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Outsourcing Companies and A Major Development in Japan

Outsourcing companies provide opportunities are expected to grow in Japan’s pharmaceutical markets in 2005 when the government implements a new law permitting Japanese pharmaceutical firms to outsource all phases of their manufacturing.


Lifting decades-old restrictions that limited the percentage of drug company outsourcing by requiring firms to manufacture at least part of the drugs they produced.


Under the new law, companies will manage outsourcing through a new marketing authorization system similar to those of the United States and the European Union. The new law separates companies’ marketing and manufacturing functions and gives responsibility to “marketing authorization holders” for these aspects of distributed products: quality control, inspection, and outsourcing strategy and implementation. The MAH — a pharmacist or similarly qualified individual — can decide how much and what to outsource.

A Matter of Company Survival

The new broad discretion over outsourcing decisions “gives companies more flexibility in the global pharmaceutical market and helps them control costs and quality,” says Hayashi. This freedom of action “is critical at a time when the survival of R&D-oriented companies requires greater efficiency on the production line,” says Seizo Masuda, Coordinator of the Corporate Communications Department of Takeda, Japan’s largest drug maker.

The law also promises to both increase the role in Japan of US and EU outsourcing companies that are Japanese-GMP-compliant and also give Japanese companies a stronger role in a cost-competitive global marketplace.

New Trends

Outsourcing has grown in the pharmaceutical industry as companies work to strengthen Japan’s global position through maximizing the efficiency of their production methods by choosing providers who improve the total flow and cost-effectiveness of production.

  • Outsourcing has a domestic purpose also.  It helps pharmaceutical companies cut costs at a time when the government has been reducing the pharmaceutical fee schedule because of the rising costs of national health insurance, the aging of Japanese society, and the expansion of medical technology.

    Cost-cutting is very important in the pharmaceutical industry to increase overall competitiveness and to reduce the fixed costs and payroll tied to the manufacturing facility. However, cost cutting is not the only attraction; outsourcing offers flexibility in production; it facilitates meeting growing demands while assuring quality at a global level.

Outsourcing Expands Global Reach

The outsourcing provision is viewed in Japan as an integral part of a system with global reach–one capable of achieving international harmony by making Japan’s pharmaceutical system–its efficiency and quality approaches–more like those of the US and Europe. It is the latest in Japanese efforts to modernize and harmonize its pharmaceutical system for the last five years.

As such, outsourcing companies open door to new efficiencies and cost-effectiveness in Japan’s reach for a global place in the pharmaceutical economy. Moreover, because the pursuit of common manufacturing agreements is tied to the ongoing harmonization efforts between the US, the EU, and Japan, outsourcing is a key element in the move toward new partnerships between East and West. The opening of this door and the lifting of the 100% requirement by the Pharmaceutical Affairs law promises both Japan and the West that the barriers to outsourcing will continue to diminish. While it will take some time for the smaller firms to gain the experience to make the most of their new-found opportunity, firms of all sizes will benefit from the new outsourcing opportunities with outsourcing companies. They will offer Japan’s pharmaceutical industry efficiency, cost-effectiveness, and the ability to gain competitive advantages in their manufacturing approach..

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