In the first fifteen years of the 21st century Turkey saw rapid economic growth, greater access to healthcare, and a boom in pharmaceutical sales. The country’s healthcare sector is now entering a new era of greater govt support for the pharmaceutical industry, more focus on R&D and the potential for massive growth in both public and private healthcare infrastructure.

The 21st century has brought much change to Turkey. GDP tripled from under USD 267 billion in 2000 to over USD 822 billion in 2013. Massive infrastructure projects created over 13,000 km of roads, 24 new airports, 88 new universities, and 650 hospitals.

For the healthcare and pharmaceutical industry, this period was defined by the Healthcare Transformation Program (HTP), which saw the complete overhaul and expansion of the Turkish Healthcare system between 2003 and 2013, with three separate social security agencies combined into a unified social security institution (SGK). During the same period the private sector was expanded and brought into the national reimbursement system, and more than 98 percent of Turkey’s population were brought under national insurance coverage.

This transformation caused pharmaceutical sales volumes to skyrocket at a 9.6 percent CAGR between 2003 and 2013, according to the Turkish Drug and Medical Devices Agency (TITCK). The reimbursement rate increased to more than 95 percent, and patient access to health care services and general healthcare awareness improved each year.

Of course, achieving this status quo came at a price, and after seeing healthcare expenditure begin to rise rapidly in the late 2000s, the government offered aggressive public discounts in 2009 and 2011 to contain spending. As such, pharmaceutical expenditure grew by just three percent in real terms over the same period.

“The healthcare system in Turkey…is now being used as a model for many developing countries.”

Recep Akdağ – Former Minister of Health

Having reached the end of this transformational era, what will be the trends, dynamics, and initiatives that drive change in the Turkish pharmaceutical industry in the coming years?

“At the time we took office in 2002, Turkey was not in a good position with regards to the economy, various social issues, and of course the state of the public health system,” explains the former minister of health Recep Akdağ, who led the transformation program.

“The entire country was waiting and hoping for change, and the expectations for this change to happen were very high. This was both an advantage and disadvantage for us; we were able to gain strong political commitment and public support which were essential for reforms of the magnitude that were required… We were able to achieve real progress through our efforts, and together the changes that were made transformed the health care system in Turkey to the extent that it is now being used as a model for many developing countries.”

Since the transformation program’s reforms ended in 2013, and with it Akdağ’s ten-year mandate as minister of health, the driving force for change and progress in the sector faded away. The need for a new vision for the sector arose, as well as the opportunity for the industry associations to play a role in developing the government’s new strategic plans, particularly in the pharmaceutical industry.

Murat Barlas, chairman of Liba Laboratories and the senior board member of the Pharmaceutical Manufacturers Association of Turkey (IEIS), explains that “the current plan for the pharma sector until 2023 was prepared by the industry and delivered to the government.”

This plan was published by the association in November 2011, in a report entitled ‘Partnering with the Government to Globalize the Turkish Pharmaceutical Industry,’ while the AIFD published a similar strategy document in 2012 titled ‘Turkey’s Pharmaceutical Sector Vision 2023 Report’, and the two garnered enough attention that several items from their action plan surfaced in the government’s own plans, including the national Tenth Development Plan.

“Going forward, we will be prioritizing R&D initiatives, including health studies and medical innovation,” details Akdağ’s successor, Minister of Health Mehmet Müezzinoğlu. “It is for this purpose that we founded the ‘Department of Health Institutions of Turkey’, which will follow developments in medicine closely.

The Ministry of Health is encouraging the production of medical devices and medications in Turkey, and we will be supporting the development of vaccines, biosimilars, and other high value-added medicines in Turkey.” Article 1.16 of the Tenth Development Plan outlines a ‘structural transformation program within the health industry,’ and includes the target for 60 percent of pharmaceutical products and 20 percent of medical devices consumed in Turkey to be produced domestically by 2018.

Other targets for the healthcare and pharmaceutical industries have been set under the auspices of President Recep Tayyip Erdoğan’s ‘2023 Vision’, a set of goals for the country to achieve by the 100th anniversary of the Republic of Turkey’s foundation in 1923, which include aggressive targets for increasing exports and improving competitiveness for R&D investment.

While much progress is being made, questions remain regarding the feasibility of achieving these goals, and the effectiveness of the initiatives that have been introduced thus far. “The vision that the government has for the pharma sector will be achievable only if it changes its perspective on the industry as it stands,” argues Barlas.

He explains that “today, for our government, the most important issue is the cost of healthcare and pharmaceuticals… if this perspective shifts and we are able to communicate our needs better to the government, then achieving this vision may yet be attainable.” Yet, much progress is being made across the industry with numerous biosimilar development projects underway, and other investments in higher-value manufacturing activities taking place. In fact, while “some existing policies are still contradictory to this 2023 vision,” Pfizer country manager Elif Aral alleges that “the government has made it clear that they will support the industry moving forward, and not continue to treat it as a cost that must be contained.”

In terms of Turkish Lira, pharmaceutical spending returned to above inflation growth in 2014, rising 10.1 percent to TRY 16.3 billion (USD 7.45 billion) in 2014, after actually falling 4.1 percent in 2012, according to IMS and TurkStat. However, local manufacturers are quick to point out that this growth is not distributed evenly across the industry.

Cengiz Celayir, president of the Pharmaceutical Industry Association of Turkey (TISD), points out that “original imported products makeup only three percent of the market by volume, but have a market share of 27 percent in terms of value, and this is the segment that is seeing some revenue growth at present.” As such, Santa Farma chairman Erol Kiresepi believes “the future of local producers will lie in specialty products, OTC, and exports, in all of which we are building up our capabilities.”

“The pricing situation is now a fact of life,” says Cem Baydar, senior principal consultant for IMS in the Turkey and Near East region. Reference prices in Turkey are constructed from the lowest price in France, Greece, Italy, Spain or Portugal, converted to Turkish Lira at a rate of TRY 1.9595 per EUR, and then the public payer, the SGK, pays a discounted price, which was set with the industry’s consensus in 2009 at 11 percent. In December 2009 the government arbitrarily raised the discount rate to 23 percent, then to 31.5 percent in December 2010, and again to 41 percent in November 2011; the exchange rate was not changed at all until June 2015, when it was raised by 2.07 percent to TRY 2.00 per EUR, and in July it was increased by another 3.9 percent to TRY 2.0787 per EUR. As a result, Turkish pharmaceutical prices are now at approximately 38 percent of the lowest prices in Europe, save in a few special circumstances where alternative pricing arrangements are in place.

Ümit Yaldiz, head of Greater Turkey for Merck Millipore, argues that “with the change in the pricing model… companies were forced to restructure their businesses and overhaul their operating models; as such, the industry has become much more efficient, and much more competitive in the global arena, and from this perspective cutting prices was the right move and the policies have had a positive impact.” Cem Baydar of IMS explains that “companies had to adapt and implemented change management programs that are now mostly completed,” detailing how the top ten companies have reduced their sales forces by 44 percent over the last five years.

On the topic of spending growth, Baydar says that “the market has changed and is going in a new direction… specialty care is on the rise… and the hospital channel is outpacing the retail channel; sales in the hospital channel increased by 20% last year, while retail only increased by 8%,” and will continue to grow with the “growth of private hospital chains and the opening of new public hospitals.”

“By 2020, the [Turkish healthcare] sector’s revenue will double to USD 20 billion.”

Cevat Sengül – Secretary General, Association of Private Hospitals and Health Institutions (OHSAD)

The healthcare system itself is growing rapidly, including the private hospital sector, which is tied closely to the public system. “70 percent of patients in private hospitals are referred from the public system and are covered [at least partially] by social security,” explains Cevat Sengül, secretary general of the Association of Private Hospitals and Health Institutions (OHSAD). “18.9 percent of Turkish hospital beds and 23.8 percent of specialist physicians are in private institutions,” according to Sengül, yet private hospitals “have 38.3 percent of the ICU beds and perform 53 percent of class A1 surgeries, the most complex category of procedures.” Furthermore, the private sector is expected to grow significantly: Sengül expects “that by 2020, the sector’s revenue will double to USD 20 billion.”

For the pharmaceutical industry, this means that the private hospital system represents a large and fast-growing market. Ufuk Kumrulu, chairman of IV solutions manufacturer Polifarma, explains that “the private healthcare sector has been growing strongly since the early 2000s, and Polifarma identified this trend early on, so we have sold and marketed to private hospitals for many years now.” According to Kumrulu, “today 30 percent of the total [parenteral solution] product consumption is in the private system, and we think the private sector’s share of the market will continue to grow over the next several years.”

The public sector also continues to grow, with new hospitals being opened across the country and occupancy rates rising. “In public hospitals, the system is based on tenders,” explains Kumrulu, and this tender process began to change in the last year, “as in all cities’ hospital management systems, purchasing, and stock management have been consolidated underneath a single institution, which has raised the size of tenders and depressed prices.”

While it is critical that Turkey invests in expanding its healthcare system to ensure that infrastructure is able to support the growing demand for healthcare services as Turkey’s population ages, the country must also invest in physicians to get the best value out of those investments.

“The current defining circumstance in Turkey is that we have a limited number of human resources in healthcare, and have the lowest number of doctors per capita in Europe,” explains former Minister of Health Akdağ. UCB’s managing director, Özdemir Şengören, indicates that this shortage creates significant access problems for patients. “When you drill down,” she says, “you discover that in Turkey there are patients that have had an epilepsy diagnosis for many years… who still complain that they can’t find … an epileptologist, to treat them. Patients also complain that when visiting hospitals, they can’t ask their physicians the questions they have because each patient has very limited time with the doctor,” due to the incredible number of patients each physician must see each day.

Murat Uslu, general manager for Actelion Turkey, echoes Şengören’s comments. “The Turkish healthcare system has a lot of excellent facilities, while some others have quite a way to go in terms of equipment and workload, and this of course affects physicians’ ability to efficiently diagnose patients. The number of physicians, and the number of specialists per capita is very low in Turkey, making it difficult for physicians to dedicate sufficient time to each patient.”

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