BEST YEAR EVER: TURKEY IMPORTANT MARKET FOR U.S. PHRMA

UNCLAS SECTION 01 OF 02 ANKARA 000293

SIPDIS

DEPT PLEASE PASS USTR FOR LERRION/BPEUK
DEPT PLEASE PASS USPTO FOR JO ELLEN URBAN
USDOC FOR ITA/MAC/CRUSNAK
USEU FOR JULIE NUTTER AND USTR
TREASURY FOR JONATHAN ROSE

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ETRD KIPR USTR EUN TU
SUBJECT: BEST YEAR EVER: TURKEY IMPORTANT MARKET FOR U.S. PHRMA
COMPANIES


SENSITIVE BUT UNCLASSIFIED. NOT FOR INTERNET DISTRIBUTION.

Ref: (A) Ankara 5335 and previous


1. (SBU) Summary: Turkey currently represents the 14th largest
market in the world in terms of pharmaceutical sales, and it is on
track to grow to the 10th largest by 2009. The size of the market
comes from volume and not from the pricing of pharmaceuticals, which
PhRMA company representatives complain are much too low. In
addition to ongoing IPR issues (reftels),PhRMA companies in Turkey
worry about the length of time it takes to receive marketing
approval and to get their products included on the list of drugs
authorized for reimbursement under the state-run health insurance
scheme, which accounts for 90% of health care spending in the
country.

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14TH LARGEST MARKET FOR PHARMACEUTICAL SALES
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2. (SBU) Turkey is an important growth market for research-based
pharmaceutical companies. In 2005, pharmaceutical sales in Turkey
amounted to approximately $6.5 billion, 50-65% of which went to
innovative U.S. and European companies. According to the innovative
companies, Turkey represents the 14th largest market in the world
for pharmaceutical sales, and it is on track to grow to the 10th
largest by 2009.


3. (SBU) Given low per capita healthcare spending, the innovative
companies believe there is tremendous headroom for growth.
According to OECD data, Turkey currently spends $580 per capita on
healthcare, 25% of which is spent on pharmaceuticals. This is much
lower than the average for EU countries ($2,100) and the U.S.
($6,102). Turkey's state-run healthcare system provides 90% of
medical care, including treatment at state (public) hospitals,
80-90% compensation for drug expenses, and insurance against
job-related injuries and illnesses. Only about 1 percent of
Turkey's population utilizes private insurance, which allows access
to better healthcare services in private hospitals and labs with
small co-payments for medical care and prescriptions.

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LOW PRICES, HIGH VOLUME
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4. (SBU) Pharmaceutical pricing in Turkey continues to be an issue
of importance to innovative pharmaceutical companies. According to
AiFD (Turkey's version of PhRMA) General Manager Engin Guner, prices
in Turkey are currently 17% lower than the cheapest countries in
Europe. Company representatives tell us it is the volume of
consumption that keeps Turkish market as one of the largest in the
world, not the price of the products. Eli Lilly representatives
told us that if Turkey implemented a pricing system similar to
Germany, their profits would increase by approximately $240 million
each year; using Hungary's prices, profits would increase by $140
million.

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SLOW APPROVALS, HEALTHCARE SPENDING REFORMS
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5. (SBU) As their main concern, U.S. company representatives point
to the slow approval process for new products to be registered and
authorized for reimbursement under the state insurance scheme. EU
directives require that new pharmaceutical applications be reviewed
within 210 calendar days. The Turkish MOH, however, previously
interpreted this as 210 business days and stopped the clock whenever
additional information was requested from the companies. However,
this is just the first step. Once a product is registered, the wait
for it to be reviewed and approved for inclusion in the socialized
healthcare system can take another year. Often, after enduring
years of waiting, innovative companies have received a refusal
notification from the Turkish MOH without an explanation. AiFD has
been working with the new Social Security Institution (SGK),which
is responsible for developing the drug reimbursement schedule, to
reform the system to review drugs within three months, provide clear
reasons for refusals, and to create an appeals process for refusals.
According to Guner, the new President of SGK has been receptive to
their proposals and AiFD is optimistic that these changes will be
implemented.


6. (SBU) PhRMA company representatives have also expressed concern
about the recently approved agreement between Turkey and the IMF to
limit the growth of government health spending. The GOT agreed with
the Fund to reduce the reimbursable margin between the cheapest and
most expensive reimbursed drugs in a given bioequivalence group from
22 to 20% and to reduce the price of generic drugs from 80% of the
original price down to a maximum of 72%. The GOT also plans to
increase the number of comparator countries used to determine the
reference prices for pharmaceuticals (which could exacerbate the
already low prices). Finally, the GOT agreed to train physicians in
the appropriate use of drugs, particularly antibiotics. The
companies feel that innovative pharmaceutical purchases are bearing
an unfair share of spending adjustments (generic products are not so
affected) and that Turkish patients are being denied access to the
best medicines as a result.

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AND SPEAKING OF IPR...
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7. (SBU) Lest we forget, PhRMA companies in Turkey are still trying
to resolve ongoing data-exclusivity (DE) issues (ref A). While the
EU and the USG regularly weigh in on the issue, Turkey's MOH is
exhibiting marked fatigue. Turkey's generics manufacturers, who
historically have been well-connected politically, consider the DE
problem solved. Representatives of the Pharmaceutical Manufacturing
Organization in Turkey (which represents generics manufacturers)
told us that the DE issue was resolved with the new legislation.
They cautioned that the organization's role will change from
"protecting" generics manufacturers' rights to license molecules by
working with the government to fighting in the courts "outrageous"
claims to data protection that overstep both Turkish and EU
regulations. They believe that generics and innovative companies
can begin to work together, however, on the pricing issue.

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SITUATION NOT PERFECT BUT LUCRATIVE
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8. (SBU) Comment: While the situation in Turkey for U.S. innovative
pharmaceutical companies is certainly not perfect, Turkey has been
and should continue to be a lucrative market. Since the GOT is their
largest customer in Turkey, it is understandable that PhRMA
companies prefer the USG and the EU to take the lead in pushing for
improved IPR protection and the GOT's compliance with its
international obligations. The threat of reprisal is real, and with
the IFI's pressuring Turkey to cut its public healthcare costs,
continued dialogue on this issue will be needed to ensure that these
cuts are evenly distributed between Turkey's domestic generics
manufacturers and the multinationals operating here.

WILSON