Attracted by amenities, Japanese pharma firms relocate to local area

More than anytime in the past, Japanese pharmaceutical companies are becoming common in the Princeton region, already a hotbed of American pharmaceutical and biotechnology companies. In the Carnegie Center on Route 1 South, for instance, Akros Pharma and Kyowa Pharmaceutical recently joined tenants such as Takeda America, which arrived in 1993.

One might ask why these companies are coming to the area. According to Tetsushi Inada, president of Kyowa Pharmaceutical, the financial and bureaucratic conditions are better here than in Japan.

"In Japan . . . drugs are paid for by taxes. It is a different business game. The price in Japan is decided by the government and not by the market," he explained.

Inada noted that cultural differences can be factors as well. "In Japan, the culture and the religion make it very difficult to try a new approach," he said. "Americans have more open minds about participating in clinical evaluation of drugs."

Pharmas from around the globe are setting up shop here to tap the United States market, the largest in the world. That's a big plus for the 80 Princeton-area companies that serve the pharmaceutical industry, particularly the clinical research organizations that shepherd drugs through the testing process.

Half of the 40 Japanese firms that opened pharmaceutical offices in the United States came to New Jersey. Though northern New Jersey has been the preferred location, these companies began to filter into Princeton several years ago.

Japan is well represented for the usual good reason: An office here helps Japanese firms set up business deals in an area rich with pharmaceutical companies. "This is the lifeblood of research throughout the world," said Bill Healey, executive vice president of the HealthCare Institute of New Jersey. "The Japanese pharmaceutical industry over the last 15 years has made a conscious decision to come to New Jersey because of all the possible partnerships New Jersey brings to the table."

Japanese pharmaceutical companies confront an operating environment in the United States that is different from their homeland's. According to many of the company's officials, these differences can be good and bad.

One advantage is the chance to make a larger profit. In Japan, which has universal health insurance, the government pays for all prescriptions, said Takahiko Iwaya, director of the health and welfare department of the Japan External Trade Organization in Manhattan. In contrast to the United States, small companies in Japan manage to stay in business only because of government assistance.

Pricing is different also. In the United States, when an old drug goes off patent, its price falls and it must compete with generic substitutes. But in Japan, partly because of the insurance reimbursement policy, the drug price doesn't go down very quickly. Old drugs fetch higher prices than they would in America, while brand-new drugs are not marked up as high as they are here.

"Relatively speaking, drugs can be sold longer in Japan than in the United States," Iwaya said. "Some people say the smaller and less strong drug companies can survive better in Japan under this system." Because new drugs fetch higher prices than in Japan, however, it is less risky to invest in research in the United States.

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"It is said that, in Japan, people don't want to take big risks in any activity," says Iwaya. "There is no economic incentive, so not as many people want to take the risk of participating in clinical trials."

Attitudes towards the treatment of terminally ill patients also differ. In Japan, where treatments emphasize maximizing patients' comfort, aggressive treatments are not as common. Thus, companies developing aggressive treatments often find it better to be in the United States.

In the United States, however, new drugs must go through rigorous clinical testing by the Food and Drug Administration before reaching the market.

"Because the United States is a country where there is a mixture of many different cultures," said one insider who wished to remain anonymous, "it needed stringent regulations. In the past, Japanese regulations were less stringent but everybody was supposed to do the same thing. Several years ago, Japan adapted the international regulations, and Japanese investigators — and patients — are taking time to adapt to them."

Before, patients did not have to sign "written informed consent" forms to enter a drug trial. Arrangements were more informal. Now administrators must make a lot of effort to get patients to join. "There is more paperwork, more guidelines, and perhaps some resentment," said the insider.

Thus, frustrations with the new additional red tape is further taking away from the appeal of operating in Japan.

Inada noted the overall benefits of operating in the United States, "The hospitals here have better infrastructure; they have the doctors willing to run the clinical trials."