When a prospective partner in Japan tells you “we hold a license for pharmaceuticals”, which license do they mean? Under Japan’s Pharmaceuticals and Medical Devices Act (薬機法), two entirely different systems are referred to by the same everyday phrase. Mistaking one for the other is a common way for a deal to reach the contract stage before its premise collapses.
Responsibility for placing a product on the market, and permission to distribute it
A marketing authorization (製造販売業許可, Article 12) makes the holder the party responsible for placing that medicine on the Japanese market. The holder carries final responsibility for quality, efficacy and safety, and decides on a recall if one becomes necessary. It is also the entity that files the application for each product’s approval.
The Japanese term contains the word “manufacturing”, which leads many to read it as a factory license. It is not. No manufacturing facility is required. What the holder carries is not production but accountability. The standard English rendering is marketing authorization holder, usually abbreviated MAH.
A distribution license (販売業許可, Article 24) permits the holder to distribute finished medicines. It governs the act of supplying them, not responsibility for the product’s presence on the market.
These are separate licenses. Holding one does not permit the activity governed by the other.
Distribution licenses divide again, into three
Article 25 divides the distribution license into three categories. Which one a company holds determines who it is permitted to sell to.
| Category | Permitted customers |
|---|---|
| Store-based retail sale 店舗販売業 | General consumers (guidance-required and OTC drugs) |
| Household placement sale 配置販売業 | Medicines left with households, settled after use |
| Wholesale distribution 卸売販売業 | Pharmacies, hospitals and clinics, marketing authorization holders, other licensed distributors |
The point most often misunderstood in practice is that a wholesale distributor cannot sell to general consumers. The permitted customers are fixed by Article 138 of the Enforcement Regulations and are limited to businesses and medical institutions. Selling to consumers online and supplying pharmacies and hospitals are both “selling medicines”, but they require different licenses.
The reverse also holds. A store-based retail license alone does not permit wholesale supply to pharmacies or hospitals.
The scope of products covered also differs by license
Every license certificate states its scope of products covered (取扱品目). This is easily overlooked.
- Prescription drugs (医療用医薬品) — dispensed against a physician’s prescription
- Guidance-required drugs (要指導医薬品) — require face-to-face information from a pharmacist
- OTC drugs (一般用医薬品) — over-the-counter, Classes 1 to 3
Being told that a partner “holds a pharmaceutical license” tells you nothing about which of these they may handle. A license limited to OTC drugs and one extending to prescription drugs permit entirely different ranges of products. If your product is intended for medical institutions, this cannot be left unconfirmed.
What this means for an overseas company
To place an overseas medicine into Japanese distribution, both are normally required: a party that takes responsibility for the product on the market (the MAH) and a party that distributes it. And the same company does not necessarily hold both.
Companies holding marketing authorizations are largely pharmaceutical manufacturers. Even where they have distribution networks, they are cautious about assuming market responsibility for an unfamiliar overseas brand. Conversely, companies with practical wholesale operations do not often hold a marketing authorization as well. The result is that two Japanese counterparties may be needed rather than one.
There is a further constraint: an overseas corporation cannot obtain a marketing authorization in its own name. That subject is covered separately.
What to establish first
- Whether the product is classified as a drug in Japan (if not, a different regime applies)
- If it is, who will act as the marketing authorization holder
- Which distribution license your counterparty holds, and what scope of products it covers
- Whether your intended customers — consumers, pharmacies, medical institutions — fall inside that scope
These four points are premises to settle before any discussion of price or volume. Taken in the reverse order, terms get agreed and only then does it emerge that the intended route to market is not permitted.
INCAPE holds a wholesale distribution license for pharmaceuticals (Osaka Prefecture, No. B14657; scope: all prescription drugs, guidance-required drugs and OTC drugs). We advise on product classification and on the combination of licenses a given product requires.
