Japanese Diabetes Diagnostics Markets

A Report by Frost & Sullivan

Executive Summary

M a r k e t D y n a m i c s

Market Overview

The Japanese diabetes diagnostics market is the largest market in Asia Pacific. It has grown at a stable rate in 2005 and is expected to grow at a higher rate over the period 2005 to 2012. This is considered to be a high growth market with immense market potential. The increasing incidence of diabetes and the resulting higher volumes of diagnostic tests are bound to support this strong growth.

Around 83 percent of the Japanese diabetes population has actually been diagnosed with the disease, which is comparable to those seen in western countries. However, an affected population of 1.2 million remains undiagnosed, reflecting the future long-term potential of this market. By 2012, it is estimated that a higher percent of this patient pool would remain undiagnosed of diabetes. This shows the steep increase in the incidence of the disease with the simultaneous increase in the diagnosis rate.

The Japanese diabetes diagnostics market is in the mature stage characterized by lower profit margins, high number of market participants, decreasing prices, and high degree of competitiveness. The distribution structure is simple and more commonly direct. However, smaller manufacturers market their products through distributors who act as middlemen between the manufacturers and the customers.

Industry Challenges

The following are the challenges that are likely to be faced by industry participants in the
Japanese diabetes diagnostics markets over the period 2006-2012.

• Fixed fee schedules for all physicians and hospitals creating preferential imbalances
• The increasing ageing population creates a burden on the healthcare system
• Strict government regulations lead to a complex registration process
• Private hospitals managed as non-profit organizations
• Small pool of skilled labour

M a r k e t E n g i n e e r i n g M e a s u r e m e n t s

Market Stage

The Japanese diabetes diagnostics market on the whole is a mature market. The laboratory segment is even highly mature and is characterized by lower profit margins, high number of market participants, decreasing prices, and a high level of competitiveness. On the other hand, the point-of-care testing (POCT) segment features in the high growth stage of the market development process and is characterized by new product launches, higher profit margins, high growth rate, and increasing number of market entrants. This segment is clearly fragmented between nine vendors. Even the laboratory segment is fragmented, contradicting the nature of a mature market. A significant percent of the market revenues in the laboratory segment is generated by the regional companies, which collectively account for the fourth highest market share by any participant.

Market Revenues

Laboratory testing is the largest segment contributing to a major share of the total market. Laboratory testing has been the golden standard for diabetes testing worldwide for a long period and continues to remain the same. The high awareness levels among the Japanese population about the disease condition had led to more number of regular health check-ups. Also, the testing volumes of the non-diabetic patients undergoing diabetes diagnostic tests are high in Japan, as the entire population is covered for medical insurance. These factors have been the major contributors to market revenues in 2005.

Market Growth Rate

The Japanese diabetes diagnostic market has grown at a steady pace in 2005. It is expected to grow at a higher rate over the period 2006-2012.

The conventional laboratory testing market has witnessed a modest growth in 2005 and is expected to grow at a steady compound annual growth rate (CAGR) over the period 2005-2012. This segment is expected to grow at a conservative pace with the highest growth percentage in 2008 and the subsequent years witnessing a minor slip in growth rate.

Market Potential

The market potential of the Japanese diabetes diagnostics market in 2005 was estimated at $401.9 million and is forecast to grow at a higher pace during 2005-2012. The growing diabetes population and increased number of patients admitted in hospitals are contributing to this growth.

The more striking factor is that nearly 6 million (83.0 percent) of this patient population is diagnosed with diabetes with only around 1.2 million (17.0 percent) people remaining undiagnosed. These high levels of diabetes diagnosed population are comparable to those seen in western nations.

Customer Priorities

Price seems to be the emerging factor among Japanese laboratories in deciding between products of different manufacturers. The severe cost constraint of these labs has led to a low purchasing power, thus making it a deciding factor.

Japan possesses a sound technology infrastructure and end customers in the diabetes diagnostics market have ranked this factor as the second priority for the purchase of a product. Japanese health care centers are looking at developing their infrastructure further and are technology oriented. There is a growing awareness at least in the level II and III hospital laboratories that updated technological products could improve their productivity and efficiency. Hence, laboratory units are expected to rank technology as the second-most priority by 2012.

Customer Loyalty

Japanese laboratories operate under a stringent annual budget and soaring operating costs. The low renewal rates of annual service contracts (at only around 50.0 percent) have created unsatisfied levels of service among the laboratories. This has considerably impacted the manufacturer-customer relationship. All these factors have directly weakened the customer loyalty toward the manufacturer.

M a r k e t R e v e n u e F o r e c a s t s

Market Forecasts

The Japanese diabetes diagnostics market was worth $333.6 million in 2005 and is anticipated to grow at a moderate CAGR during the period 2005-2012. The diabetes population is anticipated to grow at moderate pace over the period 2005-2012. Increased awareness about the disease condition is driving the growth of this market. An ageing population, industrialized nation, and a robust healthcare system are factors that drive growth in the diabetes diagnostics market. This market is not much affected by changes in the economy, as all the healthcare expenses incurred by the Japanese people is covered by the national insurance system.

C o m p e t i t i v e S t r u c t u r e

The laboratory diabetes diagnostics segment presents a diversified market scenario with a low market concentration (percent of market controlled by top three vendors) in 2005. There were few prominent large companies which contributed almost 50.0 percent of the total diabetes diagnostics market. The other local participants contributed to a high 10 percent of the market revenues, as they had the advantage of low costs.

Similar to the laboratory segment, the POCT segment also offers a diversified market scenario. Very true to the nature of a growing market, the market has not consolidated, with just few companies commanding a high market share.