The Japanese pharmaceutical market is changing. Focus is on cost saving measures, which often means increased pressure on prices of pharmaceuticals. Novo Nordisk is, however, optimistic about the prospects in Japan - historically a cornerstone in the company’s globalisation.

In 1997 Novo Nordisk ranked tenth amongst all foreign pharmaceutical companies in Japan and was the second fastest growing in terms of sales among the top ten companies, with a growth rate of 7.2%. This growth was achieved in a market which overall declined 1.8% compared to 1996. The driving force was an increase in the insulin market which grew by 9%. Valued at USD 47 billion in 1997, Japan is the world’s second-largest pharmaceutical market after the US. An important market that is set to change. On top of the continuing economic recession, escalating health care costs and the rapidly ageing population are major concerns to the government. The authorities have implemented a number of measures to curb the rising costs. These measures include continuing pharmaceutical price reductions, increased patient co-payment and the initiation of a major health care reform to be implemented from year 2000. Although the devaluation of the Japanese yen has no immediate influence on the operating result of Novo Nordisk Pharma Japan - the Japanese Health Care affiliate, the weakening of the yen results in a depreciation of the  company’s contribution to the consolidated results of Novo Nordisk. In other words, the performance gain which the company is achieving has to some extent been neutralised by the currency whereas previously, the currency exchange gains have added to the performance gains.

Government-enforced price reductions are a common means to contain rising health care costs. Contrary to other countries, the price reductions in Japan have not been enforced directly on the selling prices of the pharmaceutical companies. What is reduced is the reimbursement that buyers receive through the National Health Insurance (NHI) system. This is part of government policy to eliminate the difference between NHI price and purchase price of the medical institutions. In 1996, the average NHI price reduction for Novo Nordisk Pharma products towards the patients was 6.4% (8.5% for all products), in 1997 it was 0.8% (3% for all products), and in 1998 it was 6.4% (9.7% for all products). Novo Nordisk Pharma, however, has to a certain degree been able to maintain its selling prices towards the wholesalers. “The reason why we have largely been able to maintain our selling prices is that we are market leaders in our fields and our products are highly specialised,” explains Roger Moore, president of Novo Nordisk Pharma. “The consequence for Novo Nordisk is that we have been less negatively affected by the price cuts than the market in general.”

The incidence of diabetes - specifically Type 2 diabetes - is increasing rapidly with the ageing of the population in Japan.

Opportunities
The main driving force behind the present growth is the rapidly ageing population in Japan. In 1996, 13.4% of the population was over the age of 65 - this number is expected to increase to 26% in 2020. Presently the age group over 65 accounts for 35% of medical expenses. These statistics combined with the fact that Novo Nordisk is heavily engaged in age-related diseases such as diabetes and in the future, osteoporosis, explain why the company foresees healthy growth potential for the years to come.

Presently 2.2 million people out of a total population of 125 million in Japan are treated with medicines for diabetes, an estimated 5 million are treated with diet/exercise or are not treated, and a further 6 million are at risk of developing diabetes. This brings the number of patients that will potentially need treatment in the future, to more than 13 million. Today only 750,000 are treated with insulin. With an insulin market share of around 80%, Novo Nordisk is a strong player in the diabetes care field. “We expect this to be further emphasised in the years to come because of the rapid increase in the incidence of Type 2 diabetes and the launch of Prandin™/NovoNormŽ, which is scheduled to take place a few years after the turn of the century,” explains Moore. “We also expect to introduce new delivery systems for insulin and human growth hormone which will ensure a continued competitive edge.”

Another field that points to the future is treatment of post-menopausal osteoporosis. Treatment of the disease is an important issue in Japan because of increasing longevity of women and the widespread reluctance among Japanese women to take HRT (hormone replacement therapy). It is estimated that about 10 million people in Japan have osteoporosis. This is why Novo Nordisk Pharma looks forward to the expected future launch of levor-meloxifene, now in Japan in early stage co-development by Novo Nordisk Pharma and Takeda - Japan’s biggest pharmaceutical company.

With 35% (value) of the world market for osteoporosis, Japan is the biggest market in the world, only surpassed by the US. The market for human growth hormone, traditionally a very important market for Novo Nordisk Pharma, is growing at a steady pace volume-wise. However, due to price cuts the value development for Novo Nordisk Pharma is modest. The main factor influencing the market apart from the pricing issue is a narrowing of prescribing criteria for reimbursement. Novo Nordisk has a 30% share of this market and is presently the only company with achondroplasia as an approved indication, in addition to growth hormone insufficiency. In order to strengthen the company’s position in this highly competitive market, Novo Nordisk is developing liquid growth hormone, a product that will be much easier to handle and use. Liquid growth hormone was filed for approval in Europe in July this year. Novo Nordisk Pharma expects to file for approval in Japan within the next 12 months.

Initial self- distribution experiences
After more than 20 years of collaboration with Yamanouchi Pharmaceuticals, Novo Nordisk Pharma decided to initiate its own distribution as of 1 April 1998. “There is no doubt that the collaboration we had with Yamanouchi was very helpful in allowing Novo Nordisk to achieve its present position in this market,” says Moore, “but the time had come for us to undertake our own distribution in order that Novo Nordisk Pharma could become a fully independent company, self-sufficient for all aspects of its business. Novo Nordisk Pharma’s sales force of approximately 360 reps are now busy visiting hospitals, clinics and wholesalers with the company’s range of products. The experiences so far indicate that it was the right decision: “We are getting much closer to our customers in the distribution channel. The wholesalers are important because they in turn play an active role in the marketing of our products towards smaller hospitals and clinics. On the other hand we as a company get first-hand feedback from the marketplace - feedback which is essential for us when we further develop and refine our strategies for the market. The success of these first four months of self-distribution combined with the inauguration of the new state-of-the-art Koriyama factory, in April this year, holds promise that there will be a very good market for Novo Nordisk in Japan also in the future.“

People and organisation
“In addition to the above factors, we are strengthening our organisation and developing our employees in accordance with Novo Nordisk’s Vision and Core Values. We believe strongly that the growth of Novo Nordisk in Japan is dependent upon the growth and development of our people. We are working hard to strengthen performance orientation and accountability and to institute development plans for every one of our employees. We are also promoting the concept of empowerment because we are convinced that this is crucial to motivate our people and thereby elevate overall performance,” says Roger Moore.