As a result of aging populations, extended life spans, and socioeconomic changes around the world, health services is one of the most important topics of the 21st century. As the average life expectancy increases, the risk of falling ill to chronic diseases and experiencing health concerns in the later stages of life also increases. When we consider these factors, innovative drugs and new treatments, which can help prevent diseases and reduce treatment costs, become increasing important over time. Thus both developed and developing countries consider pharmaceutical research and development (R&D) aimed at the discovery of new treatments and the production of new drugs a priority area for investment and a strategic growth sector.

The Turkish Government aims to make Turkey one of the world’s top 10 economies in health services by 2023 by increasing R&D expenditures to three per cent of GDP and by increasing exports to US$ 500 billion. Moreover, according to the Turkish Ministry of Science, Industry, and Technology (AIFD)’s Strategy Report, Turkey should become the Eurasian production base for medium- and high-level technology products. Taking into account Turkey’s current macroeconomic conditions, political stability and increasing economic efficiency, AIFD considers these R&D targets to be realistic.

Turkey’s “Health Care Transformation Program” that was implemented in 2004 marked a major development in public access to health services and treatments. Physician consultation per capita increased five times from 1.7 per cent in 1994 to 7.7 per cent in 2011. The average life span in Turkey also increased 24 per cent in the last 30 years and has now reached 74 years.

Innovative drugs play an important role in increasing in life expectancy. Based on a study of conducted by Professor Lichtenberg of Columbia University and the National Bureau of Economic Research, innovative drugs accounted for 75 per cent of the increase in life expectancy in the 30 countries surveyed, including Turkey.

Thus if the Turkish government can implement the necessary structural changes and effectively promote innovation in the health care system, the pharmaceutical industry can be the driving force in helping to achieve the Turkish Government’s public health and economic targets.

However in order to achieve sustainable progress in health services, Turkey must also focus on improving its competitive position. Currently, Turkey lags behind other emerging pharmaceutical companies, now referred to as “pharmerging” countries such as Brazil, Russia, India and China, in global pharmaceutical investment.

According to the World Economic Forum’s Global Competition Index (2011-2012), Turkey is ranked 59 out of 142 countries, and ranked 71 in the Innovation Capacity Index.

In the Global Competition Index, Brazil is ranked 31, Russia 38, India 35 and China 47.

While the Turkish pharmaceutical sector is ranked 16th in terms of market value, it is 36th in terms of the clinical research conducted and the volume of pharmaceutical exports.

Countries that invest in R&D, develop technology, and effectively convert this technology into products become more competitive. Innovative drugs create added value in the pharmaceutical industry and are key to a country’s economic advancement. While global investment in innovative drug R&D is US$ 120 billion each year, Turkey’s share is only US$ 60 million, representing only a 0.039 per cent of global R&D. Currently, drug production is Turkey is focused around low value-added products, with high value-added products being imported.

Moreover, R&D aimed at developing new molecules (core research) has never been done in Turkey. As production of innovative drugs increases, the added value of the drugs produced will also increase accordingly.

Turkey’s competitors in the health services sector made global pharmaceutical investment a priority in the 1990s and were able to became net pharmaceutical exporters through strategic governmental planning. Turkey, which now boasts the strongest and most dynamic economy in the region, can become a formidable player in the pharmaceutical sector. Turkey has the necessary knowledge base, infrastructure, and geostrategic location to attract global pharmaceutical R&D and could become a global player in the pharmaceutical industry. This report suggests an exports-focused plan of action to develop Turkey’s pharmaceutical industry into a global R&D and production center and regional shared service center location.

The main targets of this plan are:

• Developing basic and clinical research competency and services exports: Improving Turkey’s R&D competency and increasing national and foreign direct investment; thereby making Turkey’s pharmaceutical sector a leader in R&D.
• Developing production competency and product exports: Increasing the production capacity of specific high value-added product groups; thereby allowing Turkey to become a regional/global pharmaceutical powerhouse and net exporter.
• Making Turkey a regional management and service center location for the pharmaceutical industry.

Pre-requisites for this action plan are:
The formulation and implementation of a long-term policy to support innovation in the field of health sciences that makes R&D and value- added drug production the highest priority.

Additionally, the government will provide grants that support innovation and implement regulations that protect international property rights (IPR).

The implementation of a legal and administrative framework that counterbalances the concerns of public health and the pharmaceutical sector, which should entail:

A current and realistic budget that can sustain pharmaceutical sector growth. While patient access to health care and pharmaceutical drugs has increased significantly in Turkey, the percentage of Turkey’s population with health insurance has also increased rapidly. However, the budget allocation for public pharmaceutical expenditures has decreased since 2009, and pharmaceutical expenditures as a percentage of GDP has dropped to 1.11 per cent.This number is considerably below the OECD average of 1.50 per cent.

These factors should be considered when determining the pharmaceutical budget for 2013 and beyond, as budget expenditures should match the growing healthcare needs of the country. The recommendation is to increase pharmaceutical expenditures as a percentage of GDP to 1.35 per cent.

An improvement in patient access to pharmaceutical drugs to ensure that Turkish patients can immediately benefit from innovative drugs once on the market. It is imperative that the government streamline the processes and procedures for pharmaceutical drugs entering the marketplace (via good manufacturing practices (GMP), timely registration, effective pricing, and reimbursements) to ensure that pharmaceutical drugs become available to patients in a time-frame comparable to other developed countries. The increased speed to market will in turn, attract new investment in innovative R&D.

If the above is agreed upon with the cooperation and collaboration of all stakeholders, AIFD believes Turkey can achieve the following results by 2023:

• Achieve local pharmaceutical production of US$ 23.3 billion through the production of innovative and technologically advanced products (as compared to local production of US$ 5 billion in 2011).
• Achieve pharmaceutical exports worth US$ 7.3 billion and clinical trial services exports worth US$ 782 million - totaling US$ 8.1 billion (as compared to total pharmaceutical product and service exports of US$ 587 million in 2011).
• Become a net exporter of pharmaceutical drugs with an export surplus of more than US$ one billion (as compared to a 2011 foreign trade deficit of US$ 4.1 billion).
• Achieve total R&D investment of US$ 1.7 billion (R&D investment was US$ 60 million in 2010 ), with US$ 1.1 billion of that investment derived from 3,600 clinical trials (as compared to 240 clinical trials amounting to US$ 40 million in 2011).
• Become a regional shared service center location for the pharmaceutical industry that exports management services.

The economic development plan outlined in the “Turkey’s Pharmaceutical Sector Vision 2023 Report”, will enable sustainable expansion and improvement in Turkey’s health care system while also achieving governmental targets.

Turkey has a major opportunity to become a key services and pharma products supplier for neighboring regions with its location, with total export potential of US$ eight billion.

Turkey’s pharma industry can contribute to closing the country’s trade deficit with exports of pharma products & services:

• Basic & Clinical Research: service exports with US$1 billion potential
• Value-added manufacturing: Pharma products and active pharmaceutical ingredients with US$ 7.3 billion potential
• Management & shared services center: service exports through liaison offices, regional HQs or shared service centers
• US$ 8 billion of export value equal to 2.7 per cent of total import in Europe, Russia, Middle East and Caucasia
• Turkey’s pharmaceutical industry has enough infrastructure and potential to realize this vision and become a global player.

Investments in health and pharmaceutical industries will improve public health and provide an economic benefit by increasing research, production, exports and employment.

Public health goals
The main objective of the Ministry of Health in the 2010-2014 Strategy Document was defined as “Improving the health care level of our people”.

Supporting R&D studies within the scope of improving health services.

Increasing the quality, effectiveness, and productivity of diagnostic and treatment services.

Improving pharmaceutical and medical device services, and sustaining safe market access.

Making regulations that will encourage the development of new drugs to make progress in the field of pharmaceutical technology, and to carry out scientific studies in collaboration with the public, universities and private sector.

Economic & development goals
The long-term vision of the Turkish industrial strategy was specified as “To be the production base in Eurasia by producing medium - and high-level technology products”.

Strategic targets
Promote and strengthen the position of companies that can develop their competencies and skills in a sustainable manner.

Promote medium- and high-level technology industries in production and exports.

Switch from low technology industries to high value-added products.
 
Industrial policies include:
Increasing the share of medium- and high-level technology industries in production and exports and developing a policy for industry clusters.

The pharmaceutical industry is important for its potential to support the government’s public health and economic targets by increasing R&D, innovation, employment, production and exports.

“Turkish Pharmaceutical Industry Vision” will provide economic and social benefits for the country and increase competitiveness.

It will ensure development

• Becoming a global supplier of products by meeting a great portion of the requirements of the local market through local production, and by producing specific products in Turkey.
• Decreasing the current account deficit by increasing pharmaceutical exports, and becoming a global supplier for important products.
• Improving pharmaceutical R&D and production competencies, to enable new local molecule invention and long-term interest by international pharmaceutical companies.
• Becoming a regional management center in the pharmaceutical sector, and developing other industries that are associated with pharmaceutical production.
• Supporting small and medium-sized enterprises and integrating them into the pharmaceutical supply chain through clustering .
• Expanding Turkey’s financial sector by introducing new venture capital into Turkey.

 It will provide social benefits

• Ensure the most effective treatment of diseases with the introduction of more innovative drugs to the market.
• Discover new molecules and increase domestic patents with the development of R&D
• Increase the number of researchers working in life sciences.
• Gain scientific knowledge and experience participating in global R&D networks.
• Increase employment in the pharmaceutical industry (currently 25,000).
• Increase indirect employment in the pharmaceutical sector’s supply chain.

It will increase competitiveness

• Increase the global competitiveness of Turkey by developing and producing advanced technology products through the discovery of new molecules and an increase in number of patents.
• Shift the competitiveness of Turkey from cost advantage to innovation competency by merging the knowledge of academia with industry.
• Increase investment by making Turkey a regional management center and creating an investment environment suitable for production and R&D.
• Ensure that domestic pharmaceutical companies gain the regional and global prominence in R&D and production competency.
• Increase the global competitiveness of universities with effective industrial collaboration and greater funding.