Foreign CMOs Not Prevalent In Japan, Report Finds

Japanese contract manufacturing organizations (CMOs) are growing, but foreign CMOs have not gained traction in the country yet, Research and Markets reports. The market research company expects these conditions to continue for the foreseeable future. Prior to 2005, when the laws changed, even Japanese companies faced difficulties in mounting manufacturing efforts. The current laws are unfavorable to foreign companies, but when the laws and practices change, Japanese CMOs will have to engage in price wars with foreign CMOs, the report says. Analysts write, “Japanese companies are leading the domestic CMO market. As for foreign companies, despite having corporate status in Japan, they have not seen much growth and presence in Japan.”

The 16-page report published by Research and Markets in October 2014 is titled, “The Overview of Japanese CMO Market.” Authors define the foundational principle in drug manufacturing, which starts with raw material procurement and extends to complete management of the process from beginning to end. The principle also includes quality management.

According to the report, CMOs began in the 1990s in Europe and the U.S. and expanded worldwide rapidly. However, in Japan, due to the Pharmaceutical Affairs Act that combined sales and manufacturing, CMOs were not able to thrive. In the revised Pharmaceutical Affairs Act of 2005, the legislation separated manufacturing and sales, opening the door for CMOs. In the year following the revision, CMOs experienced a 30 percent growth in sales and have been growing ever since. In 2011, CMO revenue reached 510 billion Yen ($4.7 billion), a 10 percent increase from the previous year. Due to the laws, pharmaceutical companies may contract 100 percent of manufacturing to external companies, which accounts for the high revenues realized by CMOs.

In Japan, manufacturing is regulated by the Regulations for Buildings and Facilities of Pharmacies, while quality control is the responsibility of the manufacturer. Analysts state that Japanese CMOs will continue growing until quality control practices come under the control of the government, which will give foreign CMOs the edge they need to compete in the Japanese market.

Interested parties may review the report for additional details including specific CMO companies, the laws and regulations relating to CMOs, main industry groups, factory trends, generic manufacturers, and future prospects.