While supporters of Turkey’s localization policy for pharmaceuticals implemented in 2016 applaud the changes it has brought, its opponents are awaiting a much-anticipated report by the World Trade Organization that could put an end to the policy and have global repercussions.


Five years after the launch of Turkey’s localization policy, supporters of the move have tangible results to show for it. The policy, launched officially in 2016, required foreign producers to commit to localize the production of certain pharmaceutical products in Turkey or be exposed to exclusion from its social security system’s reimbursement scheme.

Those tangible results seem straightforward. One year prior to the policy announcement, made-in-Turkey pharmaceuticals had a 42 percent market share in terms of value, but overtook imported ones just three years later, in 2019, and today account for over 50 percent of the market.

In terms of physical infrastructure, the number of pharma production facilities went from 66 in 2015 to 96 in 2020 and, in the same five-year period, pharmaceutical production skyrocketed with a 52 percent increase, according to TurkStat.

It is no wonder then, that as a key stakeholder, Turkey’s Pharmaceutical Manufacturers Association (IEIS) deems the continuation of localization policies of great importance for the industry. “During this process, the industry invested in new technologies, increased capacity utilization and employment while imports diminished,” says secretary general Savas Malkoc.

While the local manufacturing industry and defenders of the policy celebrate the changes it has brought, official opponent of the policy, namely the European Union (EU), await a high-stakes final report by the World Trade Organization (WTO) that could result in the end of the policy, the validation of it, or an escalation with political and economic implications.


The Dispute

The EU – home to many pharma companies that have complied and invested in Turkish localization in recent years such as Boehringer Ingelheim, Bayer, Novo Nordisk, Recordati and Sanofi – alleges that the localization measures taken by Turkey, and its implicit request for technology transfer, fail to comply with four WTO agreements that all members are bound to follow.

The official complaint argues against three main aspects of the policy. First, that exclusion of non-localized products from the reimbursement scheme “significantly impairs” the competitive opportunities in the Turkish market. Second, that even when a product does comply with localization requirements, the country “bans” further importation of the product. And third, it argues that Turkey is prioritizing reimbursement applications of domestic products over imported ones, even for products that the country has not asked to be localized.

After Turkish and EU representatives failed to settle the dispute during consultations held in Geneva in May 2019, the EU requested the establishment of a panel of experts to adjudicate the merits of the case.

The EU is seemingly not alone in disagreeing with the policy as Switzerland, China, Japan, India, Russia, and the United States were included as “third parties” in the original complaint which provided them specific legal rights when it comes to participating in the dispute process.

Amongst that group, the US took a step forward one month before the failed Geneva consultations, requesting to join the consultations alleging that it had “substantial trade interests” in them, pointing to the USD 219 million worth of pharma products the country exported to Turkey in 2018.

Currently, stakeholders are awaiting the expert panel’s final report which, due to delays caused by the COVID-19 pandemic, is expected to be issued in the second half of 2021.

A party that loses a case in the WTO is supposed to follow the recommendations of the panel report. If it fails to do so, it must seek agreement or compensation with the winning party. If all fails, the WTO can authorize trade sanctions against the losing party.

As it awaits the resolution, IEIS maintains its support for Turkish localization. “The practice does not contradict international resolutions and conventions. From our perspective, the government should continue with the localization efforts to increase capacity, attract more foreign investment and technology,” Savas Malkoc says.