Lessons From the Rise and Fall of Japan’s Life-Sciences Innovation Ecosystem

Japan was once a global leader in life-sciences innovation, producing nearly 30 percent of all new drugs introduced in the 1980s. But then it faltered. Its share of global value added in the pharmaceutical sector declined by a staggering 70 percent from 1995 to 2018. Several factors coincided with the slump, including reduced government investment in basic scientific research, underdeveloped university-industry linkages, and stagnating levels of entrepreneurship. Yet no policy has been more deleterious to the Japanese pharmaceutical industry’s innovation capacity than the drug price controls the country introduced starting in the 1980s, and which persist to this day. To be sure, Japan possesses the economic capacity and scientific infrastructure to achieve a turnaround, but it will take a strategic, balanced, and coherent set of policies, including regarding pricing, to reestablish itself as a competitive biopharmaceutical innovation ecosystem. What lessons can U.S. policymakers draw from Japan’s experience as they seek to sustain America’s own life-sciences innovation ecosystem and globally competitive biopharmaceutical sector?

Tune in for an expert panel discussion examining where Japan faltered in this sector, what it must do to restore its life-sciences innovation leadership and competitiveness, why that would be in the best interests of both Japan and the United States—and what America must do to avoid following in Japan’s footsteps.

Event Transcript

Stephen Ezell: ...The decreased levels of new drugs being introduced. So in underwriting all this data from the 1980s, I came across this truly magisterial report by a woman named Maki Umemura. She's now a business professor at Cardiff University, but she was then a PhD candidate [inaudible 00:00:16] ssSchool of Economics doing her PhD dissertation, titled, quote, "Unrealized Potential: Japan's Postwar Pharmaceutical Industry, 1945-2005." And as she writes in this truly excellent piece, quote, "The biennial price reductions had a particularly severe impact on Japanese pharmaceutical firms' incentives to invest in R&D." And she elaborates, "Drug prices were revised uniformly on a regular basis, regardless of innovative value, throughout the patent protection period. These reductions incentivized Japanese firms to launch a new stream of drugs with a short product life and little innovative value that can recoup the cost of R&D, rather than invest in more substantial innovation. While the industry did intensify its R&D orientation, most firms invested less than many American and European firms. This hindered the industry's prospects of launching breakthrough drugs that would have been more competitive overseas."

As she writes in the conclusion of [inaudible 00:01:05] her dissertation, quote, "As Japanese pharmaceutical firms will not be able to profit from free market prices for pharmaceutical innovation, many firms prefer to minimize their investments in R&D. Moreover, the capping of drug prices not only resulted in smaller profits, but also limited the ability of firms to pursue riskier, costlier, or sophisticated investments in R&D." What's the point of this? The point, for the United States, for Japan, for European policymakers, is that stringent threat price controls, by capping the ability of companies to earn revenues, not only diminish their incentives to invest in risky innovation, because they can't earn, they can't utilize revenues from this investment, but it also diminishes their ability to invest in innovation, because you don't have the profit scale to do so. So stringent drug price controls reduce both ability and incentive, and really disrupt the economics of bio pharmaceutical innovation.

So then, you see that propagating throughout the entire system. If we looked at the evolution of Japanese enterprises' investment in R&D in the biomedical sector, what we see is that Japan's share of global bio-pharma R&D fell by one half from 1987 to 2018. Can't make money, can't invest in R&D. Can't invest in R&D, what happens? Well, the level of Japan's publications in biomedical scientific publications declined by 16.5% from 2000 to 2018, their level of patents declined by 7% from 2000 to 2015, and when the biotech revolution really started to get [inaudible 00:02:33], Japan started to get behind, especially behind the United States. A key reason why that was, by the way, is Japan's really suffered a decline from underdeveloped industry and university agents.

This is data from 2019 that looks at average industry funding per academic researcher, and you see that Japan invests barely one-sixth of a country like Germany. There was a significant gap in the share of GDP invested in this industry, R&D relationship between the US and Germany over that three-decade period.

And so what you will find is that today startups only account for 2% of new drug innovation in Japan compared to in the United States, where about 70% of drug candidates currently in phase three clinical trials are being deployed by small companies. So overall, just 4% of new university-developed technologies or licenses are [inaudible 00:03:30] in Japan, whereas that rate is 70% in the United States. So over time, especially as universities, with the focal point of the biotech revolution in the United States, and you have the ability to invest in university R&D and spin them off into companies, Japan has largely missed that [inaudible 00:03:52] to improve upon going forward.

[inaudible 00:03:54] Well in Japan, kind of in the late [inaudible 00:04:00], here is to product [inaudible 00:04:07] create a stable and reliable pricing environment [inaudible 00:04:13], and encourage R&D and drugs by enabling companies to recoup their developing costs for launch generics [inaudible 00:04:18].

A wonderful paper by [inaudible 00:04:23], which analyze reward systems in 2016 found, quote, the reward system works well, and should be continued to encourage [inaudible 00:04:29] can trials thereby delivering one into the address. All right, so it happens. Well it appears to work. After 2012, we see a bump in the industry, see an increase in industry sales from about 2010 to 2017. And when you look at new drugs approved in Japan, new active ingredients, what you see is that this number increased by 72% from 2010 to 2016 compared with the percents change over the previous five year period. So the PMP seems to be having effect in spurring the industry. Unfortunately, as Japan's budget situation deteriorated in 2016 and the ministry of health and welfare increased new pricing policy reforms that effectively adjusted the biennial price survey to an annual cadence to create additional budget savings.

These revisions dramatically reduced number of patent medicines that were recognized as innovative of P&P qualification. Overall, Japan, by 2022 had unlimited more [inaudible 00:05:36] drug price cutting mechanisms over the past five years cutting drug prices nearly 20%. The 2023 off year drug price revisions are expected to result in additional price test of 48% listed of products across multiple therapeutic areas. So price test continues to today plus's the impact. Well when you look at the country's share of early stage pipeline drugs across US, Japan, China and Korea, we see that since 2015 Japan has experienced the down [inaudible 00:06:07] share of early stage medicines overall and oncology drugs as well, which have decreased by half. And so, there's some evidence that these peer reviewed revisions have had a deleterious impact on [inaudible 00:06:21] ability to bring through [inaudible 00:06:21] innovations.

Okay, so where does this all leave us today and what are some policy recommendations for Japanese and global policy makers in life sciences?

I think first we would advise and counsel policy makers to fully recognize the power and potential to [inaudible 00:06:45] life sciences sector to provide innovation, productivity, economic employment and tax growth. Today Japan employs 140,000 individuals [inaudible 00:06:55] pharmaceutical jobs. We know that this has been one of Japan's most successful sectors in the past. There's no reason just like semiconductors and automotive electronics today that it cannot retain and redeem its status as a world leading competitive Japanese sector.

Second, we encourage policy makers in Japan and the US elsewhere to recognize that far from being a driver of healthcare systems and costs in [inaudible 00:07:23], data medicine at the University of Columbia where he led from 1997 to 2010 at the value of reductions in work loss days and classical emissions, attributable to pharmaceutical innovation and found that it was three times larger than the total cost of new drugs consumed. And innovative medicines can help solve societal problems and I feel it particularly in the aging society like Japan, issues of mental health diminishing of Alzheimer's, the NHLW projects that the cost of dementia will increase from 14.5 trillion Yen to 24.2 trillion Yen by 2016, those 50% of the cost of care being born by families and a hundred thousand citizens [inaudible 00:08:10] with the Japan workforce each year to provide care. We would tackle that problem with innovative solutions like the [inaudible 00:08:17] which innovative companies are investing.

So that's part A. Part B is to balance the contributions that need to be born by all actors in managing healthcare system costs in Japan. Fortunately, as I understand, often the budgetary costs are directed more innovative by cyber, for instance of the total seven or 20 billion Yen reduction in social security related expenses, and in this case for the coming five years, 82% of that for 594 billion Yen is to be drug price related. Share the cost on the [inaudible 00:08:43] system.

Finally, recognize that companies really have to earn revenues to sustain innovation and transparency, unpredictability in drug pricing is key for investment. The situation in Japan with prices for on patent and drugs [inaudible 00:09:07]than other countries in R&D cannot be recovered, makes the market less attractive than other countries for the launch new drugs, which is why the drug launch lag has accelerated in Japan over the past decade and has a negative impact on Japan's fairly involved.

I think policy makers also need to develop a comprehensive strategy to bolster the sector's competitiveness and manage that without ultra pricing issues. So in conclusion, what are some lessons for global policy [inaudible 00:09:43]? There was a great article done by Kimberly Kleys in [inaudible 00:09:48] and Drug Discovery where, she's looked at the impact of European drug price controls on the industry over the past couple decades and what she concludes, quote, is that Europe's free right is not free. European drug price controls actually led to considerable, quote, social economic cost in Europe in the form of delayed access to drugs, ordered health outcomes, decreased investment research capabilities, and [inaudible 00:10:11] place on high value pharmaceutical jobs.

Most countries want to have their KKP to two, they want to have low drug prices and they want to have a competitive drug industry. It's time for policy makers to realize that you can't have both. You have to balance the interest of both parts of the equation and in a context where globally, policy makers are pawing upon the global public to make sacrifices and investments in global challenges like climate change. We can't expect, countries should not be free riders on pharmaceutical foundation, countries need to step up and invest in R&D and adequately value innovative medicines that producing [inaudible 00:10:57] before.

So thank you and with that I am going to turn it over to our panels. Joe, go ahead.

Joseph Damond: Thank you Stephen. Thanks. Congratulations on such an excellent report. Sure carefully. I'm going to give a perspective now for someone who's been involved with Japan pharmaceutical policy for 22 years now. I can barely believe it's been that long and who's lived through some of the changes that you talked about, Stephen, some them that are, many better and some that had an adverse effect and to draw some lessons about that. What I've seen in terms of Japanese policymaking systems, some lessons for them and for others.

By the time I started working on this in the early two thousands, 2001 in fact, it was clear that Japan was lagging behind the American and European pharmaceutical sectors. In fact, in 1990s had just end it, was the blockbuster era really began. It was a big product, big companies at our scale and Japanese companies really did not participate in that at all. They were very inwardly looking. Japan [inaudible 00:12:20] and their profits were basically based in their own environment. They were a couple of exceptions but not very big ones. Biggest Japanese company at that time, similar to today, it was probably 15th or 20th of the world.

As a result of that, the innovative industry really began to work intensively to talk to the Japanese government and the US government by the way, about how they were lagging behind, how it was having an impact on access to medicines in Japan under their national health insurance system. We worked a lot by the way, with the US government at that time. We were able to show those many points that Stephen makes. The system was basically designed, it was basically protectionist wasn't a working protectionist in terms of high tariffs. But, basically it's systematically discriminated against innovative products. We're getting very high prices for off patent products, sometimes 70% of what the originated price was, which was dominated by Japanese companies, thus surprisingly and relatively low prices then from the originators.

Well if you can make 70 in this industry, which is very risky and it takes a long time to develop a product and it's very expensive, you can make 70% of the revenues without having to innovate, without having any risk on research and development, you will. And, hundreds of Japanese companies did and resulting in them not being particularly innovative and Japan was not spending less on drugs, they were just spending on old drugs, where at that time something like 80% of the revenues spent on medicine were in the generic sector where the US has always been the mirror image of that.

As a result of a lot of this effort, as I said, we were able to characterize this as a mode of domestic policy that discriminated against foreign companies but also that was hurting their own industry, which was quite evident. Japan did start taking note of their foreign measures and they started earlier than the pricing reform started in the early 2010s that Stephen accounted. First they had to close the drug bank [inaudible 00:14:43] together was significant one. Japan had an antiquated non-aligned drug regulatory agency, in fact it had two drug inventory agencies, we might not remember that which they combined, which were understaffed and which made it much easier for Japanese companies to get products where it was very difficult for western companies.

They combined the agencies, they created user fees, they increased the staff to review drugs and by today, now that drug buy in terms of approval time between the FDA or the EMA approved drug in the United States, Europe and Japan has pretty much been close, that's good news. In the early 2010s as I'll get to in a second, they started pricing reforming because they realized that it was very little incentive built into their system, which was the market for Japanese products, was for Japanese firms, was in Japan, if you weren't getting rewarded in that market, you weren't getting rewarded anywhere. In addition, they started to consolidate later their research and their government sponsored research and to biomedical science. But in short, I think the key here, and Stephen, Stephen you touched on this, is that there was a holistic strategic approach on the, in terms of improving the industry's ability to compete globally and innovate.

It was regulatory, it was pricing. There were also some improvements in intellectual property rights. It was research and development. And in fact in 2012 when the United States started negotiations on the ill-fade at TPP, industry at that time, in America, we really did feel it was a bit of a division, but the issues were serious enough to raise as major issues in the TPP negotiations. Whereas they had been raised in Korean negotiations and Australian negotiations earlier in the decade. That's how much things have improved by.

As Stephen noted on the pricing side, they did put in place this price maintenance premium, which was a premium for innovative drugs, but also maintained the price of your drug relatively speaking over the life of the patent so that you could get a return on your investment and that helped create a certainty for companies to invest and do research and development in Japan, as Stephen showed, began to work. But then, after 2017 or so, some of these policies began to be reversed, particularly by the Ministry of Finance as was noted. In particular, it started to become a lot more reactive to developments in the marketplace like unanticipated drugs that became big sellers and that had line extensions, in other words, they were approved for new indications.

Apparently, even though these drugs were treating more and more people and proving more innovative than even their developers had thought initially by getting new indications, the Ministry of Finance, offered to actually punish that innovation by telling you, oh, more people like this drug., it's actually more effective than you thought, you know what, it's worth less to us than it was before. That's a great way to dis-incentivize innovation.

In addition, the lurching that was started to be created by, okay, there's a big product this year, so now we're going to invent a new mechanism to deal with that and another and some new indications on these products the next year creating a lot of policy uncertainty for the sector. And then, on top of it all, they began to limit this price maintenance premium, then they [inaudible 00:18:42] fairly benign thing, but they started to show their sort of protection again.

In other words, if you were, your ability to get that premium was linked to how many products you either launched in Japan or initiated in Japan. Well, I was working in the biotech association, 70% of all the new products in the US are initiated by small companies. Guess how many of them have previously launched products in Japan? Zero. So how many of them are going to launch, are going to get these price maintenance premiums in Japan? None. And if you're trying to promote a biotech collaboration and the fact that this industry is again changing, and this is another theme I wanted to bring out was, Japan continued to sort of be behind, lag behind changes in industry structure. Okay, this big ecosystem of biotech industry, biotech, small biotech companies doing all of this innovative research and development was relatively a new phenomenon. It really took off in the early 21st century, partnering with those companies and forming their own ecosystem like that in Japan would've been the thing to do.

But they were still sort of stuck back in the nineties when the first industry was dominated by these big companies. Finally, finally, the coffin or one of them was that they started introducing annual price [inaudible 00:20:07] you can say what difference is that make you cut every year, every other year prices and things like that, but without going into too much detail about the Japanese system, the point here is the price cuts were based on the difference between one wholesaler sells to say, a hospital lab and what the set reimbursement price was. And if there's a lacking, there's a gap between what the wholesale sells to the hospital, that gap is closed. Well what, guess what? That gap is what the, that's the money the hospital makes on the drug. They're buying cheaper from the wholesaler and then they're selling it to the patients with some profit and if you lower the price, what happens? They continue. You have to continue to get that gap to the hospitals and get a sale there. So every year now you're creating this downward cycle of drug pricing after they're launched and it's going twice as fast. The curve is twice as steep as it was before.

So what did this do? As I think the data shows that all the impact of undermining local innovation, in some ways, they tried to promote, there was some great innovation, China's always had great, Japan's, always great science to give special benefits to the regenerative medicine sector, especially if you were launching your regenerative product in Japan. My comment on that is fine, but once again it's reactive. It's saying where do we actually have a lead and then we're going to reward them after they already have a lead as opposed to saying, well maybe we should give these incentives to other sectors so that we can develop a lead or can develop some incentive in those markets.

So once again, they go back to this reactive approach, focusing on one sector in the innovative portion of the industry at which they were happened to be competitive. And if you were an American company or a foreign company, you happened to be in that sector, you might get some benefit from it, if you weren't, you might not. I want to say that clearly, I'll finish with a couple of quick comments. Clearly Japan has got some serious problems in terms of demographic problems and health and social problems and dealing with how are they going to pay for medicine, how are they going to get people access to the most advanced, that aging society, still relatively slow economic growth. The industry has been pointing out, continues to point out for years and years that there are some solutions to this that they have not really gone all in on yet, including continuing to make generics as cheap as they are in the USA and other long listed products, which is another way of generics, but they're branded in Japan to lower the prices on those.

Japan is not wanting to hurt too much the industry that it does have. So by protecting the industry it does have, it's preventing, it's being prevented from getting the industry that kind of should have, which is this innovative world leading technological sector. It's hard to have both. They've also not looked at the changes that are happening. As I said, this cohort of small companies doesn't exist in Japan. There are a few, there's a little bit of venture capital but, they've really not done a lot to develop that. In addition, and this is what we're raising, they're not looking at the new technologies and the system that's designed is really designed with the old some, the older technologies that could be the chemical drugs, what they call small molecules and biologic drugs even. The future and the future technologically advanced company like [inaudible 00:23:46], things like gene and cell therapy and gene editing.

Those are different types of products and they have different, and they're going to be very difficult to reimburse unless you have a good plan in place. There's going to be very difficult to incent people to actually, or companies to develop those products. They have small populations that requires a lot of focus on patients and I don't think the Japanese system is really designed that well and I think they're, to do that and what I think the result is going to be, are gaps in access to some of these new medicines and a lag by the Japanese industry. You're just fighting a fight that's 10 or 15 years old. My advice would be they need to go back to this era where they were looking at these issues and this agrees with what Stephen said, be holistic. You've got to have an all of government's approach.

You've got to weigh the balance the pros and the cons. You've got to focus on rooting out the areas where you're actually inefficient. If you're rewarding these zombie companies and they are zombie companies and I've met a bunch of them that are getting, continuing to get financed from Japanese banks, don't ask me why, but they do, keeping them alive, there's needs to be some focus on that.

You need to create some policy coherence and stability as opposed to this reactive where you continuing [inaudible 00:25:05] that new policies every month and sending, or every year, excuse me, and sending all kinds of mixed signals to the sector, which in the sector that has the long runways of research and development this sector does, really undermines the risk taking. You need to look at the future tech here and not just what companies are good at now like regenerative medicine, I mean there's a lot of technology and I know that there's work being done at the Japanese universities, but somehow that needs to be commercialized. And finally you need to focus a lot more on building partnerships with the global ecosystem, including the small, medium-sized enterprises that are doing so much of the research and way, as I mentioned, the way that they have altered the price maintenance premium actually works against that. So I'll just end there. I got lots of worse stories, but I don't want to bore you with those and look forward to the discussion. Thanks.

Stephen Ezell: We really look forward to hearing the war stories. That was excellent, thank you. Let remind our viewers online that if you would like to ask questions, we welcome you to some of those via the slide app on the web page [inaudible 00:26:17]. Melanie?

Melanie Berry: Great. Okay. Thank you so much to Stephen and the Information Technology and Innovation foundation for invitation to join this panel today. It's really an honor to be here with both Andrew and Joe. It's excellent panelists.

So I wanted to share a couple of observations today based on my work at the Asia group on the political landscape surrounding biopharmaceutical innovation in Japan and how it's shifted in recent years. Perhaps offering a slightly optimistic note on the prospects for substantive change in future term. Based on our work and our interactions with many stakeholders in the ruling that both democratic party, other parties and ministries in Japan, we have actually seen a significant number begin to advocate more actively for changes in the system to better foster innovation in pharmaceuticals.

Driving this or enabling it, is overall stability of the correct best political landscape. This is really helpful to open the door to greater advocacy for lawmaker, particularly within the LTP, for example, in the near term, so for example, prime minister communication does approval ratings have sort of stabilized at this point and [inaudible 00:27:32] leverage strengths in international diplomacy over the past several months with key examples being his strength to keep his summit with [inaudible 00:27:37] on that relationship. That's really given him a bit of a boost politically, LDP as well as in a solid political position. So for now it looks like the potentially a snap election of the lower house does not appear to be on the immediate horizon. What that means in terms of upcoming pharmaceutical reforms is that this environment gets a little bit more flexibility and bandwidth, potential LDP advocates of more innovation friendly policies, to be more outspoken and active and to listen to ministry a little bit more.

So these LTP figures are now interacting or contending with stakeholders distributed among two other groups. We see in this drug pricing policy debate this year, within the Ministry of Health, Labor and Welfare and then within the Ministry of Finance. So as the support notes, the ministry finance in particular is focused very intensively on cost management in the healthcare system. Essentially setting a cap on spending on social spending overall and then balancing those costs mainly via drug price compression. So that leaves, as Stephen touched on this panel, other stakeholders represented in decision making on healthcare spending, including within [inaudible 00:28:48] among payers, healthcare providers and others on the central social insurance medical counselor, [inaudible 00:28:55] , essentially they're competing for what's left in [inaudible 00:28:58]. Industry itself is not really represented on [inaudible 00:29:01]. So in some ways, I think, they're simply easier to target and enables Ministry of Finance and HLW to lean more, has enabled them to lean a little more heavily on drug price compression [inaudible 00:29:14] as Stephen mentioned.

Turning to know the more positive trajectory and momentum, we see now another dynamic potentially driving this momentum is that among industry, as well in Japan, we've noted more alignment on proposals and key issues, whereas previously, say like maybe four or five years ago there was more of sense of divide between foreign companies and organizations like Japanese counterparts. We've noted a little bit more alignment, more consensus on the issues that need to be resolved in terms of pricing mechanisms and so on. And that has kind of been met with corresponding interest among lawmakers and hearing what they have to say. Driving a lot of this interest is the widespread recognition that lagging pharmaceutical innovation is a really serious issue for Japan, particularly stemming from Japan's failure to quickly develop an effective COVID vaccine and as well as the record and expanding trade deficit in pharmaceuticals which hit 4.6 trillion Yen in 2022. So this highlighted the serious challenges in the system and has viewed decision makers and policy and [inaudible 00:30:23] with a sense of urgency.

And then the Ministry of Health, Labor and Welfare's expert panel, which is currently meeting, were just wrapping up their work this week, their expert panel on comprehensive pharmaceutical policy measures has sort of engaged and catalyzed a lot of these concerns and reports on potential recommendations that'll be submitted to [inaudible 00:30:43], so the government suggests that those recommendations may end up going against some of the entrenched interests in the system.

So there's a real possibility this year that there could be some possible changes to Japan's pharmaceutical current system and that industry's perspectives could be seriously considered in that process. So as an example, we've discussed the price maintenance premium and the recent changes that are particularly deigned new companies, new market entrants that don't have a long legacy in the Japanese market. That's one area we're hearing, that there may be some adjustments that would benefit startups and new market entrance in particular that really drive innovation in 21st century.

There could also be something more structural and comprehensive, but I've been watching that space at the same time. I think as Joe kind of mentioned, this lurching approach has been taken to pharmaceutical policies. In some respects that sort of lurching or piecemeal approach does still pose risks when you start tweaking one part of the system or making ad hoc or in-the-weeds changes, those can have the possibility down the line of hidden or unintentional effects. So one example of an in-the-weeds change that we've seen as something that is going against kind of the innovative goals government is laid out, is this co-factor zero rule, which some of you may be familiar with, but it's intended to promote transparency and cost disclosure for products. Essentially it adds a co-efficient to premiums granted to products for innovation or marketability and then lowers those premiums, the products have a low cost disclosure rate as marked price process in Japan.

The lowest co-factor zero is essentially wipes out any premiums awarded to a product and even it's added to products such as those that are part of the [inaudible 00:32:26] program which provides premiums and accelerated [inaudible 00:32:29] processes to designated innovative drugs and sort unmet needs. And larger and more established companies can sometimes take or accept that hit with smaller emerging firms can't and those are who those premiums are intended to bring to the market. And as I mentioned, those are the players that are really driving innovation right now. So those kinds of small tweaks, if not done very carefully and in a holistic manner can really undermine goals of achieving and fostering organization.

And then I mean the broader issues, you said, this high of social spending, the amount of social spending that the government is allocating there, is not getting any bigger for now, while the Ministry of Finance is trying to constrain increasing social security spending, at the same time the government's increasing spending in other areas like defense quite significantly. And so there are these competing priorities which lead to a broader debate about how to pay for all of it, including whether tax increases might be introduced and that gets into more sensitive political territory.

So how to address that with Ministry of Finance perhaps is beyond the scope of this panel. But it's important to keep in mind in terms of broader, political ways. At the same time just to close out, there are a lot of people within the LDP and elsewhere who are serious about figuring these problems out and addressing this innovation challenge in biopharma. So I for one, am hopeful that we might see some real substantial change during the upcoming price form around. Japan is certainly not the only country to face sort of demographic challenges and [inaudible 00:34:02] all these priorities that they're facing right now. So there's a real opportunity here for a precedent to be set in terms of balancing these factors for better or for worse. Thank you.

Stephen Ezell: Wonderful. Thank you Melanie. That's great. Okay, Andrew?

Andrew Wylegala: Oh yes, thank you very much and it's a pleasure to join the panel and to join last. Heavy lifting has been done by the experts to the right, which frees me up to sprinkle off a couple of observations that could take the conversation in other directions in the Q&A.

I'm coming back as mentioned to Japan USB after a few years away and the thing that overwhelms me is how close the alignment is in a whole host of sectors from security and technology policy and real commercial issues out there. So this is a interesting reminder for me that we aren't in perfect alignment and perhaps don't want to be. That's the cautionary nature of the story. It's also room for us to get the model right by learning from one another. It's clearly some shortcomings in the US model as well.

So three things that I wanted to mention. First, my own echo experience as a commercial officer briefly in Japan but 30 years overseas in a couple of relevant markets, Korea and Germany as well. And my main takeaway there, from my Japan experience was that it wasn't a linear descent, but as the report mentioned there was an evidence flow, things were looking more or less optimistic over time, which is encouraging for the notes that are rebound, which Melanie has also highlighting in her comments.

Second item, I wanted to make parallels from my most recent experience, which was a couple of years in Taiwan. If anything, I think the Japan model serve as a double cautionary for Taiwan in some areas there's either greater challenges in that market where they haven't got the established base in innovation, the infrastructure to go forward and yet have very high ambitions to find the next engine for Taiwan's innovation in the next export platform. And yet, some of their restrictions on the price side and these other concerns, market access and the like are even more severe there, actually poses some real questions for Taiwan. It would be great to also hear in the conversations some markets that are moving more aggressively, Korea and of course China come to mind.

And then third and finally I would just like to pose and learn from the analysts and the group what we can do to go forward on the report. Next steps to make sure the lessons are disseminated. What we can do, policy makers in the business communities and my own organization and America societies to look for synergies into group situation in both markets.

So first on my experience, I was reading the report, I was struck by cause and effect, these policy changes, there wasn't that much of a policy lag, the assets to the market, US exports really did react relatively rapidly to some of these changes that were made.

As I saw it, my time coincided with that brighter period, let's say 2012 to 17. And those were the years when the price maintenance premium was really coming on, very well received, seemed to be having a very positive effect on the US exporters that we were dealing with. The firms in the market, the [inaudible 00:37:54] sector at large. After the pricing as was reviewed in by Stephen and the report and then by Joe. This is the era also where the [inaudible 00:38:06] policies we're streamlining, were really taking their effect.

There's a huge positive buzz about prospects of regenerative medicine and genomic technologies and cell and gene therapies and Dr. Yamanaka and Nobel Peace Prize was all coming together then, it really did seem to us at that time that Japan's old mojo was coming back. But at the same time I recall we were worrying with, we were working with some of the worrying signals in that latter part, especially 2015-17.

There were the fear that the price pressures in the form of biennial reviews coming into annual reviews were going to be coming into place accelerating the downward pressure, the increased use of reference pricing from other markets, I remember as a concern. And the big concern that the health technology assessment model that was just being tried out wasn't going to be a holistic approach that really took into societal value, took into account the societal value of novel drugs and approaches. So at that time our section was visited by a lot of the firms represented in the room today and Joe was certainly there with bio and bringing delegations out to ring an early bell of caution about the direction that things were going. Commercial section, we were pressed into action to do what we could, talking to NHLW, even the cabinet MLF at time, as we got into the resources issues.

It seems like those worries were really well founded because in the five or so years since I left, I'm learning that really there has been a deterioration with the policy changes and that's played out in the statistics that were shown. Another indicator I had was watching an outbound FDI flow because we got increasingly involved in all sectors but especially life sciences. And there was certainly a cooperation then of what was happening as we made some reverse missions back to the US with the ambassador we dropped in on companies like [inaudible 00:40:16] and learned how well they were doing in the states and why they were, they were doing well and a lot had to do with the innovation climate but also the capacity to commercialize innovation, not just lead in technical innovation.

Most recently since I started this new job, I heard that story again that we did a business topic webinar with a representative of Status sells USA [inaudible 00:40:48] recent hour, the president of the company and I think they employ 1200 people by now in the United States. The bulk of their R&D work is being done in the United States, as Mark explained. That was the first of 30 such presentations we've done with Japanese companies in the US from the life sciences sector, which in itself says something, a lower profile and there aren't that many of those firms, but those that are in the US seem to be doing quite well. In that conversation, we were also paired with an economist who talked about a lot of the other factors which are [inaudible 00:41:32] , the Japanese innovation framework in life sense such as, again, Stephen mentioned, but the failure to really exploit the open innovation model seemed to be the strongest of those.

On second, say real quickly, what I observed in Taiwan. There are many structural, regulatory and even cultural parallels it seems with Japan. More importantly, perhaps more ominously that Japan is often a policy model for Taiwan. Like Japan, we've got an economy with a low birth rate, rapidly aging population, universal healthcare system, but real budgetary constraints and Melanie was mentioning competing priorities in Japan again for a rare time, both of those are at defense spending is one of the area being pointed to for a fresh source of crowding out potential resources for this sector.

So lots of challenges in Taiwan and Taiwan is not a biopharmaceuticals or healthcare market where total cost is considered but rather short term cost minimization seems to be the name of the game. So tied to the low investment in healthcare and we've got stagnating investment in this area six, 6.5% for over a decade now.

It's created a situation where the payer's hands are tied and access to the most innovative and effective treatments are being delayed or plainly not reimbursed at all. Major differences with Japan, if my understanding is correct is that while Japan applies the downward drug cost pressure, it mostly reimburses in line with the regulatory label, the approved indications of usage. While in Taiwan there's a much more significant gap between reimbursed and improved usages for innovative medicines in that market. So that's a real counter incentive obviously for the most innovative pharma to see Taiwan as a long term strategic market. Also, because public health, public health outcomes at risk, just for one example in the oncology area I heard about by utilizing the most innovative therapies in the early disease setting could be curative and therefore very cost-effective. In Taiwan they reimburse with cost centric treat-to-fail approach, that is they might start with older generations of drugs and work their way to costly, more innovative medicines as they fail, and unfortunately cancer progresses.

[inaudible 00:44:13] it creates inequitable healthcare environment as the most affluent members of society can procure innovation earlier on, out of pocket expenditures. So many of the same challenges we're also seeing, saw on the med tech and the device side as well, which raises some questions about the broader innovation model. Taiwan, like Japan is well poised for homegrown innovation, outstanding clinical skills, dealing with cutting edge procedures and to spark innovation, highly capable manufacturing base that could be pretty readily deployed in the sector but there seems to be relatively little happening at the grassroots in both places, although I think Japan clearly is far ahead of it. So those are the two points.

And then the last piece was moving forward and efforts at restoring Japan's leadership and innovation. That was the title of the discussion that we had with Astellas recently and Richard Kaz was the economist who offered his observations in the area.

In the interest of time, just again to recap, open innovation, university cooperation were again mentioned but so too were US venture capital and private equity activity moving into Japan as a partial support as well as direct investment by US firms, particularly into SMEs in Japan, perhaps being part of the solution of some of the succession issues that we are familiar with. So we are there. I'd like to conclude my comments and say thanks.

Stephen Ezell: Andrew, that was great. Thank you. Well, all right, I encourage those online to submit those questions via slide down. And, of course to the audience here as well. Maybe we just start by asking that the panelists, if they would like to react to anything they heard from a fellow panelist.

Melanie Berry: I could just underline Andrew's point about, in terms of what we can do and for next steps underlying that point about the importance of funding and potentially easier private equity for startups in Japan as part of the efforts to invigorate that ecosystem and build innovation.

I mean, I think there's just a hesitancy towards kind of longer term risk taking that is needed, given clinical trial lengths and all the risks that perhaps are perceived to come with investments into healthcare related startups. So, bringing in some of that additional funding from us rather than the 14 Japanese firms to go abroad to look for that funding, I think would be a good step in that direction.

Joseph Damond: I would just add, pick up a point that Andrew made, but it's interesting that other major economies of East Asia did [inaudible 00:47:20] Japan's stakes spending some time looking at this, they all had similar healthcare systems, they were all dominated by the Ministry of Health and industrial policy was actually dominated by Ministry of Health's perspective.

Ministries of health are I think necessarily in notoriously domestic agencies or inward looking. They're not exactly the best position to make an industry global, and in the case of Japan, certainly Taiwan and so maybe more recently Korea and China, they all did that though. And even though you can name world leading companies in [inaudible 00:48:01] in most of those countries, can't really name life sciences like top two, top three tiers, any of those markets least not yet. And so there's some lessons to be learned that go beyond simply what Japan did because it was imitated by a lot of its neighbors.

I do think that creates some opportunities though today's, the way that even industry works today. I would say that 20 years ago when I started here, scale was a big factor. We're getting into the sector and American, the largest 10 American firms were 10 times larger than the largest Japanese firms, much less firms in Taiwan, or Korea. But now there's a lot of opportunities for smaller players, small, medium size enterprises in biotech. If you can put those structures together, finance and as was mentioned, academic and commercial cooperation. So all is not lost. And it also means, by the way, I think that the US needs to be on its toes too because the sector is changing. I think you are starting, if you look at exports just of those four economies, Japan, Taiwan, Korea and China in the sector, Japan, absolutely Japan, Taiwan are flat. I mean it's as if for 20 years flat and in real doll in nominal terms too. It's not even rising with inflation.

Korea has made some interesting place because it's got some world leading companies like Samsung and LG and the biosimilar space and that was a really interesting strategy, to see if they can go beyond that. China has been just pouring tens and hundreds of billions of dollars into the sector. They have a big large local market, but their exports are starting to go up too. A lot of that's in the, not necessarily as advanced areas, but they're starting to break out a little bit of all of this. So it'll be interesting to see. But those are all challenges for Japan as well because nobody's standing still.

Stephen Ezell: Japan, like many countries is not like the United States in the sense that, any [inaudible 00:50:22] announcement is not posted in the federal register or if you want RFI continent for state [inaudible 00:50:27], is there policy environment in Japan. So a question is, A, what are the most effective way for stakeholders to provide their inputs to Japanese policy makers who are putting these issues? And B, what messages do you think resonate more strongly and effectively when we're trying to make the broad argument to properly [inaudible 00:50:52].

Melanie Berry: So the question is one of the best ways for your private stakeholders going to, how do we convey their perspectives? And that's a big question. I think my head is going in a lot of directions in terms of recommendations. But I mean, I think acknowledgement of some of the difficulties and challenges of Japan's kind of budget situation and some of the constraints around pricing is good. I think that situations are grouped a little bit in terms of the amount of transparency and willingness of government stakeholders to interact with the industry. So some of that direct outreach to particularly entrepreneurial lawmakers can sometimes be interesting as well as to different advocacy groups based on specific issues related to drugs, specific drugs and portfolio, so on and so forth. As well as some of the more public facing advocacy that makes a case for why a certain change is important to a broader audience rather than just the ones that feel like they're already immersed in the world of pharmaceutical policy.

So kind of extending that maybe out, a little bit inappropriate to do, a way to go about it.

Joseph Damond: I was going to note again for a lot of years, I don't know if this was optimal or it certainly didn't work that the industry, the American industry and the European industry too by the way, asked for a lot of help from [inaudible 00:52:30] governments to get them a seating table in Japan and that there were bilateral talks, processes set up going all over the [inaudible 00:52:43] administration in the pharma sector and med tech sector too ,to do that, to give us some points because typically the Japanese government, a lot of other governments is more interested in its own condition stakeholders I think. And so that it did become a sort of an annual part of annual trade discussions between the two governments and that did have some impact on it I really do believe on the reforms that were made in the beginning and even before 2012.

So that's one thing I would say. Second thing I would say is I'll do quick point. So one is who is the audience here too? It's difficult to communicate with. I think the parties that are losing but they don't know necessarily are Japanese patients. That's a difficult audience to reach. So the industry benefits for legal reasons and for cultural reasons. But the problem is that you're talking primarily in the Ministry of Health, which has a particular perspective on things and sometimes that's frustrating and it's not necessarily going to lead to fast change.

So that's another problem that you have and I'm trying to think of what the third point I had because I had a really good one. But I would say this, this is the other thing in terms of who's considered a stakeholder in Japan, because again goes to that voice. Traditionally, and I think a lot of other governments work this way to be considered a stakeholder, you had to be invested in Japan. So when I worked at pharma, pharma companies have been there for many, many years, a few years or more. So they were, their country president or sometimes the senior executive would come in from outside and they would get an audience with the Minister of Health or other officials.

But going back to the reality of today's one, what Japan really needs to do if you want to go international is, its networking. These skill sets, these productions, innovations is all networked, but it's very difficult for the, and I, when I was representing my office trying to sense represent the network like these people aren't in Japan and that's exactly the problem, want them to be here. I found it wasn't done that much, but what was sort of interesting when we go there, we bring CEOs from small lives and companies, they would say to Japanese officials, if you stop doing this like the price maintenance premium you have to previous products launched in Japan, we will come here, we'll do research and development.

So the problem is that if you've got, there aren't stakeholders and nor is there a stakeholder in the sort of broader life sciences industry, in Japan's biotech sector so to speak, is it exists but it's quite weak and it's much weaker than say the middle group of companies that are producing non-innovative products who employ thousands. There's hundreds of those companies and there's, they employ thousands of people and Japan is much more concerned about preserving their jobs and listening to them than it is this non-existent or very tiny constituency. And that requires, I go back to this, a little bit of forward-thinking about this, the industry you have or is the industry that you want that matters.

Stephen Ezell: Great. Any questions from our audience here in person? Excellent. If you would just identify yourself in the organization and what?

Event Attendee: Sure. My name's Alkalo, I'm a senior associate at the Asia group for Melanie. I had a question in terms of mechanisms for industry discussions and conversations and in 2021 the new pharma vision was updated for the first time, I think since 2013 it was a big deal, a lot of excitement around this, but since 2021 we haven't really heard much active or action around that pharma vision 2021, do you think that is still a mechanism for industries to engage with or is that kind of been shelved by the government? Parallel to that though is, what's seeming the success of the NHLW's expert panel, seems to maybe have come out of that vision, but it seems like that's still an unused tool. Any thoughts on that?

Stephen Ezell: [inaudible 00:57:34].

Joseph Damond: That's a really great question. First of all, every few years Japan puts out one of these strategies and I've had [inaudible 00:57:52], this amazing slide that with flow charts that I can't really understand or best [inaudible 00:57:58] in the world with the squares in the arrows and the circles and all that. And they're [inaudible 00:58:03], I'm sure they're very brilliant. And then sometimes they do sit on the shelf for a number of years. Sometimes they don't. Sometimes they do because the resources have already been allocated. It's just the plan. Sometimes they sit on the shelf because it, to really be effective, it requires inter-agency cooperation that hasn't really been developed and has to be, that's impedance to the plan. I always think that there's some good thinking in those plans though, and that from the perspective of, I always felt like from a perspective of a foreigner, in going to Japan and talking to them about these issues at any time that you could point to the fact that these ideas were not your ideas, because there's always this assumption that they're self-serving when you come in as an American or European, that it was actually the government that agreed that this was the right policy direction, that at least you can have some credibility that way.

So I think that they're still good to point to and I think that if they haven't been followed through on, that's an additional point that actually should be made.

Stephen Ezell: Anything to add Melanie?

Melanie Berry: No, I mean I think that's all.

Stephen Ezell: Okay.

Event Attendee: Yeah. Chris Callwell with MSD, if I'm correct, I think you did a little bit of the core in Japan of the findings, I'm just curious, what reactions have you received from your discussions with people in Japan?

Stephen Ezell: So, I met with five parliamentarians, and I would say four of them were quite sympathetic to the arguments I was putting forward, particularly the last individual was the representative of the LPD on the [inaudible 01:00:01] and I think they were really saddened by the domestic industry's ability develop a COVID-19 vaccine. Yeah, I think that really has animated attention and energy that perhaps policy choices have caused the industry to diminish or to suffer more [inaudible 01:00:32] is really understood or anticipate policymaker. So every time I'm that [inaudible 01:00:35] know every single policy maker. This is a real national concern for us and we've recognized that we have to better support this industry's ability to innovate platform. So that [inaudible 01:01:04]. Also, I think, [inaudible 01:01:04] and this might be naive or too American, but just, it's talking to a company in a tough economic time, you have to adopt a growth mindset. A lot of people have all innovation paradox [inaudible 01:01:12] Kodak and they're declined.

They went from, all apply of the sought price and a sales revenue making the nine to 60 billion dollars to bankruptcy 13 years later. And that point was as the new technology is invented, they stopped to invest in market, they stopped to invest in investigation, they caught in kind of mindset of contraction, whereas the only choice in that environment is growth, is innovation. This is an industry that can be an economic growth driver for you. This industry can generate employment, tax revenues, and help get you out of the broader box you find yourself in with the declining mobile [inaudible 01:02:00]. And I think there was some recognition policy because that, yeah, broadly that's the kind of mindset that Japan has and not just for this sector itself, but all broader economy because that's, that's the only way down box.

Event Attendee: Thank you.

Stephen Ezell: Introduce yourself. Introduce yourself.

Event Attendee: Yes your Honor. Jim Pottery with GR Group. Thanks Stephen for the excellent review of the report and to all the panelists, really, really good commentary. One of the things that strikes me across from beginning to end is the sense of time. So you've taken this long time horizon and looked at the decline in the industry, but I want to pick up on a couple of things that the panelists said. Andrew, you mentioned your sense of responsiveness or how quickly things could be responded to in terms of policy change, in terms of positive impact. And I think Melanie also highlighted the looming increase in defense spending. And so we've got these two things coming together in ways I think that are really precipitous for Japan unless they move very quickly because the doubling and defense spending will take a lot of discretionary spending the way the enormous pressure on the social security system.

And so I think one of the things to take away and perhaps emphasize going forward in the spirit of Joe's good comments on policy coherence is how to tie that all together with the urgency of the moment because there could be a good turnaround in a couple of years time if concentrated effort is made in a way with your optimism about stakeholders and the [inaudible 01:03:46]. I think those people really need to be addressed in a way that does bring to them the sense of urgency here, but also the sense of possibility. That's more a comment than a question, but feel free to pick up any of that.

Joseph Damond: No, I think it's a good point, Jim, that and I think it also makes sense. I mean it's obviously why Japan feels needs to spend more money on defense and no one's going to second guess that, but it should also be, I mean, there are also some bigger picture compelling points, obviously how they should be spending more on healthcare innovation. And it is because of the demographics, right? And having a healthy society [inaudible 01:04:33], which you can't, Japanese people are already longest lived in the world, but you need productive people too, to be contributing to the economy.

So there's strategic reasons for investing more in the life sciences sector that I think needs to be, it's just not really clear who to talk to that way and it has to be, I suppose that the Prime Minister level because the Ministry of Health, that's their purview, but they think in very tactical day to day terms and they have an annual budget and no one's really thinking about this, what's in terms of future strategically, where do we want to be? It's tough to find any [inaudible 01:05:19], but it's tough to find those people who both have some, that aren't academics that who kind of get it and have the ability to move the policy in that direction.

Melanie Berry: I just had a quick point. I think there is an intersection too now, between health security and economic security and the drive for those both in the US and Japan. I mean in Japan so far, I mean pharmaceutical supplies are part of that. From economic security bucket, you're seeing funding going more towards production of antibiotic in Japan or production of dual-use facilities that can switch to vaccine production in a crisis. But I mean there is the risk there too of that taking on that sort of reactive approach that we've discussed where they're responding to shortening that certain of supply chains or making them more resilient or cutting off certain supplies to other actors that may in the end, may be more of a kind of retrospective focus on what we have now that we need to protect or ensure that we have access to versus being more competitive in the future in areas like bio-pharmaceuticals and biotech so there is a bit of a risk there, but that can be kind of a broader framework, their wish to look at health, security and innovation.

Andrew Wylegala: Two quick reactions on resources and timing. The first one is a question back to the group. Are we making enough headway on the argument about a true societal value calculation for the budget for these finite resources? And then second we go back to that point again about high not being so finite. If you are able to structure this right, that you create a growth dynamo for the second you actually grow society for some resources.

Event Attendee: Thank you.

Stephen Ezell: Let's take an online question briefly. Why should Americans shoulder the cost of higher drug prices to pay for innovations that everyone benefits from? How can the United States prevail on other countries who pay more too?

Joseph Damond: That is a great question. Well I think we're talking here about one way of doing it, which is Americans do, I think, maybe disproportionately support the global innovation that's happening in the world, but it has its positive impact too, which is we also have the most leading biopharmaceutical sector which develops most of the drugs in the world and including cures. And as you discussed today, Steven, Japan has fallen behind here, has fallen behind. So I think going around and, it's not necessarily technically wrong to call these other countries free riders of American innovation, but I don't think that's the way you persuade people here. Because I've tried.

I think it has to be, this is in your interest too and here's why. Because you want be part, this is going to be the quintessential, one of the quintessential technologies of the 21st century. And are you going to be a leader in that or are you going to let leadership continue where it is? And for American to build strength on strength, it's not necessarily a bad thing. I think the challenge really is that American marketing is frustrated with the situation and they recognize it. And if America begins to emulate some of the policies that other countries have put in place, it's really the last fashion innovation.

Stephen Ezell: [inaudible 01:09:27]?

Joseph Damond: Yeah.

Stephen Ezell: No I think from the ITF perspective, the broader really isn't about price controls isn't really one about whether society wants lower prices in exchange for lower drug comp profits. It's about whether society wants lower drug prices in exchange for less and slower drug innovation, that is [inaudible 01:09:46] prices today of less effective drugs or [inaudible 01:09:48]

We just only see that problem [inaudible 01:09:54] true point the whole economic biopharmaceutical innovation, the dynamic impact on our ability to bring new drugs forward in the future, which, when you look at the country that has tripled the square on the ability to manage long terms or prices over time. And in fact drug prices have decreased net on net as a share, what consumers pay over the past 20 years. To do that, to be the first country in the world to bring innovative drugs for their citizenry and supporting innovative industry, I think we should be seen as a place to be more pointed from than rather we are protecting our citizens.

Event Attendee: Now I have one final question.

Stephen Ezell: Please go ahead. We'll get two more questions and wrap up.

Event Attendee: Hi, I'm Hailey Huttecheson, the Japan Center for National Exchange. So we talked a little bit about Japan's response to the COVID 19 pandemic, whether or not it was creating innovations throughout the pandemic and Japan's hosting the the G seven this year. Some of the topics of global health are on the agenda primary [inaudible 01:11:08] also laid out some of these ideas for global health, in its comment in the Lancet a few months ago. But I just wanted to know kind of the panel's perspective on what might be your messages to the Japanese government and in the innovation space about encouraging the sort of innovation in regards to pandemic preparedness for what might be any sort of future pandemic. Yes. So that's my question.

Joseph Damond: Sorry. I'll say one. I think it's really important to focus on the solutions, which is kind of a cliche. But what I mean is that, there are a lot of countries including Japan I think that really and including our own that really started to think about whether they need to be sort of self-sufficient with a lot of medicines. And I can kind of see that point. But really what's important, and I think a lot of responsible parties said this, is to have a resilient supply chains and really need to resist the temptation to react to some of these challenges by [inaudible 01:12:35], or looking go and loan type policies and keeping the global supply chain open. That's actually the best, and also by the way, the most economical. I mean, if every country in the world develops its own vaccine factories has, that's one great way to increase the price of vaccines to everybody as opposed to having a couple of big producers who are doing it safely and under FDA supervision.

So I think finding solutions in a collaborative way, it's really going to be important. But when crisis hits and just you can see in the case COVID, you do start to think about oh my god, does this resonate with Japan and why don't we have our own vaccine and everything? And I'm not saying that you don't have to be prepared, but that the global solutions need to be collaborative.

The other thing that they did not really do very well, I think they tried, but it is to think about how to get medicines to developing countries, in English countries to try to do that [inaudible 01:13:50] things set up and again very slow cover some. And so it's really important to learn those lessons. I think to really think about what was done, learn those lessons and keep the global trading system open.

Stephen Ezell: And as we move from [inaudible 01:14:08] of the current pandemic to think about pandemic preparedness for the future. We would counsel an ITAF that is vitally important to recognize that far from being a barrier to access to medicines, intellectual properties, funding there in and that access to medicine depends on existence of medicines in the first place.

So we would encourage countries to oppose a waiver expansion of the COVID 19 [inaudible 01:14:34] vaccines waiver, to therapeutics and diagnostics. Recognizing that it [inaudible 01:14:38] IP was never a problem during the pandemic, it was only that initially we didn't have the know how knowledge of technology that is the intellectual properties to make novel vaccines and [inaudible 01:14:51], scale it and be better at getting callbacks. But really the IP became a critical dealer of the voluntary license agreements that enabled us to rapidly and scale manufacturing vaccines and diagnostics. So looking at pandemic preparedness side of account policy, see IP and protections our decision.

Another thing I think is important for Japan is, going to do with some TV station ask about the new 88 billion innovation fund, the university fund and what the US has done so well in its innovation system, especially in life sciences but more broadly is fund university research, hire investigators at universities, give universities rights to the intellectual property that stemmed from that federally funded R&D and then license it out to new companies. And so the impact of academic university technology transfer has led to 13,000 new companies over the past two decades. Hundreds of new drugs, hundreds of thousand patents. And course as well I'm talking about [inaudible 01:15:56].

So for Japanese policy makers, I think really to turn their universities into engines of innovation and to do so by creating pathways for commercialization of technologies and bring industry and university closely together, more positive than the pandemic. But I think that's one of the biggest things. Japan can chart, broader innovation ecosystem.

Andrew Wylegala: On the vaccine too. Isn't there a great example, Joe was mentioning that country level collaboration in the sector but intra-firm, that's a great chance to make the point for open innovation making [inaudible 01:16:33] the personnel vaccine came from and what kind of system about ecosystem allow it you're coming about.

Stephen Ezell: Well great. Any final questions from the audience? Any final remarks from our panel? All right, well with that I want to, A, thank our audience for being here in person and online today, and I want to ask you to help me thank this great panel for a discussion on Japan's life sciences today.

We'll have video of this event on our YouTube website and online by this afternoon. So please feel free to share up your colleagues, speak out your-