Japan's Fujifilm Holdings said on Thursday it is close to reaching an agreement to form a joint venture with Dr Reddy's Laboratories Ltd of India to develop generic drugs for the Japanese market.

A spokesman for Fujifilm Holdings did not provide further details on the planned alliance.

Facing ballooning medical costs from an ageing population, Japan's government has said it wants generic drugs to make up 30 percent of the overall drug market by March 2013, prompting overseas firms to set their sights on the Japanese market.

The Nikkei business daily reported earlier on Thursday that the new joint venture would be owned 51 per cent by a unit of Fujifilm Holdings and 49 per cent by Dr Reddy's.

The venture will manufacture drugs in India and test them for quality in Japan, the paper said, adding that it will aim to launch drugs on the Japanese market, the world's second-largest after the United States, in 2014.

Other foreign drugmakers, including US-based Pfizer and France's Sanofi-Aventis, have also made inroads in Japan's generic drugs market, which accounted for 23 per cent of its overall drug market for the year that ended in March.

In May, the world's largest maker of generic drugs, Teva Pharmaceutical Industries, announced a $460 million deal to acquire a 57 per cent stake in Japanese generics maker Taiyo Pharmaceutical.

Fujifilm has been expanding into the medical and pharmaceutical industries as demand for its mainstay photo film paper business weakens amid increasing use of digital cameras.

The generic drugs joint venture comes after the Tokyo-based company agreed to buy Merck & Co's BioManufacturing Network back in February.

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