Turkey is one of the fastest-growing pharmaceuticals market and has the sixth-largest pharmaceutical industry in Europe in terms of sales value and is fast emerging as a major global player.The pharmaceuticals industry in Turkey has a bright future in the coming decade. With rising domestic demand and growing exports, the industry is poised for exponential growth in the near future, aver industry experts.
Pharmaceutical sales in Turkey have quadrupled over the last decade.The industry has grown at more than seven per cent CAGR from 2005 to 2015 while its GDP in the same period shows 3.7 per cent CAGR. Turkish exports have shown a steady rise in recent years. In 2014, the total value of pharmaceuticals exports reached about US$860 million. Turkey is now exporting various pharmaceutical products to 144 countries including technologically advanced countries like South Korea, Switzerland, Germany, the UK, USA and Russia.
According to Republic of Turkey, Ministry of Economy Report 2015, with a population of 74.93 million, Turkey is one of the biggest economies in the world. Even though Turkey faced some economic problems in the 2008 economic crisis, the country has per capita income of US$10,971.
The country also has a favourable demographic structure needed for its rapid growth. Since 1984, investments of foreign capital companies have increased and especially after the year 1990, about 19 foreign capital firms have entered into the Turkish pharmaceuticals market.
It has about 230 pharma manufacturing firms with around 80 manufacturing facilities. The industry is into manufacture of both active pharmaceutical ingredients and formulations. The industry is fairly well developed in the country with around 300,000 people employed by the industry. The industry is also regulated like in most parts of the world. Regulations and regulators administer every aspect of the pharmaceuticals business from manufacturing to R&D to marketing.
The Turkish government has implemented a number of regulations to bring its pharmaceutical laws in line with those in the EU, these are Patent protection, Data exclusivity, Pricing, Registration, GMP, GLP, GCP, Bioavailability and Bioequivalence, Packaging Labelling, Promotion and Advertising, Drug Research and Medicinal Product Registration, Stability Requirements, Regulation on Good Distribution and Storage Practices, PV and so on.
It is also emerging as a major destination for investment by pharmaceuticals majors too. The Turkish government views the pharmaceuticals industry as a strategic industry that will not only aid in its effort to deliver affordable healthcare to its citizens but will also help the country become a major pharmaceuticals export destination.
One of the major reasons for the spike in pharmaceuticals demand in Turkey can be attributed to the country’s Health Care Transformation Program that was implemented in 2004. The programme is a major success in terms of helping increase public access to healthcare which has resulted in increase in life expectancy which stands at an impressive 74 years. The demand for healthcare and pharmaceuticals products is likely to grow further as Turkey progresses economically. Also the percentage of older people in the population is increasing in the country, which will have a substantial bearing on the demand.
The country aims to attain a target of $23 billion in revenues from the pharmaceuticals industry by 2023 with a CAGR of 25 per cent in clinical research trials. The growth in the clinical research space in Turkey has been phenomenal. It is already ranked 35th in number of clinical research studies conducted in the world. With an aim of achieving 25 per cent CAGR in this space, the government expects a huge clinical research industry as a subset of the pharmaceuticals industry that will be connected to global pharmaceuticals majors in a tight-knit network.
Turkish pharmaceutical industries are mainly located in the Marmara region especially in provinces of Istanbul, Kocaeli and Tekirdag because of better infrastructure, telecommunication and transportation facilities, ease of supply in packaging materials and technical personnel and the existence of a high number of health institutions in the region.
The government has put together a set of policies to ensure that Turkey becomes an export hub for pharmaceuticals manufacturing and R&D by leveraging its location, demographic dividend and easy availability of highly trained knowledgeable manpower. The industry has a huge potential. The industry is generally segregated into imported originals which accounts for 50 per cent of the industry in value terms followed by locally produced generics which is 30 per cent. Locally produced originals account for 15 per cent and imported generics five per cent.
In terms of main therapeutic classes, Turkey is still a major consumer of antibiotics which is followed by oncologics and cardiovasculars. The government is making a huge effort to improve the state of R&D in the country by pumping in huge investment in R&D. Expenditure on R&D in Turkey as a percentage of GDP was around 0.5 per cent in 2003, which rose to one per cent in 2013 and now the government aims to increase it to three per cent of GDP by 2013.
The private pharmaceuticals industry will be a major beneficiary of this large investment in R&D in terms of leveraging the outputs of the R&D, access to large pool of trained R&D manpower and the benefits of horizontal flow of knowledge leading to greater innovation. This will help the industry to further grow its R&D base in the country as the cost of R&D manpower in Turkey is almost half that of EU28 countries and with this huge R&D push by the government, a larger pool of talented and trained manpower will be available to the industry.
Presently, among the R&D personnel in Turkey, 35 per cent are PhD holders and 15 per cent have master’s degree. For the country as a whole, the number of R&D personnel per thousand people is around 200. This indicates a higher quality of R&D happening in the country with better qualified manpower.
The primary piece of legislation that regulates the pharmaceutical industry in Turkey is the Act on Medicinal Products for Human Use which has been in existence from 1928 and is kept up-to-date since then through amendments from time to time. The ministry of health has the overall responsibility of regulating and administering the drug policy as well as for licensing.
The General Directorate of Pharmaceuticals and Pharmacies (GDPP) is the prime nodal agency which is responsible for registration, granting approvals for marketing, pricing, legal classification, control of advertisement for pharmaceutical products as well as for inspection of the manufacturing facilities. However, in spite of the robust regulatory framework on paper, the implementation on the ground is a bit more relaxed leading to dilution of standards which has the potential to hurt the brand Turkey. This is a risk that the country has to mitigate to move forward in creating value in the industry. Also run of the mill FDI in this sector needs to be identified and actively discouraged.
The policy package brought together by the government is also having an impact in attracting foreign direct investment in the industry. However, much of the investment is targeted at leveraging Turkey’s location and its proximity to Europe and comparatively lesser stringent regulatory framework of a European country. In the long run, this will hurt the ecology of the country and render the industry unsustainable. The present fetish of the government to overplay the cost-competitiveness of the Turkish pharmaceuticals industry and the overall economy in general will lead to short-term gains no doubt but may harm long-term prospects of the industry and the economy as a whole.
The right strategy for Turkey is therefore in betting heavily on R&D and moving up the value chain to deliver R&D enabled solutions to the industry. Its focus on clinical research is good but it must also focus on developing contract research organisations and aim to create enterprises that will leverage the same demographic dividend of the country to provide value-added and R&D-enabled solutions to global pharmaceuticals giants and not just play of the cost-competitiveness all the time. The large domestic demand and its locations will remain key attractions for FDI in future too but its huge investment push on R&D will likely catapult Turkey into a different orbit of innovation and value generation.
AIFD’s Vision 2023 is to help create a pharmaceutical industry in Turkey that can manufacture higher value-added products, attract globally significant R&D investment, and use advanced technologies to export products on an exponentially greater scale, which will in turn help tip the foreign trade balance in Turkey’s favour. Turkey has a major opportunity to become a key services and pharmaceutical products supplier for neighbouring regions with its location, with total export potential of about US$8 billion.
The most important challenges mainly include the approval process for the marketing of new drugs, which is the first step to entering the market, is slow and problematic in Turkey and the pharma pricing remains one of the most problematic issues. Domestic production should be increased to a level which not only meets the country's needs but also reaches to a good level of export and more sophisticated system must be introduced for the pricing of pharmaceuticals.
Dr Reddy’s Laboratories and TRPharma have partnered to manufacture biosimilars pharmaceuticals mainly versions of Aranesp, Neupogen, Neulasta and MabThera in the Turkish market. Also Russian biosimilars manufacturer Biocad has signed a definitive agreement with Turkish oncology specialist company Koçak Farma for the export of biosimilar drug darbepoetin alpha APIs.
The country aims to integrate more closely with the European Union and ultimately become part of the Union at some later date. Its economy is about US$1.5 trillion and its GDP is growing at approximately three per cent p.a. Turkey is a young country in the sense that 50 per cent of its citizens are below 30 years of age. About 64 per cent of its GDP is from services and 28 per cent from industry. Even though agriculture accounts for less than 10 per cent of GDP, it still employs 25 per cent of its population. Turkey is an attractive investment destination with low cost of labour and is considered by many investors as a gateway to Europe.