Thomas’s book and also the arcane scientific histories that constitute much of Hara’s study. Like Thomas, Umemura emphasizes the negative impact of the policy of MHW (later the Ministry of Health, Labour and Welfare, MHLW) of setting a retail (prescription) price for each new drug and reducing that price over time in a way that rewarded pharmaceutical companies for developing me-too drugs while providing few incentives to invest in the discovery and development of innovative drugs. She and Thomas also emphasize the negative effects of protectionist policies.

The most original insights are in Umemura’s two middle chapters which contrast drug discovery and development in antibiotics and anticancer drugs. Each is grounded in case studies that integrate biomedical, historical, and institutional factors. Some, like Hara’s, summarize the discovery and development of innovative drugs and show how company scientists kept abreast of worldwide developments and often initiated collaborations with academic researchers. Other case studies show how weak science, small numbers of medical specialists, and conflicts of interest within MHW advisory committees led to the approval and use of several ineffective cancer therapies.

Umemura clearly shows how the inability to obtain product patents on pharmaceuticals prior to 1975 discouraged the development of innovative drugs—an issue glossed over by many English-language academic researchers. Soon after the launch of Meiji Seika’s antibiotic, kanamycin, and Kyowa Hakko’s novel cancer drug, mitomycin, these companies found sales being undercut by established Japanese pharmaceutical companies copying and marketing the same drugs. Indeed, Umemura’s case studies contain tantalizing suggestions that new entrants from other industries had a better record of innovative drug discovery than established pharmaceutical companies. If she had explored this in more depth, along with the inability of most of these new entrants to sustain their initial successes, she might have added new information to the current debate about whether new entrants can spur innovation, especially in countries where start-ups are few.

Umemura’s analysis is rooted in the past. Many of the sins she lays at the door of the Japanese government and medical establishment have been substantially rectified. The protectionist industrial policies that she and Thomas criticize have been largely dismantled. Executives of international pharmaceutical companies now rarely complain about an unlevel playing field vis-à-vis Japanese companies or about Japan’s patent system. Complaints persist about the long time it takes MHLW to approve drugs, both foreign and domestic, compared with the U.S. and European regulatory agencies, but the delay has decreased. Approval of me-too drugs has become substantially harder. Under drug retail licensing requirements implemented in 2006, most physicians no longer sell drugs, removing a large...