Evolving Research and Development Landscape for Rare Diseases: Growing Concerns Over Orphan Drug Lag in Japan

Abstract

Patients with rare diseases worldwide face substantial unmet therapeutic needs. In Japan, drug lag—delays in drug approval compared to other countries—has resurfaced as a pressing public health issue. This study analyzes orphan drugs (ODs) approved in the United States (US) from 2005 to 2021, examining OD lag trends, and research and development (R&D) models to streamline OD development in Japan. Despite increased OD approval in the United States since 2018, the number of unapproved ODs in Japan has substantially increased. Although OD lag decreased, it has resurged since 2017. This is largely due to changes in the R&D strategies of pharmaceutical companies, which are driven by the growing presence of US‐ and Europe‐based small‐ to mid‐sized enterprises (SMEs) and the evolving industry landscape. Large foreign pharmaceutical companies have shifted toward a global development strategy for Japan, aiming for more efficient development and competitive advantage. This has been propelled by a move toward in‐licensing earlier‐stage drug candidates with global exclusivity from SMEs. Japanese pharmaceutical companies have focused on in‐licensing late‐stage drug candidates for the Japanese market from SMEs without a business presence in Japan, which have not been developed locally, thereby employing a bridging strategy for Japan. With the increase in ODs developed in the United States by these SMEs, this practice has substantially exacerbated the OD lag. As these SMEs are unlikely to enter the Japanese market, it is crucial for Japanese pharmaceutical companies to proactively pursue earlier, more proactive global partnerships with SMEs.

Study Highlights.

• WHAT IS THE CURRENT KNOWLEDGE ON THE TOPIC?

Drug lag has been a public health issue in Japan for more than 20 years. Various measures implemented by the Pharmaceuticals and Medical Devices Agency, along with efforts of pharmaceutical companies, have gradually reduced drug lag.

• WHAT QUESTION DID THIS STUDY ADDRESS?

How has the recent evolution in drug research and development (R&D), particularly the growing presence of US‐ and Europe‐based small‐ to mid‐sized enterprises (SMEs) in rare disease areas, affected orphan drug development and drug lag in Japan?

• WHAT DOES THIS STUDY ADD TO OUR KNOWLEDGE?

Japan is experiencing a resurgence in orphan drug lag, which raises public health concerns. This is driven by shifts in the R&D strategies of pharmaceutical companies due to the increasing involvement of SMEs without operational bases in Japan and the evolving industry landscape.

• HOW MIGHT THIS CHANGE CLINICAL PHARMACOLOGY OR TRANSLATIONAL SCIENCE?

Recent regulatory measures aim to attract foreign SMEs to Japan; however, their business expansion remains unlikely. Japanese companies should pursue earlier, proactive global partnerships with SMEs to address drug lag. Fostering a drug discovery ecosystem in Japan is crucial for addressing unmet therapeutic needs for rare diseases worldwide.

Rare diseases (RDs) are defined by low prevalence, that is, affecting <200,000 people in the United States (US), ¹ fewer than 5 in 10,000 in Europe, ² and fewer than 50,000 in Japan. ³ Although individually rare, >7,000 known RDs affect approximately 350 million people worldwide. ⁴ Many RDs are genetic, appear in childhood, and often lead to chronic, life‐threatening conditions that impose substantial physical, emotional, and economic burdens on patients. However, US Food and Drug Administration (FDA)‐approved treatments are available for <5% of these diseases, highlighting a substantial unmet medical need. ⁵

Historically, the pharmaceutical industry has been reluctant to invest in drug development for RDs owing to small patient populations, limited market size, and challenges in achieving a return on investment. ⁵ To address this, various policies and measures have been introduced globally. Regulatory agencies, including the FDA, ¹ the European Medicines Agency, ² and Japan's Pharmaceuticals and Medical Devices Agency (PMDA), ³ have introduced orphan drug (OD) designation programs, offering regulatory and economic incentives to encourage RD drug development. Such legislative efforts, along with advances in genomics, biomedical research, and technological innovations, ⁶ , ⁷ have led to considerable progress. ¹ , ³ , ⁸

Recently, drug research and development (R&D) has shifted from large pharmaceutical companies to small‐ to mid‐sized enterprises (SMEs) and startups, driven by growth in the drug discovery ecosystem. ⁹ , ¹⁰ , ¹¹ , ¹² SMEs often exhibit flexibility and innovation, invest in pioneering technologies, and target niche markets such as cancer and RDs to gain a competitive advantage. ¹² , ¹³ , ¹⁴ , ¹⁵ As technologies rapidly evolve, large companies frequently form strategic partnerships for drug discovery and development, in‐license promising drug candidates post‐early development, or acquire smaller firms. ⁹ , ¹² , ¹⁶ This trend is driven by declining returns on in‐house drug discovery investments. These collaborations enable large companies to leverage SME expertise and innovation, and selectively acquire low‐risk development programs while providing resources and infrastructure to manage subsequent late‐stage development and market entry. ⁹ , ¹²

In Japan, drug lag—delays in drug approval compared to other countries— has been a considerable public health issue for over 20 years. More recently, drug loss has emerged, wherein drugs approved in other countries are neither approved nor developed in Japan. Drug lag is primarily influenced by development strategies, particularly related to whether Japan is included in multinational randomized controlled trials (MRCTs), ¹⁷ , ¹⁸ , ¹⁹ as Japanese clinical trial data are required for regulatory approval. ²⁰ The Ministry of Health, Labour and Welfare (MHLW) and the PMDA have implemented various measures to address this issue. ²¹ , ²² Japan's participation in MRCTs has increased, ²³ leading to a gradual reduction in drug lag from 2.4 years in 2006 to 0.4 years in 2021. ²⁴ However, the MRCT participation rate remains considerably lower than that of the United States and Germany. ²³ Additionally, the recent shift in key R&D players—particularly the growing role of SMEs—may affect drug development and drug lag for RDs in Japan. Notably, these systemic gaps have not been thoroughly assessed, and a deeper understanding could offer valuable insights to facilitate seamless OD development.

In this study, we aimed to investigate the trends in OD lag in Japan, its associated factors, and R&D models for RDs. We also sought to analyze these factors to identify ways to enhance efficient and seamless OD development and ensure timely access to innovative therapies in Japan.

MATERIALS AND METHODS

We analyzed 243 orphan‐designated new molecular entities (NMEs) and biologics approved in the United States from January 2005 to December 2021. Six NMEs and biologics were excluded because of data unavailability. Data were sourced from Drug and Biologic Approval and IND Activity Reports, FDA review reports, and Clarivate Cortellis™. Information on drug development and sales in Japan and Europe was collected from PMDA review reports, the Japan National Health Insurance New Drug List, European Public Assessment Reports, and Clarivate Cortellis™. The data cutoff date for all sources was March 20, 2024. Discrepancies were resolved using publicly available information, including company press releases, websites, investor relations, and peer‐reviewed literature.

We analyzed factors contributing to drug lag, assuming shortening it would benefit public health. While not inherently negative—such as when additional safety evaluations are needed for the Japanese population due to ethnic differences ²⁵ —it is a pressing issue when primarily driven by pharmaceutical companies' strategies, hindering timely access to essential treatments. ²⁶ The drug lag was calculated by subtracting the approval date in the United States from that in Japan. Development strategies were categorized as global or non‐global. The global development strategy involved conducting pivotal studies as MRCTs including Japan, which provide the primary clinical data for New Drug Applications (NDA) in Japan and typically consist of phase 3 confirmatory trials. Non‐global development strategies included bridging strategy, domestic development, and others. The bridging strategy involved conducting small local clinical trials in Japan to extrapolate primary clinical trial data from other countries to the Japanese population by demonstrating similarities in drug profiles between Japanese and non‐Japanese individuals. This approach usually requires extra time for local trials following phase 3 studies in the United States. ¹⁷ Domestic development involved performing all pivotal clinical trials within Japan. The “other” category included public knowledge‐based applications and foreign clinical data‐based applications without clinical trials conducted in Japan. The categorization followed PMDA evaluation policies outlined in review reports. A strategy was global if MRCTs including Japan were designated as primary for assessing drug efficacy and safety, bridging if foreign trials were primary with applicability evaluated using local trial data, and domestic if local trials in Japan were primary. For cases with multiple primary trials, classification was based on the trial deemed most critical by the PMDA.

ODs approved in the United States with no clinical studies or development discontinued in Japan were defined as undeveloped in Japan. The number of patients in Japan referred to the estimated population expected to use the drug. The age of indication was classified as pediatric if approved for patients aged <18 years. Company nationality was categorized as Japanese or foreign‐affiliated based on the headquarters' location. Organization and company types were classified by market capitalization (small: <$1 billion, medium: $1 billion to <$8 billion, large: ≥$8 billion). Marketing Authorization Holder (MAH) referred to the first entity registered in the country. A company with its own branch in Japan was classified as having an operating base in Japan. If applicants differed between Japan and the United States, the R&D strategy was considered an external collaboration. Pipeline strategies were categorized based on the method of drug acquisition: in‐house discovery, in‐licensing, and mergers and acquisitions (M&A).

Wilcoxon rank‐sum tests and analysis of covariance were used to identify factors associated with drug lag. To address multicollinearity, variables with a variance inflation factor >5 were excluded from the final regression model. Pearson's chi‐square test was used to examine factors associated with development strategy and to compare development and pipeline strategies across company types and US approval years. Multivariate logistic regression analysis was performed, with adjustments for potential confounders, to assess factors associated with the development strategy. All statistical analyses were performed using EZR version 1.61, a modified version of R for biostatistics. ²⁷ Statistical significance was set at P < 0.05.

RESULTS

Growing OD lag in Japan and risk factors

Between January 2005 and December 2021 (drug approval years in the United States), 243 ODs were approved in the United States (Figure 1 a ). The number of approved ODs gradually increased over time, with a notable surge since 2018. However, a corresponding increase in the number of ODs unapproved in Japan was observed, with 105 drugs (43%) in this category. These trends were more pronounced in Japan and resulted in a larger number of unapproved drugs in Japan than in Europe (46 drugs), despite orphan designation being initiated earlier. Seventy‐eight drugs (32%) had not been developed in Japan, indicating growing drug loss.

Figure 1.

(a) Trends in US‐approved orphan drugs and their development status in Japan and Europe. Annual number of US‐approved orphan drugs between 2005 and 2021, and their approval and development status in Japan on March 20, 2024, and in Europe for reference. (b) Trends in drug lag in Japan for US‐approved orphan drugs between 2005 and 2021, including all US‐approved new molecular entities and biologics during this period. (c) Trends in drug lag in Europe for US‐approved orphan drugs between 2005 and 2021.

The OD lag in Japan has decreased since 2013, with a median lag of 195 days between 2016 and 2018 (Figure 1 b ). The OD lag was considerably larger until 2015 compared to that of all NMEs and biologics, and to that in Europe; however, it has since decreased to a comparable level (196 days in Europe between 2016 and 2018; Figure 1 c ). Notably, the median OD drug lag between 2019 and 2021 was larger (261 days), and 22% (24 drugs) of US‐approved drugs between 2018 and 2021 were still under development in Japan, suggesting a resurgence of OD lag since 2018.

Table 1 presents the characteristics of ODs approved in Japan and the corresponding drug lag for various factors. ODs were primarily discovered by foreign‐affiliated organizations, with originators consisting of large pharmaceutical companies (42%), SMEs (46%), and academia/non‐profit organizations (12%). Approximately 63% of drugs were developed in the United States by large companies, whereas 37% were developed by SMEs, of which 69% were US‐based, 20% were Europe‐based, and 71% had no operational presence in Japan. Japanese companies and large foreign companies were primarily responsible for development in Japan, employing global development (40%) and bridging strategies (44%). Additionally, 35% of ODs were developed through partnerships with other companies. Most drugs (78%) received OD designation in Japan, and the median forecast for peak sales in Japan was $22.7 million (Q1: $8.4 million, Q3: $60.0 million, at 138 JPY/$).

Table 1.

Characteristics of orphan drugs approved in Japan and drug lag

Independent variables	n (%)	Drug lag (median (IQR)) (days)	P‐value*
Drug characteristic
Modality
Chemical	77 (55.8)	736.5 (136.0–1,257.0)	0.580
Biologic	61 (44.2)	718.5 (188.0–1,388.0)
ATC classificationa
L	80 (58.0)	682.0 (167.8–1,191.0)	0.260
Other	58 (42.0)	876.0 (181.0–1,589.8)
Indicationb
Number of patients in Japan
<500	76 (55.1)	871.0 (194.3–1,385.0)	0.180
≥500	62 (44.9)	588.0 (139.0–1,146.0)
Age
Adult	96 (69.6)	699.0 (173.0–1,299.8)	0.682
Pediatric	42 (30.4)	839.5 (177.0–1,373.0)
Originator
Nationality
Japanese	15 (10.9)	41.0 (−155.5–701.5)	0.005
Foreign‐affiliated	123 (89.1)	766.0 (195.0–1,380.5)
Organization type
Large pharma	58 (42.0)	710.0 (161.0–1,146.0)	Ref.
Small to mid‐sized enterprise	63 (45.7)	681.0 (182.0–1,374.5)	0.582
Academic/non‐profit org	17 (12.3)	876.0 (219.0–1,729.0)	0.339
Marketing authorization holder in the United States
Nationality
Japanese	8 (5.8)	−13.5 (−685.5–770.0)	0.065
Foreign‐affiliated	130 (94.2)	753.5 (189.8–1,355.8)
Company type
Large pharma	87 (63.0)	681.0 (167.0–1,130.5)	0.152
Small‐ to mid‐sized enterprise	51 (37.0)	951.0 (183.5–1,652.0)
Operating base in Japan
Yes	101 (73.2)	507.0 (136.0–1,127.0)	0.002
No	37 (26.8)	1,278.0 (517.0–1,765.0)
Marketing authorization holder in Japan
Nationality
Japanese	56 (40.6)	882.0 (47.8–1,481.0)	0.969
Foreign‐affiliated	82 (59.4)	706.0 (197.3–1,171.8)
Company type
Large pharma	100 (72.5)	721.0 (185.8–1,286.8)	0.766
Small‐ to mid‐sized enterprise	38 (27.5)	782.0 (80.5–1,576.5)
R&D strategy
External collaboration
Yes	48 (34.8)	1,033.0 (284.0–1,543.5)	0.024
No	90 (65.2)	507.0 (135.3–1,241.3)
Development strategy
Global development	55 (39.9)	204.0 (107.0–501.5)	Ref.
Bridging strategy	60 (43.5)	1,246.0 (878.0–1,637.3)	<0.001
Domestic development	17 (12.3)	706.0 (−171.0–1,858.0)	0.446
Others	6 (4.3)	579.0 (375.5–954.3)	0.127
Number of RCTs
0	35 (25.4)	699.0 (154.0–1,210.5)	0.602
≥1	103 (74.6)	729.0 (184.0–1,374.5)
Regulatory status in Japan
Orphan drug designation
Yes	107 (77.5)	690.0 (152.5–1,279.5)	0.094
No	31 (22.5)	1,127.0 (360.5–1,544.0)
Sakigake designationc
Yes	5 (3.6)	−68.0 (−140.0 to −58.0)	0.001
No	133 (96.4)	760.5 (192.0–1,377.0)
Regulatory status in the United States
Breakthrough therapyd
Yes	60 (43.5)	521.0 (123.0–1,043.3)	0.008
No	78 (56.5)	896.0 (214.5–1,625.3)
Accelerated approvale
Yes	46 (33.3)	713.5 (214.0–1,103.8)	0.635
No	92 (66.7)	766.0 (153.8–1,539.3)
Marketability in Japan
Estimated peak sales ($m)f
<20	64 (46.4)	1,033.0 (193.3–1,603.8)	0.020
≥20	74 (53.6)	503.5 (148.5–1,113.0)

^a L: Antineoplastic and immunomodulating agents, Other: except for L.

^b First‐approved indications.

^c PMDA designation to expedite the development and review of innovative drugs that offer advantages over existing therapies for treating serious or life‐threatening diseases.

^d FDA designation to expedite the development and review of drugs that treat serious or life‐threatening diseases, particularly when preliminary clinical evidence indicates substantial improvements over existing therapies.

^e FDA program allows for earlier approval of drugs that treat serious conditions and fill an unmet medical need based on a surrogate endpoint.

^f 1$ = 138JPY.

^*Wilcoxon rank‐sum test.

Contributors to a longer drug lag included foreign‐affiliated originators, US MAHs without an operating base in Japan, external collaborations, the bridging strategy for development in Japan, the absence of Sakigake and breakthrough therapy designations, and small market potential (all P < 0.05). Analysis of covariance identified significant factors associated with drug lag, including patient population size in Japan, company type of MAH in Japan, development strategy in Japan, and breakthrough therapy designation (all P < 0.05; Table S1 ).

Trends in OD development strategies in Japan and factors driving their changes

Until 2012, the prevailing strategy for developing ODs in Japan was the bridging strategy (Figure 2 ). However, around 2014, a notable shift toward global development strategies occurred, leading to a substantial reduction in OD lag. Despite this progress, bridging strategies have resurged since 2017. Between 2019 and 2021, a global strategy was employed for 51% (22 drugs) of ODs, whereas a bridging strategy was employed for 47% (20 drugs) of ODs. Among these drugs, 12 were still under development in Japan, assuming bridging strategies, which indicates a renewed increase in drug lag.

Figure 2.

Trends in development strategies in Japan for US‐approved orphan drugs and their correlation with drug lag. Development strategies adopted in Japan for US‐approved orphan drugs between 2005 and 2021 that have been either approved or are under development in Japan are displayed. This analysis includes 22 drugs under development in Japan, for which development strategies could be reasonably inferred to accurately reflect recent trends. The dotted lines represent the drug lag for each period.

We compared the characteristics of ODs approved or under development in Japan, categorized by global and non‐global development strategies, and explored the factors driving changes in development strategies (Table 2 ). The choice of development strategy was significantly associated with factors such as company type, the presence of an operating base in Japan for US MAHs, the nationality of MAHs/developers in Japan, pipeline strategy, and market potential in Japan (all P < 0.05). Multivariable binary logistic regression analysis revealed that foreign‐affiliated companies as MAHs/developers in Japan were significantly related to a shift toward global development strategies (OR = 2.86, 95% CI 1.12–8.18, P = 0.039; Table S2 ).

Table 2.

Analysis of factors driving changes in orphan drug development strategies in Japan

Independent variables	Development strategy		P‐value*
	Global (n = 58)	Non‐Global (n = 102)
Drug characteristic
Modality
Chemical	33 (56.9)	62 (60.8)	0.630
Biologic	25 (43.1)	40 (39.2)
ATC classificationa
L	38 (65.5)	56 (54.9)	0.190
Other	20 (34.5)	46 (45.1)
Indicationb
Number of patients in Japan
<500	27 (49.1)	49 (59.0)	0.250
≥500	28 (50.9)	34 (41.0)
Originator
Nationality
Japanese	6 (10.3)	9 (8.8)	0.233
Foreign‐affiliated	52 (89.7)	93 (91.2)
Organization type
Large pharma	26 (44.8)	36 (35.3)	0.401
Small‐ to mid‐sized enterprise	27 (46.6)	52 (51.0)
Academic/non‐profit org.	5 (8.6)	14 (13.7)
Marketing authorization holder in the United States
Nationality
Japanese	3 (5.2)	8 (7.8)	0.521
Foreign‐affiliated	55 (94.8)	94 (92.2)
Company type
Large pharma	42 (72.4)	51 (50.0)	0.006
Small to mid‐sized enterprise	16 (27.6)	51 (50.0)
Operating base in Japan
Yes	49 (84.5)	60 (58.8)	0.001
No	9 (15.5)	42 (41.2)
Marketing authorization holder/developer in Japan
Nationality
Japanese	13 (22.4)	55 (53.9)	<0.001
Foreign‐affiliated	45 (77.6)	47 (46.1)
Company type
Large pharma	46 (79.3)	66 (64.7)	0.053
Small to mid‐sized enterprise	12 (20.7)	36 (35.3)
R&D strategy
Pipeline strategy
In‐house	26 (44.8)	24 (23.5)	0.006
In‐licensing	20 (34.5)	61 (59.8)
M&A	12 (20.7)	17 (16.7)
Marketability in Japan
Estimated peak sales ($m)c
<20	19 (34.5)	45 (54.2)	0.023
≥20	36 (65.5)	38 (45.8)

N (%).

^a L: Antineoplastic and immunomodulating agents, Other: except for L.

^b First‐approved indications.

^c N = 138, excluding 22 drugs due to unavailable data; 1$ = 138JPY.

^*Pearson's chi‐square test.

Varying OD development strategies in Japan by the type of MAH/developer

Figure 3 a illustrates the trends of MAHs and developers in Japan. Prior to 2009, most ODs were developed by foreign‐affiliated companies. Since 2010, approximately 55% of drugs have been developed by foreign companies, whereas 45% have been developed by Japanese companies. From 2010 to 2012, the proportion of drugs developed by Japanese companies was relatively high. Among these 11 drugs, four were developed by Japanese companies following requests from the Unapproved and Off‐label Drugs Review Committee, starting in 2010. ²¹ Since 2016, the number of drugs developed by foreign, mainly US‐based, SMEs has tended to increase, thus replacing large foreign companies.

Figure 3.

(a) Trends in marketing authorization holders (MAHs) and developers in Japan for US‐approved orphan drugs between 2005 and 2021 that have either been approved or are under development in Japan. (b) Changes in development strategies employed by foreign‐affiliated companies as MAHs/developers in Japan. (c) Changes in development strategies employed by Japanese companies as MAHs/developers in Japan.

Foreign companies, particularly large pharmaceutical firms, have increasingly adopted global development strategies (Figure 3 b ), whereas Japanese companies have predominantly relied on bridging strategies (Figure 3 c ). Large foreign companies primarily relied on bridging strategies until 2012; however, they shifted to global strategies in 2014, accounting for 79% between 2019 and 2021 (Figure S1a ). Foreign SMEs exhibited varying development strategies, primarily global strategies, with an increasing number of cases employing bridging strategies (Figure S1b ).

Evolving pipeline strategies for ODs and their association with changing development strategies

We examined the trends in pipeline strategies of foreign‐affiliated and Japanese companies (Figure 4 a ). Foreign companies balanced a combination of their own drug discovery (39%) with in‐licensing (39%) and M&A (22%) to build their pipelines (Figure 4 b ). Conversely, Japanese companies primarily relied on in‐licensing (66%) to acquire pipelines (Figure 4 c ).

Figure 4.

(a) Trends in pipeline strategies of marketing authorization holders (MAHs) and developers in Japan for orphan drugs approved in the United States between 2005 and 2021 that have either been approved or are under development in Japan. Pipeline strategies were categorized based on how drug candidates were acquired. (b) Trends in pipeline strategies employed by foreign‐affiliated companies as MAHs/developers in Japan. (c) Trends in pipeline strategies employed by Japanese companies as MAHs/developers in Japan. (d) Changes in development strategies employed by foreign‐affiliated and Japanese companies as MAHs/developers in Japan for in‐house discovered orphan drugs. Considering the change in development strategy trends observed in 2014, we divided the period into before and after 2014. Global strategy and non‐global strategy, including bridging, domestic development, and others, were compared across different company types and US approval years. (e) Changes in development strategies for in‐licensed orphan drugs were analyzed for foreign‐affiliated and Japanese companies as MAHs/developers in Japan.

The development strategy for in‐house‐discovered drugs is typically determined internally, whereas the strategy for in‐licensed drugs is influenced by the development status in each region at the time of in‐licensing and licensing territories. We analyzed the associations between selected development and pipeline strategies by company type of MAH/developer in Japan for in‐house discovered and in‐licensed ODs. Before 2014, foreign companies largely used bridging strategies to develop both drugs in Japan (Figure 4 d,e ). However, since 2014, a notable shift toward global strategies was observed for both (both P < 0.01). Similar trends were observed for drugs acquired through M&A (Figure S2 ). Japanese companies that rely heavily on in‐licensing have continued to use bridging strategies, particularly for in‐licensed drugs, with an increase in these strategies corresponding to the rise in in‐licensed drugs since 2014.

To explore the factors driving the differences in development strategies for in‐licensed drugs, we analyzed the specifics of in‐licensing strategies. Since 2014, foreign companies have significantly shifted to in‐licensing earlier‐stage drugs from SMEs for global territories, with 67% of these drugs in‐licensed during early development stages in the United States, compared to 66% in‐licensed at late stages before 2014 (P < 0.01; Figure 5 a,c ). Most drugs were not developed in Japan, highlighting a considerable gap between development stages in the countries (Figure 5 b ). Additionally, the number of drugs in‐licensed by foreign companies from SMEs increased from 7 to 14 since 2014 (Figure 5 d ). Conversely, Japanese companies have largely continued to in‐license late‐stage drugs for Japan or Asian regions from foreign SMEs, which have not been developed in Japan, with the number of such deals increasing from 12 to 26 since 2014.

Figure 5.

(a) Changes in the US development stage of in‐licensed drugs by foreign‐affiliated and Japanese companies. For US‐approved orphan drugs between 2005 and 2021 that have either been approved or are under development in Japan, the development stage in the United States at the time of in‐licensing was classified as early stage (discovery to Phase 2) or late stage (Phase 3 to approval), and these stages were compared across different company types and US approval years. (b) Changes in the Japanese development stage of in‐licensed drugs by foreign‐affiliated and Japanese companies. (c) Changes in territorial exclusivity acquired by foreign‐affiliated and Japanese companies. For in‐licensed drugs, the licensing territory was classified as global or regional (Japan, Asia, or ex‐US), and these territories were compared. (d) Changes in the types of licensors for foreign‐affiliated and Japanese companies.

DISCUSSION

This study revealed that since the surge in US‐approved ODs in 2018, the number of ODs unapproved or undeveloped in Japan has rapidly increased. Although Japan's OD lag decreased, it began to widen again. This trend was primarily attributed to the contrasting development and pipeline strategies employed by MAHs/developers in Japan. Large foreign companies have shifted toward a global development strategy for Japan, driven by in‐licensing earlier‐stage drug candidates with global exclusivity from SMEs, contributing to reducing OD lag. Conversely, Japanese companies have increasingly been in‐licensing late‐stage drug candidates for the Japanese market from SMEs without a presence in Japan, which have not been developed locally, thereby employing a bridging strategy for Japan. This practice contributed to the expanding OD lag, leading to a tendency toward polarization of OD lag. These drugs included clinically important therapies such as antineoplastic agents, highlighting the critical issue of ensuring timely drug access.

Global and bridging strategies aim to leverage foreign clinical trial data for regulatory approval in Japan. However, they differ in their approach. In the global strategy, clinical trials are conducted as MRCTs including Japan, requiring consistency between the results of the overall study population and the Japanese subpopulation, ²² with MRCT results serving as primary evidence for approval in Japan. It enables simultaneous regulatory submissions across regions, reducing drug lag. However, challenges persist, including the regulatory requirement for local phase 1 trials before MRCTs, ²² the substantial funding and infrastructure needed to manage MRCTs across multiple regions, and the risk of divergent Japanese subpopulation results negatively impacting the overall MRCT outcomes. In the bridging strategy, development in Japan typically begins after confirming the positive results of primary clinical trials conducted abroad. A local clinical trial is conducted to assess the similarity in drug response between populations, allowing for the extrapolation of these results to the Japanese population. ²⁵ Owing to the difficulty of securing sufficient patients for RCTs, this trial is often a non‐randomized, single‐arm trial with few Japanese patients, lacking comparative controls and stringent success criteria. ²⁰ Although this strategy may be beneficial in increasing the likelihood of drug approval in Japan, it typically delays regulatory approval.

Over the past decade, the key players in R&D have shifted to US‐ and Europe‐based SMEs. ⁹ , ¹¹ , ¹² , ¹⁶ From 2015 to 2021, approximately 47% of US‐approved drugs originated from emerging biotech, and 66% of large pharmaceutical pipelines were sourced via licensing and M&A. ¹⁶ This trend is expected to continue, with 66% of new phase 1 trials initiated by small biotech. SMEs frequently conduct initial clinical trials independently in the United States, and later license or sell their drugs to larger companies. ⁹ , ¹² Recent advancements in outsourcing development services have enabled SMEs to manage extensive development programs with minimal infrastructure, leading to a gradual increase in SMEs directly bringing drugs to key markets. ⁹ , ¹¹ , ²⁸ According to this analysis, by 2021, approximately 50% of US‐approved ODs were developed by SMEs. The proportion of ODs developed in Japan by SMEs rose to 23%, with 60% of these developed in Japan under a global development strategy. However, given several challenges, further expansion to Japan is improbable. The global RD treatment market has grown 13% annually from 2022 to 2030, with >60% of the revenue from North America. ²⁹ Despite this, the Japanese pharmaceutical market has been shrinking, with negative growth anticipated due to the reform of the drug pricing system. ³⁰ SMEs often lack the financial resources for regional expansions owing to limited R&D funding sources from existing product sales, ³¹ particularly with increased development costs. ³² Conducting clinical trials in Japan is challenging owing to the low patient enrollment performance, cumbersome study procedures, and complex regulatory requirements. ²² , ³³ A reasonable R&D strategy for SMEs may prioritize the United States as the primary region, with lower priority for Japan.

Development strategy analysis in Japan revealed a clear distinction between large foreign companies and Japanese companies. This difference highlights the notable divergence in R&D approaches. Large foreign companies built their pipelines using a combination of in‐house drug discovery, in‐licensing, and M&A, with United States‐ and Europe‐based SMEs serving as primary sources. Around 2014, these companies shifted their strategies from region‐specific to global by incorporating Japan into their global development plans. This shift was possibly influenced by a notable change in the therapeutic focus among many companies from mass‐marketed drugs to specialty disease areas, including RDs, around 2010. ³⁴ Additionally, accelerated innovation and heightened competition in the RD sector, ⁶ , ³⁵ coupled with the establishment of infrastructure for MRCTs in Japan, ²² have likely driven global development strategies aimed at efficiently streamlining development and ensuring profitability. In‐licensing strategies have evolved toward earlier‐stage drug candidates with global exclusivity, advancing global strategies. This shift likely occurred in response to intensified competition, with companies increasingly focusing on RDs and enhancing their open innovation and licensing approaches. ¹¹ , ³⁵ , ³⁶ The trend toward earlier‐stage in‐licensing may be influenced by the accelerated approval program in the United States, often based on phase 2 trial results. ³⁷ These changes reflect a strategic adaptation to the evolving industry landscape. Conversely, Japanese companies relied heavily on in‐licensing late‐stage drug candidates for the Japanese market from foreign SMEs, assuming a bridging strategy to reduce the risk of development failure. Japanese companies, generally smaller in scale, tend to adopt this approach, even though they may not guarantee substantial revenue returns. Notably, this has also been observed in large Japanese companies such as Takeda and Otsuka Pharmaceuticals.

The differences in in‐licensing strategies between large foreign companies and Japanese companies stem from various factors. ³⁸ , ³⁹ Large foreign companies frequently pursue high‐risk, high‐reward strategies to swiftly gain a globally competitive advantage by adopting innovative assets early. Japanese companies generally emphasize risk management and focus on assets with higher success potential. Financial strategies also differ, with foreign companies investing heavily in R&D, in‐licensing, and M&A backed by substantial financial resources, whereas Japanese firms take a more cautious approach, carefully selecting investment targets. Even Takeda Pharmaceutical spends only a fraction of the R&D expenditure of Pfizer and Merck. ⁴⁰ Moreover, historical backgrounds and market approaches vary. Foreign companies have traditionally expanded globally with flexible strategies tailored to the various market characteristics, whereas Japanese companies have primarily focused on the domestic market. ⁴¹ This study also demonstrated that large foreign companies more frequently target global licensing territories, and have operating bases and experience in drug development in Japan. As R&D becomes increasingly specialized, US‐ and Europe‐based SMEs will continue to play a central role in R&D. Large foreign companies have been actively investing in SMEs and startups, leading to substantial growth. ¹² , ¹⁶ With limited growth prospects in the Japanese market, it may be crucial for Japanese companies to collaborate proactively with these SMEs on a global scale to achieve success in global markets. A broader restructuring of the pharmaceutical industry in Japan, including M&As and a genuine shift toward globalization, may also be necessary.

Drug lag and drug loss have emerged in Japan as notable issues, garnering substantial attention. Although these challenges have distinct causes and public health implications, they share structural roots, including Japan's declining market attractiveness and its complex clinical trial and regulatory landscape, with overlapping potential countermeasures. ⁴² With foreign SMEs driving pharmaceutical innovation, addressing these issues requires promoting the simultaneous development of SME‐originated drugs in Japan to reduce drug lag and attract SMEs to Japan or facilitating the entry of SME‐originated drugs into Japan to address drug loss. In light of these points, the Advisory Council of the MHLW has discussed various countermeasures with industry and academia. ²⁶ Notable policy advancements include relaxing the requirement for domestic phase 1 trials before MRCTs, enabling approval of drugs for serious or life‐threatening RDs based on overseas pivotal clinical trial data, and expanding conditional approval frameworks, thus minimizing time‐intensive Japanese clinical trials. The Central Social Insurance Medical Council has introduced a Rapid Introduction Pricing Premium for drugs developed with a global strategy and filed early for NDAs. ⁴³ These are expected to primarily address drug lag, with potential benefits for mitigating drug loss. Furthermore, the criteria for OD designation have been broadened, ²⁶ and drug pricing reforms have expanded systems to evaluate the value of innovative medicines, with a focus on addressing drug loss. ⁴³ While the impact of these initiatives is still under evaluation, additional measures may be necessary to engage foreign SMEs in OD development in Japan, considering the resources required and the associated challenges. ²² , ²⁹ , ³⁰ , ³¹ , ³² , ³³

A limitation of this study is that the analysis was based on US approval years, focusing on the development timelines and strategies in Japan following initial development in the United States, where OD development typically begins earlier. This approach may not fully align with trends based on actual calendar years. Several drugs remain under development in Japan, and the actual drug lag period and R&D strategies may change slightly in the future due to approvals in Japan or strategy modifications. Although this study highlights the R&D strategies differences between foreign and Japanese companies and captures key trends, variations among individual companies and drugs, and underlying factors such as corporate culture and policy, are possible.

In conclusion, various efforts and advances in R&D have led to a surge in OD development in the United States. However, Japan is experiencing a resurgence in OD lag, raising public health concerns. This is largely due to changes in pharmaceutical companies' R&D strategies, which are driven by the growing presence of United States‐ and Europe‐based SMEs and the evolving industry landscape. With a growing number of ODs developed in the United States by SMEs without a presence in Japan, Japanese companies are increasingly in‐licensing late‐stage drug candidates for the Japanese market from these SMEs and employing a bridging strategy, contributing to the expanding OD lag. Given the challenges, these SMEs are unlikely to expand their OD development and operations into Japan. Therefore, it is crucial for Japanese companies to seek earlier, more proactive global partnerships with SMEs to effectively address drug lag. Additionally, because most ODs originate from abroad, cultivating a robust drug discovery ecosystem in Japan is essential to meet the substantial unmet therapeutic needs of RDs worldwide. Further research is warranted to gain insights into the impact of ongoing regulatory framework reforms and efforts on OD development.

FUNDING

This study was supported by Grants‐in‐Aid for Scientific Research (grant numbers 21H00739, 20H01546, and 20K20769). The funding body did not participate in study design, data collection, analysis, interpretation, report writing, or the decision to submit this article for publication.

CONFLICT OF INTEREST

K.E. is an employee of Takeda Pharmaceutical Company Limited. I.K. is an employee of Merge System Corporation. K.K. has received research donations for their institution from Kumagaya Gumi, Sumitomo Life Insurance, Merge System, Yasuhara Chemical, Tamai Investment Education, and Ernst & Young ShinNihon. All other authors declared no competing interests for this work.

AUTHOR CONTRIBUTIONS

K.E., I.K., Y.K., Y.L., S.S., and K.K. wrote the manuscript. K.E. and K.K. designed the research. K.E. performed the research. K.E. analyzed the data. K.E. and S.S. contributed analytical resources.

Supporting information

Table S1.

Table S2.

Figure S1.

Figure S2.