Big Data & Japan's Aging Population: Opening the Door for US Pharma

Innovations in Big Data will have a lasting impact on care and present an opportunity for U.S. pharmaceutical companies, writes Nobuko Kobayashi.

As with any modern social infrastructure in Japan, Japanese healthcare is a legacy from the high growth economic era post-WWII.  On the bright side, it has served the nation well for over 70 years.  The country is ranked at no.10 on the world’s health systems by World Health Organization (WHO) leaving the U.S. in the dust at no. 37.  Average life expectancy in Japan is 86.8 years for women and 80.5 for men - as many as four to five years longer than the U.S. equivalents of 81.6 and 76.9. National Health Insurance system requires seniors over 75 to be accountable for mere 10% of the medical cost as out-of-pocket.  

But Japan is not a nirvana of healthcare. As with any legacy, the system is built on assumptions that no longer work. As a victim of its own success, Japanese healthcare today is weighed heavily down by an aging population. Baby boomers born between 1947 and 49 will surpass 75 by 2025, towards which the medical cost, already north of 42 trillion yen, is expected to balloon. Social security cost currently occupies one third of the national spending, with the revenue generated from taxation is struggling to keep pace. It is therefore imperative for the Japanese Government to contain the healthcare cost.

The current situation is both a cautionary tale for other countries to note regarding  demographic change, as well as a window of opportunity for foreign health players. For the US pharma industry, which is a long-time player in Japan, there are significant new opportunities driven by the world’s fastest aging society.

Big Data in Japan

There are many levers to balance medical cost with quality of service. Notable examples include preventive care or tailor-made solutions such as genetics. The mass application of these levers is only made effective by the digitization of Big Data. Japan has a population of 126 million - a little less than a third of the U.S. population. With already advanced healthcare standards, the question is whether Japan can be a frontrunner in collecting and analyzing health-related Big Data. Unfortunately, in the current environment data is siloed by type of disease, service provider and region. It is thus not cost effective to collect data large and deep enough to base the development of new drugs or measure the effectiveness of new treatments. This is about to change.

While the Personal Information Protection Law reenacted in 2017 is expected to put a break on the ever-expanding commercial use of personal data in the era of Facebook backlash, a law considered to be an accelerator in healthcare-related data collection quietly passed the Diet last year. Next Generation Medical Foundation Law (次世代医療基盤法), dubbed the Healthcare Big Data Law, will be in effect on May 11, 2018. The new scheme collects clinical data from healthcare service providers all over the nation, centrally anonymizes the data and makes it available for a fee to public and private sectors. With service providers being able to reference Big Data, customization of treatment will be more precise. Big Data will also provide a foundation for clinical trials conducted by pharmaceutical companies and academia.

The government authorizes the data processor who conducts the balancing act of anonymizing and yet retaining critical information from individuals. It is noteworthy that for a patient, providing their information is an “opt-out” system at the time of initial treatment, which means that once opted “in”, the anonymized clinical data will automatically remain as part of Big Data for multiple usages. 

This is good news for U.S. pharma players, as the initiative contributes to further shortening the Drug Lag (the lapse between the time a drug is commercialized outside and inside the country). Drug lag is a total of development lag and approval lag. Between the two components, in Japan, the development lag is significant at 1.1 years difference from the US median in 2014 according to PDMA.  With access to consolidated clinical data readily available for Japanese population, the development lag can be further shortened meaning earlier revenue generation in Japan for US players. It also opens a window of opportunity to collaborate with academia to develop new treatments in Japan by leveraging the newly accessible Big Data.

The pressure from an aging Japanese society coupled with digitization opens a new frontier in Japan. This scenario will likely create a battle of data analytics capabilities at pharma companies which will fully embrace the benefit of Next Generation Medical Foundation Law. 

Outlook

To evaluate the potential in Japan from the US pharmaceutical industry viewpoint, it is important to note the societal problems lying underneath the aging and decaying population. Potential solutions will need to consider enhancing the quality of life for seniors while controlling medical costs. With digitization in the pharma space, new possibilities will emerge. Clinical data consolidation will be analyzed to help predict future medical issues. Additionally digital medicine will be refined to  prevent the proliferation of unused drugs - currently a serious drain on cost estimated to amount 50 billion yen a year by over-75 alone according to a survey by Japan Pharmaceutical Association. 

Domestic pharmaceutical companies are hungry for open innovation, as evidenced by Otsuka Pharmaceutical successfully partnering with U.S. start-up Proteus Digital Health to put micro sensors in the schizophrenia drug Abylify to improve compliance. The Japanese government has stated that they plan to double the inbound FDI balance from end 12 to end 20 to 35 trillion yen. Innovation in Japan also has implications for countries who face the similar issues with aging populations such as Italy, Greece and Germany.  As with the new Healthcare Big Data Law, the change is happening quietly but surely. Casting a new light on Japan is a sensible decision for US pharma companies.

Nobuko Kobayashi is a partner in global management consulting firm A.T. Kearney’s Consumer Goods and Retail Practice, serving Japanese and multinational clients in consumer industries.