Japan’s efforts to address drug supply issues: regulatory reforms and industry collaboration

Additionally, starting from 1 April 2024, the Ministry of Health, Labour and Welfare (MHLW) has requested that MAHs submit a report if: a supply shortage occurs for the pharmaceutical products they manufacture and sell, resulting in limited shipments or a halt in supply; or they become aware of a potential supply shortage within the next six months for any of their products that fall into certain categories (eg, essential medicines for stable supply (anzen kakuho iyakuhin) and non-substitutable products). To ensure the timely provision of drugs to medical institutions and others, the reported supply status is updated daily and made publicly available.

While the Japanese government acknowledges the importance of ensuring a stable supply of pharmaceuticals, the current Pharmaceutical and Medical Device (PMD) Act lacks specific provisions for guaranteeing a stable supply or managing supply systems. On 10 January 2025, the Health Sciences Council, an advisory body to the MHLW, published proposed revisions to the PMD Act and related laws. Subsequently, on 12 February 2025, the government approved a bill to amend the PMD Act and submitted it to the National Diet of Japan for its final approval.

The proposed reforms

One of the proposed revisions focuses on ensuring the supply of quality-assured medical pharmaceuticals. The revisions include the following: (1) establishing a system for ensuring a stable drug supply chain by requiring MAHs to appoint a responsible person for managing a stable supply (a stable supply system management officer or anzen kyokyu taisei kanri sekininsha) and to take necessary measures such as creating a stable supply system procedure manual; (2) obligating MAHs to submit reports on drug supply and demand and any supply disruptions when there is a risk of a shortage of medical pharmaceuticals, giving the MHLW power to legally request reports from MAHs and wholesalers and to request cooperation from MAHs, wholesalers, medical institutions and pharmacies; (3) improving access to alternative products from overseas when there is a shortage of approved medical pharmaceuticals, medical devices or in vitro diagnostic pharmaceuticals by enabling expedited approval and temporary acceptance of foreign language packaging as exceptions; (4) adding medium-risk changes as a new category for modifying manufacturing procedures to expedite the approval process and allowing annual reporting for minor changes that have minimal impact on quality, instead of requiring individual notices; and (5) enabling the MHLW to monitor and analyse data collected at pharmacies to better understand supply and demand dynamics.

The consolidation of generic drug manufacturers

Furthermore, on 17 February 2025, to enhance and ensure a stable supply of generic drugs, which are crucial for supporting healthcare, the MHLW and the Japan Fair Trade Commission published the ‘Case Studies Related to the Antitrust Act for Industrial Structural Reform to Achieve a Stable Supply of Generic Drugs’ (the ‘Case Studies’). The shortage of medical pharmaceuticals was initially triggered by quality-related misconduct issues among generic drug manufacturers that came to light in December 2020. However, addressing the supply shortage problem requires further investment in personnel and facilities to improve production efficiency, which first necessitates enhancing the profitability of these companies. In Japan, fundamentally resolving this issue is challenging due to the low prices of drugs, which stems from the country’s financial situation, particularly due to its aging population and declining birthrate. Therefore, as one attempt to enhance profitability and efficiency, the government has released the Case Studies to encourage the consolidation of generic drug manufacturers.

Recognising the need for the generic drug industry to move away from excessive price competition and restructure into companies that can benefit from economies of scale, the MHLW proposes the following ideal vision for the generic drug industry in the Case Studies: (1) companies with a large market share and a wide range of products should grow into general trading companies through improved productivity and profitability; (2) companies specialising in specific areas should consolidate their product lines in areas where they have strengths, achieving an appropriate scale to ensure productivity; and (3) the ideal number of suppliers for each active ingredient should be around five companies. To be in line with this vision, it is necessary to maintain a market where several strong competitors with sufficient supply capacity exist, and this idea is also consistent with the requirements of competition law in the country. To enhance the predictability of antitrust law enforcement and to foster and encourage companies to create such an environment, the Case Studies showcase examples of the following types of transactions permitted under antitrust law: corporate mergers, information exchange, product integration, joint production and manufacturing consignments, joint procurement, joint distribution and other forms of collaboration and cooperation among multiple companies.

Conclusion

In summary, addressing drug supply issues in Japan necessitates a multifaceted approach that includes regulatory reforms, industry collaboration and strategic planning. The authorities’ ongoing efforts emphasise the need to foster both a competitive pharmaceutical market and a resilient regulatory framework to ensure a stable supply of pharmaceutical products is achieved and to safeguard public health. Through coordinated efforts and proactive measures, Japan aims to develop a robust pharmaceutical industry capable of meeting the needs of its population, amid global challenges.

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