In recent years, the generics market in Japan has reached a turbulent period. Due to government policy, the volume share of generics is increasing rapidly. On the other hand, generic companies could not profit more than before because of the reduction in generic prices. As a result, the generic business in many new entrants, mainly innovative pharmaceutical companies, was transferred to a vertically integrated company run by pharmaceutical wholesalers and pharmacies in 2010s. Generic names in Japan have resembled those of private brands( PBs) such as foodstuffs. In this paper, we conducted a survey analysis of the advantages of a group of vertically integrated companies sell generics as PBs, mainly by NIHON CHOUZAI Co. Ltd., in comparison with previous studies in other industries.
First, a vertically integrated business model in which both manufacturers and pharmacies are within the group can maintain sales prices and conduct sales activities with a minimum number of MRs. This suggests that sales management costs can be reduced.
On the other hand, the brands of these generics were derived from the company name, not the pharmacy name. Furthermore, these companies could not acquire the store brand because they also deal with brands of many trading competitors. There were no cases in which generics sold by a vertically integrated company had unique added value in accordance with the needs of the patients or pharmacists. The reason these companies take such a strategy is that pharmacies, rather than patients, have the choice of generics brand. And since the pharmacy has the brand selection right, the pharmacy can immediately switch from innovative medicine to PB generics according to the pharmacy’s intention. These suggest that PB generics are efficient and effective business compared to PB businesses in other industries.
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