Almost two decades after initiating large-scale health system reforms, Turkey has consolidated the provision of universal healthcare coverage to over 95 percent of the population. The effort, part of the country’s Health Transformation Program introduced in 2003, has been commended by international organizations across the world. But today, as citizens reap the benefits, Big Pharma companies have been left asking if they should continue to foot the bill.
After all, Turkey’s universal healthcare coverage is, in part, being sustained through some of the lowest pharmaceutical prices for countries with a similar socioeconomical situation. Today, Turkey spends less than one percent of its GDP on pharmaceuticals, way below the OECD average.
The sustainability of the ecosystem is in question due to low pricing, delayed access and a limited budget, according to the general manager for Novartis Turkey, Avinash Potnis.
The pricing for medicines in Turkey is reference-based, whereby the least expensive ex-factory price in two of five listed EU countries is taken as the price. The basket of reference countries includes Spain, France, Portugal, Italy and Greece but the Ministry of Health (MoH) has discretion to change reference countries, provided it makes an announcement at least two months before.
We should find common ground with the government because companies need to have a successful business in order to help patients
The second step in the process, and one that is often critiqued by executives, is the implementation of a special Euro exchange rate set by the MoH since all prices are converted into Turkish liras.
“The Ministry of Health has implemented a special Euro exchange rate which is not related to the real exchange rate because, today, the rate is 10.3 Turkish Liras per Euro, but the official exchange rate is 60 percent of the previous year’s average exchange rate. This becomes very challenging at a time where the currency fluctuates constantly; the Lira’s depreciation means that the initial 60 percent can fall to 40-45 percent in real terms,” explains Recordati’s Ismail Yormaz.
According to the Turkish executive, Recordati is in a relatively strong financial situation, but they have a couple of products with a negative margin and the company is negotiating to decrease the manufacturing costs.
With a slightly sarcastic tone, Yormaz notes that all general managers and CEOs in Turkey might as well have a mathematics degree because all of them know about pricing, gross margin, exchange rates and calculations. But the real question for the Turkish pharma industry today, he argues, is “sustainable… until when?”
Ingrid Drechsel, Bayer’s pharma head for Turkey and Iran, paints a similar picture, highlighting that the German company will “always play a role, regardless of the pricing system, but it is true that we should find common ground with the government because companies need to have a successful business in order to help patients.”
[Pricing] could be a problem in the future… We are having continuous conversations with the government so that we can go from survival to investment mode
While most executives concur that pricing is an issue that needs fixing, some are more optimistic and do not believe that it amounts to an existential crisis.
“Turkey is a promising place to do business regardless of the pricing issues and the current backlog in registration. There is a generation of young talent that is very capable. The economy will continue its upward trend, reflecting the resilience of the Turkish people,” says Menarini’s Uğur Bingöl.
Stroking a more sympathetic tone, he alleges that companies cannot leave because there are business principles involved, “we are here to serve patients and save lives… we have to stand with the country in the bad times just as we have done during the good times.”
But even Bingöl concedes that while Menarini is not holding back, “it could be a problem in the future… We are having continuous conversations with the government so that we can go from survival to investment mode.”
Searching for solutions: value-based healthcare
The solution to the pricing dilemma, according to Avinash Potnis, is not to look at pharma products from a price perspective alone, but instead to take a value-based approach.
“For example, the value of our chronic heart failure therapy is not measured by the price but by the time a patient stays out of the ICU, reduced mortality and finally the quality-of-life patients gain,” he notes, adding that the “artificial exchange rate” should be taken out immediately since it is almost half of the actual rate.
Burak Cem, general manager for Novo Nordisk, a company that has found in Turkey a key market considering the high prevalence of diabetes and obesity, also contends that the best way to ensure long term sustainability of the public healthcare system and attain the most advantageous patient outcomes would be to implement value-based pricing in reimbursement decisions of innovative products.
Another solution, one proposed by Recordati’s Yormaz, is to work collectively to explain the pharma industry’s contribution to Turkey’s public health. “We have very successful politicians and bureaucrats in the country, if we can work together on this issue, when we reach a fair pricing system, we will see that the patients benefit the most.”
Side effects: loss of clinical trials and rising exports
If the pricing situation is not fixed companies will be discouraged from launching new therapies in the country, and, according to Avinash Potnis, “it can affect clinical trial investment because it would not be ethical for companies to bring innovative treatments only to have those patients not be able to continue the treatment post-closure of trials.”
The domestic price pressure has been driving companies to sell products abroad; that is why medicine exports have consistently increased over the past five years
For the Novartis exec, fair pricing will attract more clinical trials “which are not only about patient recruitment, but also a good opportunity for local doctors to become better engaged with the global healthcare ecosystem.”
A positive side effect, however, appears to be the increase in exports as companies with manufacturing capacity in Turkey look abroad for better prices.
“I believe that the domestic price pressure has been driving companies to sell products abroad; that is why medicine exports have consistently increased over the past five years. There is a huge gap between the prices you get abroad for medicines from the ones you get in Turkey… The trend of companies manufacturing in Turkey for foreign markets will continue in the next years,” says Savas Malkoc, secretary general for Turkey’s Pharmaceutical Manufacturers Association (IEIS)