GOVERNMENT INCENTIVES HELP

Despite roadblocks, generic drugs gaining traction

by Tomoko Otake

In 1995, when physician Jiro Nakano moved back to Japan after 45 years of practice in the United States, he was startled by the lack of what his American patients took for granted: generic drugs.

Generic drugs — no-brand versions of prescription drugs that feature exactly the same ingredients and effects as the original prescription drugs and released after their patents expire — are a common presence in the U.S. and elsewhere. But in Japan, few people had heard of them, or even cared to know.

Nakano soon found out why: The government-run health insurance program had covered most of the bills for Japan’s hospital-goers. People never faced the need to seek out less-expensive alternatives, simply because brand-name prescription drugs came so cheap.

But times have changed.

Alarmed at spiraling medical costs, the government hiked the percentage of medical expenses salaried workers must shoulder from 10 percent to 20 percent in 1997, then to 30 percent in 2003. People over 70 years of age with high incomes also coughed up a medical fee increase in 2002 and now pay 20 percent of the cost.

The fee hikes have prompted many who had blindly swallowed whatever was prescribed by their doctors to take a closer look at their medical bills, according to Nakano.

“Patients definitely ask more questions now,” said Nakano, who works as an adviser for Hokusetsu General Hospital in Takatsuki, Osaka Prefecture.

The growing cost-consciousness among patients is a godsend for makers of generic drugs, who have long been scorned by the medical establishment as producers of cheap copies.

Likewise, it has put manufacturers of patented drugs on the defensive.

Sankyo Co. has been busy lately taking generic drug makers to court. Since the firm’s substance patent for its mega-hit cholesterol-lowering drug Mebalotin expired in October 2002, the firm has faced an onslaught of generic alternatives from some 20 pharmaceutical companies.

In August, Sankyo sued five generic drug makers, accusing them of imitating Mebalotin’s packaging. It settled with four of them earlier this month after they changed their packages. Then in April and May, Sankyo filed two more lawsuits against four other drug makers over their alleged infringement on a manufacturing technique to stabilize the drug’s ingredients, for which Sankyo still has a patent. The cases are pending before the Tokyo District Court.

A Sankyo spokesman, while reticent to talk about generic drugs, acknowledged that the firm “feels a sense of crisis” over their growing presence.

Generic makers, who are dwarfed in size by patented drug firms, are meanwhile stepping up a publicity campaign in hopes of seizing a bigger market share.

Sawai Pharmaceutical Co., a major maker of generic drugs with sales of 22.5 billion yen in fiscal 2003, is handing out brochures and airing TV commercials featuring Hideki Takahashi, an actor hugely popular among the middle-aged and older set.

Takashi Iwasa, a managing director at Sawai, said the introduction in April 2002 of government’s financial incentives to use generic drugs was a major turning point in the battle for public recognition of Sawai and other providers of generic drugs, which number some 200.

Doctors and pharmacists today are rewarded 20 yen for every prescription they write or handle if it includes a generic drug.

The health ministry also sent out a notice in June 2002 to public hospitals across the nation to use more generic drugs.

But Iwasa gripes that the government isn’t doing enough to promote generic drugs, which are 30 percent to 80 percent cheaper than their brand-name equivalents.

And he has reason to be disgruntled — generic drugs, which earn 300 billion yen in sales a year, make up only a fraction of the 6 trillion yen prescription drug market.

Of the 6 trillion yen, drugs whose patents have expired account for 40 percent, or 2.4 trillion yen, leaving a huge potential for generic drugs to expand, according to Iwasa.

Other statistics compiled by Sawai show that, in terms of volume, no-brand drugs in Japan accounted for only 12 percent of all prescription drugs in 2002, compared with more than 50 percent as of 2001 in the U.S., Britain and Germany.

Apart from the dearth of public knowledge, experts cite various other reasons for the low penetration of generic drugs. Iwasa said most doctors don’t know the generic names for drugs; medical schools have long taught students only their commercial names.

In addition, under current law, pharmacists can give generic versions only when doctors prescribe them.

This is in stark contrast to standard practices in the U.S. and many other countries, where pharmacists are allowed to provide patients with choices between brand-name and generic drugs, even when doctors have written the former in their prescriptions, Nakano said.

Major drug wholesalers, which have close, and in some cases capital, relationships with patented drug makers, have also shied away from handling generic drugs. This has created a situation where doctors can’t get such drugs even if they crave cheaper varieties, said Junji Kasei, editor of Japan Generics Journal, a monthly magazine that specializes in the generic drug market.

The biggest bottleneck, however, might be the “brand consciousness” among patients, said Nakano, who likened the nation’s obsession with Louis Vitton to people’s aversion to generic drugs.

“There is this mentality that, the more you pay, the better product you get,” he said.

But demand is definitely on the rise — at least on the side of hospitals. In May, St. Mariana University School of Medicine Hospital in Kawasaki started issuing all of its prescriptions in generic names — the first among the nation’s major general hospitals to do so.

Now patients are offered a choice of drugs when they take their prescriptions to pharmacies. So far, only two or three out of every 10 patients have switched to cheaper versions, a trend that hospital officials are betting will soon change.

Keiso Masuhara, the pharmacy director at St. Mariana, said the 1,208-bed hospital’s move to push generic drugs has saved it 150 million yen so far.

“We know for sure the generic drug market will grow,” Kasei of Japan Generics Journal said, adding competition can only intensify in the future. “What we don’t know yet is who will emerge as a market leader.”