They Do Well Who Do Good: Insights into Japan's Pharmaceutical Industry

They do Well

      Who do Good

Insights Into Japan’s Pharmaceutical Industry

P. Reed Maurer

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© Copyright 2013 P. Reed Maurer.

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ISBN: 978-1-4669-5346-8 (sc)

ISBN: 978-1-4669-5348-2 (hc)

ISBN: 978-1-4669-5347-5 (e)

Library of Congress Control Number: 2012915040

Trafford rev. 01/22/2013

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Contents

Chapter I

2000-2010 Rapid Change In The Drug Industry

Forty Years As Prelude

Disasters That Never Come

Are The Assumptions Correct?

Has the Time Come for Generics?

2003: Integration To Dis-Integration

A Trip Down Memory Lane

So Far More Questions Than Answers

Resolutions

OTC Market: Slow Decline Or Revival?

Questions From The Floor

2006: When The Pendulum Swung

What Has Changed?

Double in Five Years?

2008: Contemplate The Changes

Can Bioventures Succeed In Japan?

Ten Questions Frequently Asked

Be Careful What You Wish For

Seeds But No Place To Grow

Who Would Have Thought?

Chapter II

An Attractive HealthCare System Evolves

Why Japan Is (Still) Important

Japan Pharma World Turned Upside Down

Japan: Home Away From Home

How To Become A Japanese Doctor

Remember History To Avoid Repeating It

Loving The Japan Pharma Market

Tug Of War

Three Belly Cuts And Counting

Everybody Talks About Change

Chapter III

Japanese Companies Differentiate Themselves

Korosho Meddling Will Curb Internationalization

Don’t Make Me Say No

DOBYO AI AWAREMU

Learn The Basics

Malaise

Too Many Boiled Frogs

What Drives You Up The Wall?

Japan Pharma Eschews In-House Manufacturing

S&M Led To S&D Then To R&D

Pros Focus On Differences

Go West Young Man

To Be Or Not To Be

Emerging Company Innovation, Focus, and Speed

Myths We Believe Versus Reality

The New Japanese Corporation

A Family Affair

Will Japan Reward Innovation?

The Fate Of Small Pharma Companies

The Galapagos Factor

The Tako Tsubo Factor

Chapter IV

Wholesaler Consolidation Continues But Issues Remain

Wholesalers Revise Their Business Models

Wholesalers At The Crossroad

Distribution Reform – What Is Left Undone

Chapter V

Managing People In Times Of Change

Enjoy It While It Lasts

Good Management Is Obvious

Beware Of Collective Wisdom

Foreign Managers For Japanese Companies

Roppongi Cleanup – An Organizational Lesson

Infinite Value Of A Good Boss

Feedback Is My Nutrition

Ten Bad Business Decisions

Chapter VI

Restructuring The Pharma Industry

Change And Reinvention Through 2005

Destruction of the Pharmaceutical Industry

Mind Blocks Preventing Change

2001: A Bridge To The Future

I Want Control (Of What?)

Out With The Old

Alliances Bloom, M&A Withers

Will Japan Consolidate Its Pharma Industry?

Some Restructuring Models Work – Others Don’t

Pharma Consolidation: A Cure Or Disease?

Same News – Different Stories

So You Think Nothing Changes

M&A Risks

Q and A

Downsizing US Style

M&A Japanese Style

Do You See What I See?

Chapter VII

Foreign Firms Learn To Compete

Foreign Companies As Competitors And Collaborators

Win By Staying On The Field (Why Foreign Managers Lose The Game)

Like Taking Candy From A Baby

Foreign Company Partners Become Competitors

Foreign Pharma Shock And Awe

Warning Signs For Foreign Executives

The 3C’s Of Success

Stop and Go Gets You Nowhere

Back From The Saddle

Optimism Is Alive And Well

The Mysteries Of Japan Pharma

Foreign Pharma Challenges In Japan

Machiavellian Thoughts About Japan

Too Long Or Not Long Enough

Gaishi-Kei Are On A Roll

Foreigners’ Edge

What’s Going On?

Home Office Friends or Back Stabbers

Chapter VIII

Pharma Company Image In Japan

The Other Side Of The Story

Things I don’t Know . . . . .But

Self Inflicted Pain

Things Not Talked About Anymore

I am Losing It

Hooray For People In Healthcare

What Do You Want To Be?

Chapter I

2000-2010 Rapid Change

In The Drug Industry

As the decade begins doomsayers predict a downward spiral of the drug industry. But this is not to be as consolidation and internationalization lead to a rebirth of both pharma companies and wholesalers. Bioventures and generics enter the market and foreign companies become serious competitors. Changes considered impossible in the past become routine. As the decade ends optimists and game changers are leaving the pessimists and status quo seekers behind. The industry is permanently changed.

Forty Years As Prelude

In June, 1964 I left the bucolic campus of Bucknell University along the banks of the Susquehanna River in Lewisburg, Pennsylvania where I was Assistant Professor of Genetics and Embryology to enter an MR training program in Eli Lilly and Company, Indianapolis, Indiana. Thus began a 40 year involvement in the pharmaceutical industry that was a prelude to what would transpire in the immediate future. Now is the real beginning, but getting here was a great ride.

The Short But Terrific Job As An MR

After a three month training program in Indianapolis, I was assigned to a sales territory in the southeast corner of North Carolina. Home base was Wilmington, a city facing the Atlantic Ocean, so there was an abundance of good seafood, particularly oysters which you could buy for a few dollars a bushel. For non Americans, a bushel is equal to four pecks.

In retrospect there is no doubt the doctors in my territory educated me far more than I educated them. They gave me some valuable lessons that stuck, e.g.

♦   Never play doctor. Telling a doctor how to practice medicine is an invitation to leave and not come back.

♦   Never say more than you know. When you have said all you know, it is time to listen.

♦   Know one feature of your drug or its packaging that will keep patients healthy and happy. I sold tons of an antibiotic liquid suspension to pediatricians because the bottle had a drip free pour feature. Mothers loved it.

♦   Find out which doctors use the kind of drugs you are selling. Psychiatrists are not very interested in antibiotics.

The best part of this job can be summed up in three statements:

1.   At the end of each day I could accurately measure my accomplishments.

2.   By listening you could get instant and direct feedback from your customer.

3.   There were no office politics. What you did, you did all by yourself.

These aspects of the job were immeasurably enhanced by a District Manager who routinely tore up home office instructions. Maybe that is why we were the top sales district in the country.

After less than two years I was transferred to Washington, D.C., a promotion because it was a hospital territory. All the doctors were specialists and harder to see than the good old boy general practitioners in North Carolina who oozed southern hospitality.

Although I was only in Washington about one year, the learning curve was a steep one -

♦   Don’t follow all the other MRs to the pharmacy. Pharmacists supply demand but they do not create demand.

♦   No doctor is impossible to see. I made many sales calls in parking lots.

♦   Provide a solution for the doctors’ problem. In a mental hospital electroconvulsive therapy (ECT) ward, a short acting anesthetic was causing pain in the arms of patients when given intravenously. My suggestion was to take it out of the refrigerator to warm up before administration. I never had to detail the benefits of the drug.

♦   Be prepared. If you don’t know the type of patients a doctor is treating and what he or she is using to treat those patients, don’t go in the door until you do know.

Once again I was aided by a District Manager who could have originated the Nike slogan, Just do it. Needless to say, Washington was the top hospital sales district in the country.

Home Office Meanderings

As this piece is not meant to be an autobiography, I will skip through four years and four assignments in the home office. Actually three years because from 1967 to 1968 I was sent to the Sloan Program at the Business School of Stanford University. For a biology major total immersion in an intense business education program was both a challenge and life changing experience. It became clear to me that the future of any US business was international, more specifically in the Pacific Rim. When I returned to Indianapolis I shocked my domestic guardian angels with a request to join the Lilly International team.

After 18 months I was on my way to Japan. My memories of the home office include many fine people dedicated to their jobs and a firm belief in the miracles they brought to medicine. Thus, it is sad, to note present public opinion of the pharmaceutical industry in the US has sunk to a level one notch above the mafia and on par with the tobacco industry. Doesn’t anyone believe in miracles anymore?

Japan 1970

I arrived in Japan on the second commercial flight of a 747 across the Pacific, missing the maiden flight by one day. Nevertheless, the atmosphere at Haneda was electric. Hard to imagine now when 747’s come and go with routine regularity. That was my brief moment in the spotlight as for the next four weeks I was holed up in a Berlitz school where no one spoke English. Nothing before or after was as challenging as learning to speak Japanese.

Until 1976 I ran the Lilly operation in Kobe. At that time Japan was an antibiotic market and we were launching the first cephalosporins through Shionogi, the most powerful sales organization in Japan. Hard to lose in that kind of environment. Imagine selling to Shionogi at US wholesale prices from Puerto Rico (a low tax base) with expenses of a small office in Kobe.

When I was asked (ordered) to return to the US I did the unthinkable and joined Merck in Tokyo. Unthinkable because nobody left Lilly except to retire. Thus began a ten year (1976-1986), adventure in building the Merck presence in Japan, primarily through the acquisitions of Banyu and Torii in 1983.

Getting truly inside Japan was exhilarating but more difficult than I can describe adequately in mere words. They say sumo is not just a sport, it is a way of life. Good athletes fail because they do not adapt to the life style. Similarly, good businessmen routinely fail in Japan because they do not focus on what it takes to get results here while persisting in their attempts to impose methods that got results elsewhere.

Once again I was lucky to have a good boss who lived in Japan as a teenager. As president of Merck International he was determined to make Merck the number one foreign company in Japan’s pharma market, and had the clout to allocate resources to achieve this goal. He now serves on the Board of Directors of Chugai and played more than a minor role in the Chugai-Roche merger.

What’s Next?

In 1987 I found the perfect boss, ME, and embarked on an odyssey of starting new businesses and buying businesses in Hawaii and Japan. Although not always successful it was and is fun. I know it is fun because there is not enough time in a day, week, month, or year to do all there is to do. There are so many more opportunities than time.

But, the best is yet to come. It is my pleasure these days to meet and work with men and women in their 40’s and early 50’s who are changing Japan at a pace unimaginable a few short years ago. The pharma industry as we knew it yesterday will be unrecognizable tomorrow.

The opportunity to be a part of this change process is a dream come true. The big news is not what happened, but what will happen. Yes, 40 years in this industry was a great education, but the real results are only beginning.

Japan Times 1903, July 26, 2004

Disasters That Never Come

"Let’s be of good cheer, remembering that the misfortunes hardest

to bear are those which never come." — J. R. Lowell

As we enter a new year the voices of doom and gloom are louder than ever. Bearers of bad news grab the headlines and accuse optimists of being out of touch with reality. They delight in telling anyone who will listen about the risks of doing business in Japan; so much so they fail to see obvious opportunities. I refuse to get sucked into their litany of woe, and I will tell you why.

From 1981 through 1988 drug reimbursement prices were reduced a cumulative 61.4%. The loud voices called this a downward price spiral that inevitably would kill the pharmaceutical industry, and only end when reimbursement prices were below manufacturing costs.

A reality check indicates not a single drug company went bankrupt, and the pharma industry is ranked in the top tier of industry profitability charts. Check out the cash position of most pharma companies and you will find an embarrassment of riches socked away in deposits earning low interest rates.

Why is it a mystery that the message, We need higher prices, does not resonate with government officials who can read a public financial statement as well as the average man on the street?

Not to be deterred, the loud voices claim price reductions prohibit pharma companies from doing research to discover new drugs. This statement has been made so many times that it is received with eyes rolling skyward and a shrug of the shoulders as if to say, Spare me.

As a reality check, I recently checked out the web sites of a number of drug companies and without exception they all boasted about their increased financial commitments to R&D.

Some noted their plans to buy back shares. The powers that be must believe their own shares are a better investment for surplus cash than an investment in R&D. Web sites are as accessible to government officials as they are to me.

Another favorite subject for the loud voices is Japan’s allegedly complicated, non-transparent, slow drug approval process. How quickly they forget that not long ago Japan led the world in terms of the shortest review time following submission of an NDA. Unfortunately Korosho was thrown off track by scandals in the Ministry and a subsequent reorganization.

The reality is officials want to improve their performance, have set targets for a short review time, and are getting their act together within the Organization for Pharmaceutical Safety and Research.

How many times must we listen to those who speak about the disasters that will come from foreign companies doing business in Japan? They cannot succeed because the cultural gap is too wide.

Well, you and I both know a number of foreign companies who are doing very well, thank you. Interesting that the recent Taisho/Tanabe bust was attributed to cultural differences between the two firms. Can two Japanese companies have different corporate cultures? Is the Pope Catholic?

Merck proved a long time ago in the case of Banyu that you could merge a foreign company with a Japanese company and get results far better than either was able to achieve alone. Roche and Chugai are about to prove this was not an exception to the rule by using the same model.

The doomsayers tell us generics will wipe out the research intensive industry. Billions of sales dollars are accounted for by drugs coming off patent and there is nothing in the pipeline to replace them.

You heard this before, right? But name one generic manufacturer that is of sufficient size and staying power to merit more than a passing glance. Would you invest your pension fund in any of their stocks? The best jobs in these companies are in their legal departments finding ways to break patents. Beats me why industry associations recommend generics as a way to lower drug costs.

On a broader scale it is amazing how many visitors come to these shores with the preconceived idea Japan is going down the tubes. They expect to see bread lines and a poverty stricken population. As far as the Western media is concerned, the Japan pendulum swings between two extremes. Either it is a miracle economy poised to take over the world, or it is a setting sun destined for irrelevancy as a third rate economy. Right now it is in the latter position as it was in the mid 1970’s. The take over the world phase occurred in the 1980’s.

My reality check on all this comes when I go to a restaurant, take the plane or train to Osaka, pass through the Ginza at 11:00 p.m., or try to book rooms at a ski resort on short notice. You know the answer – full. For 14 years I have had the same view of Tokyo from my balcony in Azabu. There were never so many new buildings under construction, all over 40 stories high.

On a Friday night late in November, friends returned to their home in Takanawa only to realize no one had a key. They could not get into their own house. The alternative was to check into a hotel for the night. You know how many hotel rooms there are in the Takanawa/Shinagawa area, yet all were booked solid. After an exhaustive search they found one room in a small hotel.

If these are signs of an economic disaster what would a booming economy look like?

As the quotation says at the top of this article, be of good cheer going into 2002. Price reductions in April will not be the end of the world as we know it. Health care reform measures, if they ever come, will not drive pharmaceutical companies into bankruptcy. New drugs will be approved at a faster pace than last year. Foreign companies will have more opportunities in Japan than they are probably capable of optimizing. Generics will not be a threat to any original molecule in Japan for the foreseeable future. Fortunately or unfortunately deflation will not make Japan an inexpensive location to do business. And with a bit of luck, my favorite baseball team will repeat as the Japan champions, trouncing the Giants along the way.

Have a great year, and the next time you must listen to loud voices telling you how bad it will be, remember they are always wrong.

Pharma Japan 1777, December 31, 2001 & January 7, 2002

Are The Assumptions Correct?

The attitude of organizational clerks can be summed up as, If it hasn’t been done before, it can’t be done. Everyone is susceptible to this thinking because something new implies change, and we fear change because it alters established, comfortable behavior patterns.

Fortunately, clerks do not run all companies but their influence is pervasive in too many of them. They are permitted to make false assumptions that stymie progress and delay the execution of decisions until a crisis forces action. Without a crisis there will be no action, and without action there most certainly will be a crisis. The process accelerates when the CEO of a company is a clerk or follows the advice of clerks.

This could be a perfect opening to talk about Japan’s banking crisis, its deflationary spiral, foreign policy, or anemic economic performance over the last decade. Unfortunately I am not qualified to discuss any of these subjects, and do not believe foreigners should try to tell the Japanese how to run their own country even if asked for an opinion.

But we do know something about and participate in the drug business. Thus, false assumptions can negatively affect my income, a good way to focus one’s mind.

Let’s begin with some obvious examples from the past and then fast forward to the present.

In the late 1980’s and beginning of the 1990’s, Japanese pharma companies were on a role. More new chemical entities were discovered in Japan than in any other single country, or in all of Europe. More new drugs were launched first in this market because the Koseisho approved new drugs faster than any other regulatory agency. Japanese companies dominated the top 10 list by sales, number of MRs, and market share. They were setting up offices abroad so fast the trade press was warning Western readers about a Japanese invasion. The drug market was growing by double digits and the yen was strong. This prompted some forecasters to speculate on a Japanese pharma market as large as the US when measured in dollars.

I need not tell our astute readers what changed by the late 1990’s - in short, everything. Hard to believe but there are people out there who are still sleeping. What false assumptions do they refuse to give up? To name a few:

♦   They believe they still have the luxury of staying in businesses that lose money and suck resources away from their core pharma business. These include the animal health business, OTC products, and agricultural chemicals among others.

♦   They haven’t noticed the consolidation of wholesalers so they continue to ship to and bill 80 wholesalers while 15 do 80% of their business. They believe rebates and special sales incentives create new demand rather than shift inventory. US based companies fall into the same trap.

♦   They believe foreign companies must come to them to develop and market products to be successful in Japan. They persist in proposing joint venture business models for mutual benefit to those who are no longer listening or remotely interested.

♦   They fail to understand why their MRs cannot (should not?) promote every product in their portfolio to every person with an M.D. after their name.

In retrospect it is easy to identify past changes and note the dinosaurs who did not adapt. Harder to evaluate present changes and identify false assumptions, but worth a try.

The co-pay increase to 30% of drug expenditures is almost certain to influence doctors’ prescribing habits. Combine this with the increase of bungyo to almost 50% and you have the possibility of new paradigms very different from the past. To name a few:

♦   A high reimbursement price may dampen rather than enhance demand.

♦   Add on therapy with no real benefit will be hard to justify.

♦   Long listed high priced products may lose market share to lower priced products (read generics).

♦   The business of selling will be done in a pharmacy rather than the doctors’ office.

A change to marketing approval from manufacturing approval will spur many to get out of production, if not entirely at least to out-source a substantial part of their manufacturing. Companies with leaders are already making these decisions.

The mother of all false assumptions (I am going out on a limb here) is the current craze for industry consolidation. Yes, I read the two inch thick Pfizer spin for their acquisition of Pharmacia. I also noted the once-in-a-lifetime exit package for the Pharmacia CEO. Meanwhile, hundreds of his subordinates await word on their own see-you-later deals. But hard not to note Pfizer will be the leading company in Japan by market share, and will have over 3000 MRs in the field. This fact will have an impact on everyone who believes only Japanese companies can dominate the top ten list.

Everyone also knows there is a three to five year honeymoon period of cost savings in a mega merger. Wall Street loves this because of the positive effect on earnings. The question is What do you do for an encore after cutting the fat? Another acquisition?

Many question the assumption that more money in research equals more new products. More money can certainly buy more marketing clout and the capability to develop a product, but does it buy creativity and innovation?

Time will tell. I am betting in five years we will see the same investment bankers who put acquisition deals together retained to break them up because the parts will have greater value than the whole.

Interesting times. Until future changes become a reality, the best course of action to take when a clerk tells you something cannot be done is get a second opinion from a leader not a follower.

Pharma Japan 1814, October 7, 2002

Has the Time Come for Generics?

Once again generic prophets are preaching about a boom for their business in Japan. The last time this happened was almost 10 years ago when a respected consulting firm joined the chorus to forecast a born again opportunity. In the intervening years the generic market, I am not making this up, went South in both value and volume. The boom turned into a bust.

Could it be different this time around? A lot of people think so. Alert readers know the reasons, others do not consider generics a high priority in their review of the news. For these readers, here are the key issues:

♦   In April, Korosho recognized generics as a separate drug category for the first time. This and \500 will get you a cup of coffee, but recognition is good PR and a seal of approval.

♦   The government is encouraging national hospitals to use generics. This is not mandatory, but encouragement is better than indifference.

♦   Pharmacists were given economic incentives to fill generic prescriptions. This is a long way from the right to substitute a generic for a brand name prescription, but some money is always better than no money.

♦   Depending on the level of income, people over the age of 70 will pay 20% of their drug bill out of pocket, up from 10%. Low income elderly patients pay 10%. This change took effect in October.

♦   More and more doctors are getting out of the drug dispensing business. Because the doctor’s pharmacy is no longer a profit center, he or she is no longer discount sensitive.

♦   In April, 2003 the out-of-pocket percentage on drug costs will increase to 30%, up from 20%. This will make patients price sensitive, i.e. a lower priced drug is better than a high priced drug.

The latter two issues are most important because doctors will not have an economic incentive to prescribe a high priced drug if they are not buying it at a discount for their own pharmacy, and patients will begin to voice their preference for a lower bill when they visit a pharmacy to fill prescriptions.

So far so good, but the government has a tendency to both give and take. Here are the negatives:

♦   Generic drugs continue to be listed in the reimbursement tariff once per year while NCE’s are listed quarterly. This annual event occurs in July, so if a brand name drug goes off patent in August, a generic must wait 11 months for listing.

♦   The so-called GE rule was abolished. This rule effectively set a floor price for generics, now there is no floor. Consequently when prices were revised in April, many generics had their reimbursement prices reduced by 60% to 70%, whereas under the GE rule the maximum was about 40%.

♦   Hospital pharmacies continue as profit centers, thus no motivation to dispense low cost (low discount) generics.

Regardless of what the government does or doesn’t do, the generic industry suffers from negatives that will not disappear overnight.

♦   Generic companies are small, often family owned enterprises without sufficient capital to expand or the motivation to do so.

♦   They lack nationwide distribution and have few MRs promoting their products.

♦   Their distribution is through dealers who know only one way to sell – price.

♦   Generics have an unreliable image regarding quality and consistency of supply, particularly in smaller package sizes.

♦   Customers in this country are conscious of brand names, thus averse to private label merchandise.

♦   Given the plusses and minuses, are generics a good business? Real numbers are hard to come by because of the nature of distribution, but the generics value is probably three to four percent of the drug market, and volume might be eight percent. Low by US standards, but Japan is a large market and any growth in the generics market share could translate into a business worth watching.

What should we look for?

♦   Consolidation of the local generics industry.

♦   Tie-ups between local companies and foreign generic producers.

♦   Pharma wholesalers actively distributing and promoting generics at reasonable prices.

♦   Prescription patterns that indicate a shift from long listed high price drugs to generics.

♦   Pharmacists lobbying doctors to prescribe generics.

♦   Patients vocalizing a need to reduce their out of pocket drug costs.

What you will not see anytime soon:

♦   A pharmacist’s right to substitute generics for brand name prescriptions.

♦   More frequent listing of generics.

The take-home message is that the generic market has bottomed out and will grow above its low base at a rate faster than overall market growth. If generics can capture 10% of market value we are talking about a high single digit billion dollar market, enough to attract attention and create momentum for further penetration. The prophets of boom may be right.

Pharma Japan 1822, December 2, 2002

2003: Integration To Dis-Integration

Restructuring of companies is the most significant transformation of the Japanese pharmaceutical industry since liberalization occurred in 1975. This trend will become more pronounced in 2003 although some of the leaders, notably Takeda, started the process two years ago. The laggards must catch up or they risk becoming irrelevant as serious competitors.

What do I mean by restructuring? The word has many implications, and unfortunately in Japan the connotation is often destruct rather than construct; in other words, a negative image that suggests more pain than gain.

In essence I mean changes that focus the entire organization on functions that create value. We all know organizations do a lot of things that do not add value. The danger is these activities become so ingrained in the corporate culture that change is resisted. This is why restructuring is necessary as the only way to break out of a death spiral.

I suggest the restructuring process is a move from integration to dis-integration. That is, a firm should retain those functions that add value by virtue of proven internal capabilities, and retreat from those activities that do not add value, or from those that third parties can carry out more cost efficiently, read cheaper.

Integration: A Model Whose Time Has Past

The integrated business model is comfortable and self perpetuating because it assumes all activities can be controlled by company managers and their full time employees. Control is a powerful emotion, and once gained is intensely protected. Whether control is exercised productively is not an issue. Just having it is enough.

Integration proceeds along a vertical and horizontal axis. On the vertical axis are business functions. Assume the business began with a scientist who discovered a useful drug. He or she hires more scientists to expand the scope of discovery research. They in turn hire specialists to conduct pre-clinical and clinical trials to satisfy regulatory requirements. Because these people want to control their source of product, they employ engineers and chemists to staff a manufacturing facility. Production people want to do their own marketing and promotion, so the firm hires MRs and a marketing staff, and these employees want to control distribution and post-marketing activities. You end up with company employees doing everything from discovery research through to post-marketing surveillance.

The horizontal axis plots both research and business areas. Assume a company begins with research in a specific disease area, say bacterial infections. This is expanded to hypertension, then CNS, osteoporosis, and finally to every affliction known to man. No company, university, or government laboratory has the money or brains to be successful in this mission.

The fruits of research are drugs prescribed by doctors and dispensed by pharmacists. But why not use the same drugs in animals, plants, or in cosmetics and foods? Why not market the drugs as nonprescription products? Business areas are then expanded because synergies are assumed to exist across a broad spectrum of usage.

Since no one wants to lose control, basic questions go unanswered. Where do we add the most value? Can we become a leading pharmaceutical company and a first class cosmetic company? Can we realistically expect to discover new drugs in every therapeutic area? Are we a wholesaler supplying demand or a marketer creating demand? Can we market our drugs to doctors and to consumers equally effectively?

Dis-Integration Is Emerging

Many factors cause the integrated business model to fail, or at least be questioned. For example, a new CEO who is not part of the control mentality changes the company mission; or shareholders demand a higher return on their invested capital. In the Japanese pharma market the greatest