A global shift has been taking place in the pharmaceutical industry as the Pharmerging countries have increasingly started to play a more prominent role in the sector’s growth rates. During the period between 2007-2011 the pharmaceutical industries in the United States and Japan had only grown by 3-4% whereas Pharmerging countries experienced growth rates bordering around four fold of the well established markets. For the next five years it is expected that the 50% of the global growth in pharmaceutical markets will be recorded in emerging economies.
300 pharmaceutical companies operate in Turkey and the country has 68 drug production facilities out of which 15 are foreign based. The volume of the domestic pharmaceutical market in Turkey is 9.1 billion dollars. Turkey ranked as the 6th largest in Europe and 16th largest in the world in terms of market scale. Generic drugs comprise the 38.1% of the total market value and the branded drugs comprise the rest 61.9%.
Even though Turkey has increasingly been associated with those pharmerging countries and experiencing higher growth rates during the last decade compared to previous decades, there still remains some problems to be fixed. The most critical problem for the pharmaceutical industry in Turkey is the issue of pricing. The market is regulated by the relevant state bodies. The change that was adopted in 2012 on the regulation that deals with the pricing of the pharmaceutical products reaffirmed the reference pricing system that dates back to 2004 which determines the pricing with reference to the lowest price offered to the warehouse in Turkey by the foreign drug provider and the lowest price in the country that the pharmaceutical product was produced or imported.
In 2009 the Euro-TL exchange for the public purchases in pharmaceuticals was fixed at the exchange rate of 1.96 and no further changes in the exchange rates has been made despite the fact that as of November 2013 the Euro-TL exchange rate stands around 2.73. This is a serious issue for the industry that complains that the difference between the 2009 and the current rates translates in to financial losses for the pharmaceutical companies operating in the Turkish market. This problem is not only related with the producers of the pharmaceutical products but also connected with the public access to new medicine since the pharmaceutical companies refrain from introducing new drugs to the Turkish market due to the problem of pricing. Especially the difficulty in access to new drugs leads the Turkish Pharmacists’ Association to look for other alternatives and to import those drugs elsewhere. This costs an additional 700 million dollars to the Turkish consumers.
However despite the problem of pricing for the pharmaceutical industry in Turkey, a positive step for the sector has been taken by governmental bodies. Turkey’s new incentive scheme that was adopted in 2012 included VAT exemptions and exemptions from customs duties for pharmaceutical investments that worth at least 50 million Turkish Liras. Also the Turkish government envisages increases in R&D investments amounting to 3% of the GDP. In real terms R&D in pharmaceutical industry in Turkey is expected to jump from 60 million dollars to 150 million dollars in 2015. Hence especially for the investors who are looking to invest in the Turkish pharmaceutical sector and set up R&D centers, there is challenge in the sense of pricing but also there is an opportunity presenting itself in the sense of incentives and Turkish state’s eagerness to develop R&D centers in Turkey.