TAKURO KUSASHIO and KOHEI YAMADA, Nikkei staff writers
TOKYO — Japan’s trade deficit in medical goods is likely to top 3 trillion yen ($26.45 billion) in 2021 for the first time as the nation loses its market presence in the era of biopharmaceutical drugs.
The deficit started to expand about 15 years ago. According to data released by the Ministry of Finance, it has exceeded 2 trillion yen for six years in a row.
The red figure amounted to 2.3 trillion yen in 2020, comparable in size to the 2.5 trillion yen in trade for communications equipment, including smartphones. It is eating into the trade surpluses for automobiles and electronic components, which are propping up the Japanese economy as a whole.
Imports of COVID-19 vaccines have been adding to the deficit in pharmaceuticals. The loss is likely to exceed 3 trillion yen in 2021, as vaccine imports soared more than 10 times in the January-to-October period year-on-year.
The focus of competition for the development of new drugs is shifting from the synthesis of chemical compounds to the discovery of biological drugs. Japanese drugmakers’ ability to develop new drugs has weakened as a result of failing to keep up with the technological shift.
Japan used to be a leading drug developer, along with the U.S. and Europe.
The top 20 bestselling medicines in the world in 2000 included three drugs developed by Japanese companies, including a drug for hyperlipidemia (elevated fat in blood) developed by Sankyo, which is now called Daiichi Sankyo, and an anti-ulcer agent by Takeda Chemical Industries, which has changed its name to Takeda Pharmaceutical.
In 2020, however, Ono Pharmaceutical’s Opdivo, an immune checkpoint inhibitor to fight cancer, was the only Japanese-made drug in the list, according to IQVIA, an American health care consulting firm.
Japan has been good at altering chemical compounds found in plants and animals to synthesize small molecule drugs. Researchers, with artisan-like devotion, have kept achieving refinements in developing new drugs. Japan has produced eight Nobel laureates in chemistry.
Since the start of the 21st century, however, the mainstream of development has shifted from low molecular medicines to biopharmaceuticals. Antibody drugs, which target disease-causing molecules, are highly effective, making the treatment of diseases such as cancer and autoimmune disorder possible.
Biopharmaceutical medicines are wide-ranging, and their development requires cutting-edge technology. Although large amounts of funding is needed for this, research and development outlays at Japanese companies are smaller than those at their American and European rivals. It is by no means easy for Japanese drugmakers to catch up with overseas pharmaceutical companies.
QUICK-FactSet ranked the efficiency of major drugmakers’ R&D programs by analyzing how much their five-year R&D expenses increased their expenses and earnings before interest, taxes, depreciation and amortization in the following five years. The top 20 companies include only two Japanese firms.
Gilead Sciences of the U.S., the developer of the remdesivir coronavirus treatment drug, boosted earnings by more than eight times in the past five years over the previous five years.
American biopharmaceutical companies AbbVie and Biogen posted more than fivefold gains. Japanese companies fell behind in both earnings and efficiency.
Academic and industrial partnerships are also growing more important as the difficulty of developing new drugs increases.
In the U.S. and Europe, new businesses are set up based on the results of advanced research at universities. Following clinical trials on drugs developed by such startups, big pharmaceutical companies often purchase them for practical use. This kind of favorable cycle exists because investors financially support startups.
In Japan, a scarcity of investors makes it difficult to nurture startups that bridge universities and pharmaceutical companies.
The market for drugs in Japan amounted to 10.3 trillion yen in 2020, according to IQVIA. The nation’s trade deficit in medicines will further increase if biopharmaceutical drugs become the market’s mainstream and force Japan to rely more on high-priced imports.
The delayed authorization of coronavirus vaccines by the Japanese government has exposed problems, including some that could have been dealt with by systems such as America’s emergency use authorization and are related to the use of clinical trial data. Japan currently relies on imported vaccines due to slowness in developing its own.
Along with the reinforcement of Japanese drugmakers’ financial prowess through consolidation, the government should establish a mechanism to facilitate the development of new drugs. Otherwise, the nation’s health care system could be shaken.