Reshaping landscape of Japanese generics market – uncertain future of universal health insurance

Generics/Research | Posted 11/08/2023 post-comment0 Post your comment

According to a study conducted by Kosaka M et al., Japan established a national health insurance scheme in 1961. This scheme ensured that the entire Japanese population has equal access to medical care by paying only 10%–30% of the medical cost from their own pocket [1]. Despite the advancement of medical technology and a fast-ageing society, Japan’s healthcare costs have continued to rise. However, the Japanese government has failed to offer a fundamental solution and has instead implemented interim measures, with a notable example being the encouragement of generic drug utilization [2]. Similar issues and challenges have been observed in wealthy Organisation for Economic Co-operation and Development (OECD) Asian health markets [3].


As a result, the percentage of generic drugs in total number of prescriptions increased from 32.5% in 2005 to 78.3% as of September 2020. However, a consequence of this policy change has been tragic, as the country has recently faced an unprecedented series of incidents related to poor quality assurance [4].

The representative case revealed in the study is that, in 2020, the oral antifungal drug itraconazole, sold by the generic drug company Kobayashi Kako Co Ltd, was found to be accidentally contaminated with a sleep-inducing ingredient during its manufacturing process. At least 245 patients taking the drug experienced unwarranted side effects, including two deaths due to loss of consciousness while driving. An investigation revealed that the company had been manufacturing pharmaceuticals through unauthorized procedures since 2005. Additionally, the company was also found to have made false statements in its applications for pharmaceutical approvals for 12 products. In April 2021, the government revoked its approvals and ordered the company to improve its operations. These scandals have damaged the company’s financial status and reputation, ultimately leading to its bankruptcy [5].

The study stated that not only the case above but also in the case of Nichi-Iko Pharmaceutical Co Ltd, the company was found to have been selling its products using unauthorized procedures since 2009 and was subsequently ordered to suspend operations in March 2021. Following this incident, inspections were intensified, leading to a number of pharmaceutical companies being ordered to suspend production due to similar violations [6]. The sudden suspensions of production posed a threat to stable supply, resulting in  repetitive shortages and replacements of generic drugs, including essential medicines [7].

As of August 2022, out of 15,036 medications, 1,099 had their shipments suspended and 3,135 had their shipments adjusted, resulting in a total of 4,234 medications with modified shipment statuses. 

One of the reasons behind these incidents is the implementation of policies aimed at reducing medical costs to safeguard the country’s universal health coverage [8]. The government has begun giving manufacturers and distributors independent permission since 2005, following the revision of the Pharmaceutical Affair Law. Subsequently, barriers to entry for contract production of generic drugs were lowered, allowing chemical manufacturers, textile manufacturers, and others to initiate generic drug production. As a result, the total number of generic drug companies has increased to 194 as of November 2019.

However, according to the authors, the sustainability of generic drugs has come under increasing scrutiny due to a change in the frequency of official drug price revisions. These revisions shifted from occurring once every two years to taking place once per year since 2021. This policy change has made it difficult for generic companies to restructure their portfolio while maintaining consistent profitability [9]. In this situation, generic manufacturers have been compelled to expand production to meet the demand while prioritizing a stable supply with thin profit, often neglecting adequate quality assurance [10]. The reckless promotion policy of generic drugs warrants reconsideration so that generic drug companies can achieve economic sustainability.  This might require accepting additional costs to ensure the production of reliable generic drugs [11].

Conflict of interest
The authors of the research paper [1] declared that there was no conflict of interest.

Abstracted by Makoto Kosaka, Imamura Hospital Kagoshima, Kagoshima; Akihiko Ozaki, Department of Breast and Thryoid Surgery, Jyoban Hospital of Tokiwa Foundation, Iwaki, Fukushima; Tetsuya Tanimoto, Medical Governance Research Institute, Minato-ku, Tokyo; and Mihajlo (Michael) Jakovljevic, MD, PhD; Visiting Full Professor of Health Economics, Institute of Comparative Economic Studies, Hosei University, Tokyo, Japan.

Editor’s comment
Readers interested to learn more about of  the development and regulation of biosimilars in Japan are invited to visit to view the following manuscript published in GaBI Journal:

Biosimilar development and regulation in Japan

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1. Kosaka M, Ozaki A, Kaneda Y, et al. Generic drug crisis in Japan and changes leading to the collapse of universal health insurance established in 1961: the case of Kobayashi Kako Co. Ltd. Cost Eff Resour Alloc. 2023;21(1):35.
2. Miyatake H, Kosaka M, Arita S, et al. Videoconferencing for home care delivery in Japan: observational study. J Med Internet Res. 2021;23(9):e23539. 
3. Jakovljevic M, Sugahara T, Timofeyev Y, et al. Predictors of (in) efficiencies of healthcare expenditure among the leading Asian economies–comparison of OECD and non-OECD nations. Risk Manag Healthc Policy. 2020;13:2261-80.
4. Igarashi A, Eltaybani S, Takaoka M, et al. Quality assurance in long-term care and development of quality indicators in Japan. Geronto Geriatr Med. 2020;6:2333721420975320.
5. Kobayashi Kako Co Ltd – Company profile and news. Available from: 
6. Nichi-iko Pharmaceutical Co Ltd – Company profile. Available from: 
7. Kumagai N, Nishimura S, Jakovljević M. Could high continuity of care (COC) have a negative impact on subjective health of hypertensive patients? A Japanese perspective. Cost Eff Resour Alloc. 2023;21(1):39.
8. Yoon K, Kim HK, Choi M, et al. Analyzing the effectiveness of data-linked projects for health promotion in public health centers of South Korea. Risk Manag Healthc Policy, 2023;16:1101-17.
9. Park S, Kim HK, Lee H, et al. Strategic management and organizational culture of medical device companies in relation to corporate performance. J Med Econ. 2023;26(1):781-92.
10. Murayama A, Kamamoto S, Saito H, et al. Pharmaceutical payments to Japanese board-certified dermatologists: a 4-year retrospective analysis of personal payments from pharmaceutical companies between 2016 and 2019. Sci Rep. 2023;13(1):7425. 
11. Jin H, Jakovljevic M. Fiscal decentralization and the human development index: a cross-border empirical study. Sustainability, 2023;15(11):8784.

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