Turkish Drug Sector Heads toward the World Market

The fact that the drug sector of Turkey entered among the numerous drug markets having reached a size of 10.9 billion YTL in 2007, was quite appetizing for the foreigners. 15 of the biggest 20 drug firms in Turkey were obtained by foreigners. It is expected that Turkey climbs up to rank 10th in the list of 2010 world drug consumption. Turkey, which was included among numerous drug markets of the world, became the favorite of the foreign firms upon development of the health services. International companies suggest that Turkey will be the biggest but 10th drug market of the world within the 3 years ahead. Foreign companies increase their shares in the Turkish market, and domestic firms try to be active in a wide geography from countries of the region to the Europe and American markets. Turkish drug on prescription market reached 1.2 billion pcs. of sale and 9.5 billion YTL of turnover figures in 2006. However, in 2007, Turkish drug market which grew by 12 percent with the sale of 1.3 billion boxes of drugs, closed the year with a turnover of 10.9 billion YTL. According to the data of Drug Industry Employers Union (İEİS), the sector grew by 8 percent on box basis and 14.5 percent on amount basis in 2007. According to the IMS Global Drug Market and Therapy Forecast disclosed in November 2007, the developing drug markets which include Turkey will grow by 12-13 percent in 2008. The reason why the market estimations point at growth is shown as increased access to drugs as a result of developed health services. Another important reason for the drug producers to turn to Turkey is that drug consumption per capita is low. It is indicated that annual drug consumption per capita is 500 dollars in Europe and 900 in the USA, in contrast to Turkey, which is 100 dollars. It is expected that Turkey will climb up to rank 10th in the list of 2010 world drug consumption. The biggest expectation of the generic and innovative drug representatives pursuing activities in Turkey is continuous reforms in 2008 and accelerating the processes of registration. Besides, instead of measures with a price focus, use of equivalent drugs is encouraged to contribute to development of the sector and savings in the public. Erosion of the Prices Reduced Growth The fact that the drug sector of Turkey entered among the numerous drug markets having reached a size of 10.9 billion YTL in 2007, is not only quite appetizing for the foreigners but also forces the local players to strengthen their hands. Foreign investors who increased their weight in the sector within the last few years showed their belief in the market by buying 75 percent of Eczacıbaşı Medicine. It was a marking development of 2007 that Zentiva, the market leader of Czech Republic, Slovakia and Romania, bought the shares of Eczacıbaşı İlaç Sanayi to enter Turkey. The performance of the sector in the first 10 months of 2007 points the rightfulness of expectations. The share of equivalent drugs also shows a rise in a market growing 9.4 percent on box basis and 18.8 percent on amount basis compared to the same period of the last year. The market share of the equivalent drugs was 50.7 percent on box basis and 32.8 percent on amount basis in 2006. In the first 10 months of 2007, equivalent drug market share rose by 1.2 percent on box basis to reach 51 percent. IEIS Secretary General Turgut Tokgöz shows the price erosion in the market as the reason why the same growth was not experienced on amount basis. Drug prices that increased 15 percent in the second half of 2006 showed a fast fall in June 2007. Periodic Euro value was renounced within the framework of the "Price Decree" which was published in June 2007 and the "Price Communiqué" published in September 2007. This caused falls up to 7.12 percent in the prices as from November 16th Drug Export Increased by 15 Percent The market growth also reflected on the export rates. In the first 10 months of 2007, export reached 292 million dollars with an increase of 18 percent compared to the same period of the previous year. Export, which was 311 million dollars with a growth of 10 percent in 2006, reached 360 million dollars with a growth of approximately 15 percent in late 2007. The biggest reason for this is that last year foreigners entered the Turkish market as domestic companies made their decision in favor of foreign countries. Abdi İbrahim and Bilim İlaç increased their power in the Middle East and in markets of the region, while Mustafa Nevzat entered the biggest medicine market of the world, the USA. The company which made necessary applications last year to have its drugs approved, shipped for the first time in 2007. Import reached 2.8 billion dollars in the first 10 months with a growth of 14 percent, and ascended up to 3.4 billion dollars at the end of the year. In 2006, drug export amounting to 3 billion dollars was done. Concession for Equivalent Instead of Price Discount Not only the developments in the sector are quite appetizing for the foreigners but also they force the local players to strengthen their hands. The common expectation of the sector players is a bit more care about arrangements on the market. Turgut Tokgöz said "Measures of saving in our country to reduce the cost on implementations facilitating access to drugs focuses merely on drug prices" and recommends "Implementation of policies encouraging equivalent drugs instead of price-focused measures would not only contribute to the development of our industry, but also cause more savings in the public expenses". Tokgöz, who points at the fact that the entire world strives to encourage consumption of equivalent drugs, goes on: "Europe encourages use of equivalent drugs for the last 10 years for the purpose of ensuring savings in extra-patent product market to reserve some revenues to new medicine and treatments. Thanks to the use of equivalent drugs, it is calculated that 20 billion euros of savings are earned every year in the EU. In the USA, equivalent drugs are preferred 90 percent. This rate is 70 percent in Denmark, Holland, Britain and Germany. As to our country, the ratio is 52 percent, and its elevation with various concession policies is very important particularly in that it contributes to the sustainability of our health system.” As Tokgöz mentioned, in order to increase the use of equivalent drugs accounting only for the half of the market, it is expected that first the registration process of the equivalent drugs should be accelerated and then their timely entry to the reimbursement lists should be ensured. Tokgöz expressed another expectation in the sector by saying "Various restrictions imposed on the prescribing rules within the scope of arrangements setting forth the reimbursement system adversely affect the health service provided by the public. The arrangements for savings in the reimbursement system should be planned rationally and realistically." Reforms Must Go On Secretary General of Researcher Medicine Firms Association Engin Güner stated that the market advances positively in general. Güner, who told the data protection and reference price implementations that took effect in 2005 strengthened Turkey in the international arena, pointed at the fact that access to medicine showed an increase after having opened the gate of free pharmacists to SSK members and green card holders. Güner noted that all such steps made the international medicine sector get interested in Turkey and added "Not only researcher medicine firms, but also some generic drug producers used their excess capacities to increase their export. Turkey needs to sustain her speed in the medicine sector in 2008 too. This can be made by continuing reforms in the field of health and medicine, and making international standards dominant in our sector." Güner also indicated that as in all sectors, focusing on innovation in the medicine sector, encouraging of R&D, adoption of transparency in decision and implementations, and implementation of stable policies are necessary and said Turkey is powerful enough to attract 700 million dollars of R&D investment a year. 15 Medicine Firms Involved in Foreign Capital The foreign capital wave in the drug sector starting with sale of Ilsan Iltas to German Hexal and Ibrahim Ethem to Italian Menarini went on with Eczacıbaşı in 2007. With that last development, 15 of the biggest 20 drug companies in Turkey became a part of foreign capital. The most important leap of the foreign capital in the Turkish market was the sale of Fako medicine to Actavis group against 63 million dollars in 2003. In 2006, Actavis obtained the remaining 11 percent share of Fako against 20.4 million dollars. Besides, Ilsan-Hexal was launched as Sandoz İlaç in Turkey upon Novartis buying German Hexal AG drug company in 2005. Thus, Sandoz, which produced generic drugs under Novartis in 2006, turned back to Turkey after an interval of 10 years. Furthermore, Roche, which quitted production in 2006, turned its route to R&D. Although they do not plan to open a center in Turkey currently, Roche will focus more on clinic research activities with Turkish hospitals. Such approach by Roche puts light on the Turkish projects of foreign companies. Foreign drug companies which generally remain off the production stage except for Sandoz, prefer pursuing clinic researches in Turkey. The companies awaiting the completion of the scientific substructure in both the regulations and the universities and hospitals plan to turn Turkey into an R&D center in the future. Mustafa Nevzat General Manager Levent Selamoğlu said: We sent 1 million boxes of medicine to the USA in 2007. Mustafa Nevzat İlaç, which closed 2007 with a turnover of approximately 130 million dollars, shall continue growth in 2009 through export. The target of the company which entered the USA after Germany, Afghanistan, Albania, Azerbaijan, Bosnia Herzegovina, Algeria, Czech Republic, Georgia, Kazakhstan, Northern Cyprus Turkish Republic, Kosovo, Macedonia, Malesia, Malta, Nigeria, Uzbekistan, Russia, Saudi Arabia, Venezuela and Vietnam is to export merely to America at an amount of 300 million dollars in 2010. Mustafa Nevzat General Manager Levent Selamoğlu told they sent 1 million boxes of medicine to the USA in 2007, indicated that currently they achieved 15 percent of their turnover from export. Selamoğlu expressed they made an investment amounting to 90 million dollars in the field of production since 2000, and said they will start production for domestic and foreign markets upon completion of the new plants this year. MSD Foreign Relations Director Jeff Kemprecos said: We will weight R&D in Turkey. Merck Sharp&Dohme (MSD) spending 4.5 billion dollars on R&D throughout the world gets prepared to increase its activities in Turkey. "We target at increasing our research activities and capacity in Turkey. The key to the prospective investment in Turkey of MSD is closely related to the speed of reforms and policies that develop the investment atmosphere for innovative products", and added 2008 would be a critical year in terms of actions. Kemprecos told they had been talking to the government as researcher firms for two years, and said they waited launching of reforms such as shortening of registration process. Kemprecos stated they expected a growth of 10-20 percent in Turkey in the field of innovative medicine, and indicated that they reinforced their product range as a company in 2007.