Beyond IP: How Japan Can Continue Being an Innovation Leader

Over the last 19 months, the global community has become acutely aware of the importance of global health. At a time unlike any before, we were reminded that viruses do not respect national borders, moving freely and rapidly around the world.

Throughout the global pandemic, we clung to the hope that the response to COVID-19 could, too, transcend borders. We now know well that none of us are safe from coronavirus until all of us are safe, and remarkable global leadership, innovative scientific breakthroughs, and efficient global supply chains are required to achieve that goal.

The U.S. and Japan are leading the way on many fronts. With new Administration taking the helm in both countries in the last year, the U.S. and Japan have driven the global response to COVID-19, borne from a recognition that collaboration on global health will be critical to our shared economic recovery.

Through the Quad Vaccine Partnership, both countries have committed to helping the Indo-Pacific region recover from COVID-19, while also helping to vaccinate the world. The business community and the governments in both countries are committed to supporting this goal, through licensing and manufacturing agreements between innovative companies like Takeda and Novavax. More recently, Pfizer partnered with the Japanese government to provide an additional 120 million COVID-19 vaccine doses in January 2022. 

With the U.S.-Japan Competitiveness and Resilience (CoRe) Partnership, the U.S. and Japan will partner to advance innovation, both in response to coronavirus and for the next-generation of challenges. The bold goals both countries share are rooted in the mutual desire to enhance trade, foster competitiveness, and drive investment in innovation. As we prepare to address future public health threats, this innovation will benefit individuals while also building a healthier, more productive society.

At the recent U.S.-Japan Business Council Conference, co-hosted by the U.S. Chamber of Commerce’s U.S-Japan Business Council, the U.S. Secretary of Commerce, Gina Raimondo, discussed the importance of creating a framework to foster innovation in Japan, stating “The best way to attract U.S. investors is to encourage an environment that rewards innovation, that is particularly so in sectors like healthcare.”

Both the U.S. and Japan are long-standing leaders in fostering innovation, having discovered countless new medical treatments, technological breakthroughs, and scientific advancements. The innovation taking place in both nations does not happen there by accident. But rather, it is because of a legal and economic framework that sustains risk-taking investments and long-term research into new medical technologies and goods.  

Throughout the pandemic, we have seen that an effective intellectual property (IP) framework, coupled with the creation of rules-based systems that are predictable, are inclusive of stakeholder input, and take in account the value of innovation to patients, is critical to fostering investment in innovation and delivering that innovation to the world.

Japan has long been a global leader on IP, ranking fifth overall out of the 53 economies benchmarked in the 2021 U.S. Chamber’s International IP Index. Japan also leads the way in metrics which are critical to fostering life sciences innovation, tying for second in the patent rights indicators – alongside South Korea, Switzerland, and the United States – and scoring second in indicators examining trade secrets and related rights.  

The Index also illustrates the tangible economic impact for countries who make the conscious policy choice to invest in stronger IP. The report examines the relationship between effective IP ecosystems and different socio-economic goals which all countries share. With a robust IP ecosystem in place, economies are 24% more competitive, 32% more likely to receive private sector investment on research & development (R&D), and 38% more likely to attract venture capital and private equity. On each of these metrics, the correlation with Japan’s IP system is strong.

However, IP protection is just one piece of an effective legal and regulatory framework. While countries can prioritize IP rights as a critical pillar of their economic development strategy, at the same time, governments can deprive their economy of the benefits IP protection brings by implementing market access barriers. These barriers ultimately restrict their citizens’ access to the technological breakthroughs and economic advancements which IP protections helped create.

The U.S. Chamber’s Innovation & Creativity Access Barometer sheds light on the market access barriers which limit access to innovation. The Barometer specifically examines how pricing, reimbursement, and procurement policies impact patients’ ability to access innovative medicines, highlighting the disparity between countries with market-based pricing and those that focus on cost control.

The barometer illustrates clearly that a country’s legal and regulatory framework is critical to enhancing – or inhibiting – access to the newest medical breakthroughs, and the impact for patients is real. This has particularly been the case in Japan. In 2009, the government introduced the Price Maintenance Premium (PMP) program to accelerate approval timelines and stimulate innovation. Following the introduction of the PMP, biopharmaceutical investment grew 22% in the subsequent five years, outpacing the rate of global biopharmaceutical investment.

Since 2015, however, changes introduced to the PMP program and Health Technology Assessment (HTA) procedures have created significant challenges for innovative companies seeking to introduce new medicines in the market. Over that time, biopharmaceutical investment in Japan declined by 8%, while investment globally grew by 25%. Ultimately, what the research makes clear is this: market access barriers, as well as lack of transparency and predictability, impact future investments, investments that are needed to bring Japan’s great discoveries in the lab to patients across the country and around the globe. As a first step, we propose a bilateral private-public dialogue focused on elements of an innovative, equitable, efficient, and effective healthcare system that provides patients with timely access to best available medical innovations.

If the U.S. and Japan are to continue to lead the way in response to global health threats – like the ones we face today – it will be critical to create a regulatory framework which enhances access to innovation. The U.S. Chamber looks forward to working with both the U.S. and Japanese governments to build upon the existing foundation of bilateral cooperation to cultivate a robust innovation ecosystem in Japan.