Japan’s Sawai is steering the country’s second-biggest maker of generic drugs through its first overseas acquisition in its 88-year history: the generic drug business of Minnesota-based Upsher-Smith Laboratories Inc

The $1 billion purchase should be completed within next month, providing a new boost for the Japanese firm,

While Sawai expands in the U.S., it also faces competition from Indian and Chinese makers of generic medicines as well as political pressure on the drug industry to lower prices. The Osaka-based drugmaker is counting on Japan’s reputation for high-quality therapies coupled with Upsher-Smith’s local expertise to navigate the world’s largest pharmaceutical market.
“Upsher-Smith has a very good eye on selecting products and pricing them to a level which can bring sufficient profit to the company,’’ President Mitsuo Sawai said in an interview in Tokyo last week. “We have manufacturing technology that enables us to bring down cost and want to combine it.’’

The move of the Osaka-bases company is following few aspects of the Japanese as well as American market:

• Japan has in recent years sought to encourage the use of generics to lower health-care costs
• Drugmakers are experiencing a shrinking population as well as pressure to lower prices.
• The Japanese government plans to cut prices of drugs annually from next April, instead of biennially.
• Sawai, acquiring Upsher-Smith, will expand its business in U.S. at the right time, with generic drug been approved faster. Furthermore about eight in every 10 prescriptions filled in the U.S. are for generics.
• the Upsher-Smith has factories in U.S following the wish of Donald Trump “Observing from outside, I feel that having manufacturing sites in the U.S. may turn out to be a plus in the end,’’ said Sawai.

Sawai’s strategy is to target niche therapies where it doesn’t face direct competition from bigger makers of generic medicines like Teva Pharmaceutical Industries Ltd. or Mylan NV and it will try to introduce in the U.S. market one drug of its portfolio each year.

The non generic area of Upsher-Smith will be still run and owned by the family that currently controls the U.S. drugmaker.

Source: Bloomberg