Report from Turkey

The government of Turkey is drawing up a program in coordination with the pharmaceutical industry to create ways to make the country a regional production center for pharmaceuticals serving Europe, Central Asia, and the Middle East.

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Turkey's two main pharmaceutical trade associations—Pharmaceutical Manufacturers' Association of Turkey (IEIS) and the Association of Research Based Pharmaceutical Companies (AIFD)—have been supporting the government's initiative with the publication of reports on the future of the Turkish drugs industry by two leading US-based consultants. AIFD published a report, Vision 2023, by PriceWaterhouseCoopers (PwC) in September 2012 and IEIS issued a study by the Boston Consulting Group (BCG) late last year (1, 2).

Turkey, one of the world's fastest growing emerging economies, faces considerable challenges in achieving its aim of becoming a major global power in pharmaceuticals. Within its own market, it will have to triple the average annual growth rate and raise the annual increase of domestic production sales 12-fold, while exports will have to increase almost six times, according to PwC.

There also needs to be a big improvement in relations between the industry and government, particularly with research-based companies, most of them multinational players. Companies have been critical of the power wielded over the sector by the Turkish Ministry of Health, which accounts for more than three quarters of drug purchases.

Earlier this year, AIFD accused the government of not doing enough to encourage investment and being too focused on cutting drug prices. Now, as the government works on an action plan for the sector, ties between the two sides have become closer. Kadir Tepebasi, AIFD vice chairman, said in July at the BIO International Convention in Boston, "We are very happy and excited" that the government and the research-driven segment had the same long-term targets and approaches.

Nihat Ergun, the minister of science, industry, and technology whose department is responsible for the development of the pharmaceuticals sector, has revealed that the strategy document due to be finalized by the end of this year will highlight R&D assistance, investment in human resources, and more backing for drugs exports.

The PwC and BCG reports propose that the industry can reach ambitious targets by 2023—if the appropriate steps are taken. A substantial increase in domestic and foreign investment in the sector is required, especially in production capacity for high value-added medicines, according to PwC. BCG stresses the importance of the development of production and R&D clusters.

Over the next 10 years, the objective of more than doubling pharmaceutical production to $23 billion, raising exports from approximately $520 million last year to approximately $7 billion, turning a current trade deficit of more than 80% into a net surplus, and increasing R&D investment from around $100 million to $1.7 million "is not just a dream," says Guldem Berkham, AIFD president.

Both the industry and the government believe that the country has several advantages that provide a platform for the rapid growth of the pharmaceutical sector. The country's domestic-drugs market has more than doubled over the past 10 years, while with a population of 75 million, its per capita medicines consumption is still relatively low. Over the past decade, visits to primary care facilities have more than tripled and to hospitals more than doubled, according to BCG.

Turkey has a strong infrastructure for medicines manufacture with around 300 pharmaceutical producers, making it the seventh largest pharmaceutical industry in Europe and 16^th in the world. The country has well-established universities providing a basis for R&D activities.

Above all, Turkey is strategically located at the crossroads between Europe and Asia. It has the logistical connections to supply Europe, which has annual pharmaceutical imports of $264 billion; Russia with imports of $11 billion; Central Asia and the Caucasus with $2 billion; and the Middle East and North Africa with $14 billion.

To realize the potential of these benefits by attracting large amounts of investment, the industry argues that the government must first introduce a more sustainable drugs-pricing policy. Currently, Turkey's medicines prices are among the lowest in the world.

The country has had some recent investment successes. These include Amgen's $700-million takeover of Mustafa Nevzat Pharmaceuticals, a Turkish generics producer; the formation of a partnership between Otsuka of Japan and Abdi Ibrahim of Turkey; and a decision by Zentiva, a Czech subsidiary of Sanofi, to make Turkey a production base for generic drugs.

A survey earlier this year by AIFD, however, found that price cuts by the government have been holding back investment. More than half of 23 research-based pharmaceutical companies said they had had to cancel investments because of government measures, mainly on prices.

Another problem has been a decision by the government not to recognise GMP certificates from the EU and the US. Instead, foreign production facilities have to be inspected first by Turkish officials before Turkish marketing licences for medicines can be granted.

An AIFD survey in April 2012 found that approvals of almost 300 medicines of foreign research-based companies were being delayed because of the lengthy time it was taking to gain GMP certification. "The GMP issue has to be sorted out through mutual recognition agreements with the EU and US," says an IEIS official.

Another drawback for Turkey is a poor reputation for IP protection in which it is rated 70^th in the world. In some key areas, the country has a lot of ground to make up before its pharmaceutical manufacturing industry can attain a top global ranking.

References

1. PwC and AIFD, Turkey's Pharmaceutical Sector—Vision 2023 Report, Strategy Document (Sept. 2012).

2. Boston Consulting Group, Partnering with the Government to Globalize the Turkish Pharmaceutical Industry (Nov. 2011).

—Sean Milmo is a freelance writer based in Essex, UK