Japan’s pressured pharma companies, peptides, and a growing reliance on CDMOs

With China’s rise as a drug development hub and pricing and regulatory pressures on Japanese pharmaceutical companies, Japan’s leadership in the life sciences is being challenged as the country’s share of global biopharmaceutical R&D and investment continues to decline.

While Japan is the world’s third largest pharmaceutical market by value after the U.S. and China, the country is facing increasing economic and policy pressure, according to data and analytics firm GlobalData.

Driven into action, more than 20 pharma leaders from Europe, Japan, and the U.S. met this week with Japanese Prime Minister Sanae Takaichi to call for increased expenditure on innovative medicines to help reverse these negative trends.

“Longstanding policy changes alongside growing global competition are contributing to Japan being one of the major pharmaceutical markets experiencing a structurally declining share of global biopharmaceutical R&D and investment, with early‑stage pipelines and clinical trial activity increasingly shifting elsewhere,” according to the International Federation of Pharmaceutical Manufacturers and Associations (IFPMA).

Making matters worse, the IFPMA warned that the Trump administration’s Most Favored Nation (MFN) drug pricing policies risk compounding the problem and putting Japan at a growing competitive disadvantage.

GlobalData pointed to regular drug price revisions, broader healthcare cost-containment measures, and the expansion of generics as “compressing returns on established portfolios, forcing manufacturers to reassess development timelines and operational efficiency.” The firm also noted that “government targets to increase generic drug utilization have accelerated consolidation among domestic manufacturers, while policymakers continue pushing for greater cost-effectiveness across the healthcare system.”

As a result, portfolio productivity and development velocity are becoming bigger priorities — particularly among large-cap Japanese pharma companies — with this shift most visible when it comes to complex modalities such as peptide therapeutics, according to GlobalData.

Neuland Laboratories CSO Sharadsrikar Kotturi told GlobalData that “outsourcing is becoming a requirement for survival for many Japanese companies” while noting procurement and qualification processes remain lengthy and conservative compared to Western standards.

With in-house capabilities strained by the growing complexity of peptide programs, Japanese pharma companies are engaging earlier in the process with contract development and manufacturing organizations (CDMOs), according to Neuland Labs. The Indian CDMO recently reported that it has seen a shift in demand over the past 12-24 months, with more early-stage programs in Japan seeking external support from outsourcing.

Neuland Labs has observed an increase in peptide-related engagements from Japanese pharma companies, particularly at the preclinical and early clinical stages — where it contends technical requirements are more demanding with the need to move from scientific feasibility to execution speed.

“Ten years ago, discussions were dominated by mechanism and process understanding,” Kotturi told GlobalData. “Today, the emphasis is increasingly on speed of delivery and cost certainty.”

In a podcast with Pharma Manufacturing, Kotturi discussed how peptide development is reshaping relationships between sponsors and CDMOs. The interview explores why pharmaceutical companies are engaging outsourcing partners earlier in the process, the growing execution challenges associated with peptide scale-up and impurity control, and how analytical complexity, raw material sourcing, and manufacturing scalability increasingly intersect across peptide programs.

Given these dynamics, Kotturi in the podcast said CDMOs are no longer “traditional late-stage manufacturing” options but are becoming an extension of sponsors’ research and manufacturing teams serving as “core developers and optimizers” of the process, taking it all the way to commercialization.