Transforming the Turkish pharma market



Rajesh Chhabara reports on how Turkeys future pharma growth depends on reform and European Union membership

With a population of 73 million, Turkey accounts for 40% of the Middle Eastern pharmaceutical market.

In 2009, the total audited pharmaceutical market for Turkey grew by 15.7% to reach $10.3 billion, according to figures from IMS Health, a leading provider of market intelligence to the pharmaceutical and healthcare industries.

IMS Health estimates that Turkey will be the worlds fifteenth largest pharma market in 2013, down from its rank of thirteenth in 2008.

A report by consulting firm Deloitte this year placed Turkey in twelfth place on a list of the top fifteen pharma markets in the world.

Over the past five years, the Turkish pharmaceutical market has experienced very mixed growth, with a peak in 2005 of 54%, followed by the lowest level in the period, 5% in 2006, says David Campbell, senior principal at IMS Health.

Potential for growth

Per capita pharmaceutical consumption in Turkey is relatively low, so there is huge potential for growth.

Last year, per capita pharma consumption was $132, well below European countries such as the UK ($322), Italy ($429), Spain ($503), Greece ($560), and France ($651), according to figures from IMS Health.

Turkey will become an important part of the pharma market, especially after 2015 when it is expected to join the European Union, according to Dipta Chaudhury, South Asia and Middle East program manager for the pharma and biotech practice at Frost & Sullivan.

EU membership is by no means guaranteed, however, and in any case will depend on a continuing process of regulation and reform.

The Turkish market is currently dominated by generics, since the country does not offer much protection for intellectual property as required under the Trade Related Aspects of Intellectual Property Rights (TRIPS).

Turkey will have to implement all TRIPS provisions as part of the larger regulatory reform necessary to become part of the EU.

Lack of regulation

Currently, generics account for almost 75% of locally produced drugs, according to statistics from the Pharmaceutical Manufacturers Association of Turkey (IEIS).

Last year, 21.7% of the total reference and generics units sold came from local manufacturers, up from 11.6% in 2003.

However, in terms of value, the share of local reference-generics was 51.9%.

Overall, generics account for a third of the market in value terms and half in terms of volume.

In terms of therapeutic class, antibiotics were the largest selling category in 2009, with a share of 15.1%, followed by cardiovasculars (12.5%), anti-rheumatics (8.2%), nervous systemics and oncologics (both 7.6%).

Patent reforms will help multinational companies introduce innovative new drugs in these categories.

The government has already introduced a number of regulationsincluding best practices in the manufacturing, laboratory, and clinical sectors, drug research and medicinal product registration, data exclusivity, and packaging and labellingto bring the Turkish regulatory regime in line with the EU.

But the quality of enforcement remains an issue.

The EU, for example, has declared GMP certificates issued by the Turkish Ministry of Health invalid.

Turkey has reacted by imposing inspection requirements on EU pharma imports, thus making the regulatory landscape even more complex.

Turkeys lack of regulation also makes copyright piracy and trademark counterfeiting major concerns for multinational drug companies.

Early market movers

Should Turkey join the EU, however, a new phase of growth is expected.

Turkey will become an important market for European nations looking to source cheaper drugs, Chuadhury says.

Sourcing from Turkey could significantly reduce transportation costs for European countries compared with India, for example.

And Turkey already has a foundation for further expanding exports.

Last year, the country exported $474 million worth of drugsmainly penicillin, antibiotics, and alkaloidsto over 140 countries, including the US, the UK, Germany, and Switzerland, according to the Export Promotion Center of Turkey.

Chaudhury suggests that multinational companies should establish their own offices in Turkey, even though it may be some time before they start selling patented or new products.

Pharmas should start reviewing strategy and keep themselves ready to be part of the boom when it happens, she suggests.

Joint ventures are the best wayas well as the least riskyto get to know a new market.

Firms can also consider acquisitions or set up their own plants, both of which Chaudhury considers riskier options.

Experience points to clear advantages for the early movers, IMS Healths Campbell adds.

Companies that take the lead in market entry can often reap the benefits of more discernible differentiation and earlier local entrenchment compared to those that choose to wait.

Some of the leading multinationals with subsidiaries in Turkey include Bayer, GlaxoSmithKline, Aventis Pharmaceuticals, Pfizer, Roche, Sanofi, Novartis, and Baxter.

Top local manufacturers include EIS Eczac?ba??, Abdi ?brahim, Mustafa Nevzat, ?brahim Ethem, Bilim, Fako, and ?lsan ?lta?.

The government as decision maker and payer

But companies need to be aware of Turkeys complex regulatory regime for the pharmaceutical industry.

The Ministry of Health exercises significant control over the industry through pricing and product licensing mechanisms.

According to Campbell, Turkey currently has the lowest European reference pricing, thanks to governments tight controls.

More significantly, state-owned institutions restrict medical sales representatives access to physicians.

The industry has to rely on indirect marketing approaches, such as conferences, donations, and trade promotions because laws also restrict medical advertisements.

The government is also the largest buyer of drugs, through public hospitals and social security institutions; an estimated 70% to 80% of the population has government-sponsored health insurance.

As a result, the government is the biggest decision maker and payer, wielding control over 75% to 85% of the market, Campbell says.

Government reforms since 2005 have brought various social security organizations under one roof, with the aim of using the same hospitals for all members.

However, cost containment measures are likely to lead to further pressure on prices.

As a result, IMS Health estimates that maintaining profitability will be a key challenge for pharmaceutical firms.

Growth is even predicted to turn negative this year due to price cuts; pharma firms may resort to cost cutting to protect the bottom line.

Wanted: investment in R&D

Lack of investment in R&D is another weak point for Turkeys pharma industry. Turkey spent only $38 million on pharma R&D last year, according to the Deloitte report, compared with a total of $100 billion worldwide.

The report finds that investing in R&D would not only reduce Turkeys dependence on imports for innovative drugs but would also turn the country into a net exporter.

Understanding and embracing the complexity of the Turkish market is essential.

According to Campbell, Choosing the right portfolio to align with the high-growth opportunities and local customer needs; building the right sales and distribution model; setting the right pricing and market access strategies; and establishing the right people and leadership to ensure successful execution on the ground are the key elements to success in this market.

Check out other articles in eyeforpharmas pharmerging markets series:

For more on the Middle East, see The Middle East: A pharma market in the making.

For more on Russia, see Reassessing Russia's pharma market.

For more on Brazil, see Breaking into the Brazilian pharma market.

For more on China, see Cracking the Chinese pharma market.

For more on the pharmerging markets as a whole, see How to get ahead in 'pharmerging' markets.