Japan Passes New Economic Security Bill – What's The Pharma Impact?
Executive Summary
Japan has passed a new law which will require the providers of certain products to cooperate in securing supplies to the country. For the pharma industry, there are a couple of signs which specific drugs will be within the scope of the legislation and how this will impact the sector.
Japan’s National Congress passed a new economic security law on 11 May 2022 designed to secure essential supply chains, infrastructure and sensitive information from external impacts.
Significantly, the legislation - which will gradually take effect in 2023 and does not yet have an official English name - will ask the providers of yet to be listed important materials, including pharmaceutical companies, to submit plans for the stable supply of certain products and ensure logistics plans in the case of emergencies.
It will cover a wide range of industries including energy, software and robotics and pharma is no exception. Together with the revised Pharmaceutical and Medical Device Act passed by the national congress this week, pharmaceutical companies operating in the Japanese market will be asked for further cooperation with authorities to ensure that supply chain interruptions are avoided.
Especially since the COVID-19 pandemic and a supply crisis in the domestic generic drug industry that has been running since 2021, there have been several signs that the country is generally tightening its regulations for safety and supply chain monitoring. Although the government has not yet listed exactly which materials will be subjected to the new law, the Ministry of Health, Labour and Welfare (MHLW) published a "list of medicines for stable supply” in 2021, which included more than 500 products.
Focus On Protecting Japan's Economy
The economic security law, known as "経済安全保障推進法(Kei-Zai-An-Zen-Hosho-Sui-Shin-Hoh)" in Japanese, is aimed at securing essential supplies and infrastructure, sensitive technologies and information assets during any potential external impacts like war, natural disaster or mass information theft.
It consists of four major sections: essential material supply; essential infrastructure; innovative technologies; and important patents related to Japan’s national security. The most impactful on industry will be the first section, which will take effect within nine months after the official announcement of the law, currently due to be made after June this year.
The section requires the government to draw up a list of important support materials that require stable supplies to ensure citizens' well-being; documents shared by officials in preparation for the act show medicines form part of such materials. Providers will be asked to submit plans for emergency supplies and logistics to the relevant ministry in charge – in the case of pharmaceutical products, this would be the MHLW.
The explanatory document for the new law published by the government suggests that supporting funds and loans will be made available to providers, with the ministry to conduct supply chain inspections if necessary.
Japan’s Recent Efforts to Enhance Pharma Supply
For Japan, securing supplies of essential medicine had already been an issue before the COVID-19 pandemic. One of the documents for preparatory discussions refers to the 2019 shortage of cefazolin, a cephalosporin antibiotic often used during surgery in the country. Because the raw material was produced by one company in China and manufactured in Italy, the shortage impacted medical services across Japan, the document notes, warning “if we rely on another country for the supply of important materials for the wellbeing of citizens’ life and economy, it can pose a significant risk.”
After the pandemic provoked the need to supply new vaccines and drugs quickly, while the 2021 generic crisis exposed the fragility of the country’s supply chain monitoring and crisis management, Japan has already taken several countermeasures. (Also see "A Year's Struggle: How Japan Is Recovering Damaged Generic Supplies After Quality Violations" - Scrip, 12 Apr, 2022.)
Last year, the MHLW announced a list of “medicines for stable supply", which comprises more than 500 drugs. 21 of these, including cefazolin, are categorized as of the highest priority. Similar policy trends have also been seen in India, where the supply of certain raw materials for generic drugs has traditionally relied heavily on Chinese manufacturers. (Also see "Supply Chain Crunch Meets Olympics Shutdown: China, India Drug Makers Embrace For Perfect Storm" - Scrip, 3 Dec, 2021.)
Japan has also tightened GMP regulations to enhance safety and supply chain stability for pharmaceuticals. On 13 May 2022, the revised Pharmaceutical and Medical Device Act, which will ask the industry for stricter monitoring of supply chains, while allowing quicker approvals of medicines in need, passed the national congress. (Also see "Japan Progresses 'Urgent Approval' System To Speed Drug Access" - Pink Sheet, 20 Apr, 2022.)
Which Specific Products Will Be Affected?
Now that the economic security law has revealed its aim, the pharmaceutical companies supplying to Japan market would require careful monitoring the Japanese government’s next move – especially “listed support materials” to be announced after the official announcement will be made soon.
For the providers whose product will be listed, submission of supply chain plan will be mandatory. the law also will give the government an authority to inspect the supply chain in concern for precise monitoring, another legal system for stable communication with security of information is going to be discussed.
Although the list for the law has not been announced, the already-published list of medicines for stable supply by the MHLW may give pharmaceutical industry some clue to foresee what the to-be-announced list can look like.
The government may ask pharma firms with products on the list to map the supply chain risks and may even ask for a plan to enable manufacture entirely in Japan if necessary.
In the preparatory discussions for the new law in the Cabinet Office, one opinion appearing in a document dated 18 December 2021 notes, “there are some cases that even pharmaceutical companies were not aware of that domestic production has been declining as they [manufacturers] have optimized the supply chain.”
It goes on, “We were fortunate that we still had the know-how to restart the production of cefazolin in Japan. But there are some products that can hardly be manufactured in Japan. For this issue, further discussion with risk mapping should be done.”
[UPDATE on 19 May, 2022] On 18 May, 2022, Japan officially made an announcement of the economic security law. The first part which is considered to affect pharma industry will gradually take effect by the end of February 2023.