TURKISH REGULATION MAY HALT APPROVAL OF NEW DRUGS

UNCLAS SECTION 01 OF 03 ANKARA 000143 SENSITIVE SIPDIS DEPT FOR EEB/TPP/BTA, EUR/SE DEPT PLEASE PASS USTR FOR MARK MOWREY COMMERCE FOR CHERIE RUSNAK AND KRISTIN NAJDI E.O. 12958: N/A TAGS: ECON EINV EIND ETRD KIPR USTR TU SUBJECT: TURKISH REGULATION MAY HALT APPROVAL OF NEW DRUGS REF: A. 09 ANKARA 1352 ¶B. 09 ANKARA 1503 ¶C. 09 ANKARA 1693 ¶D. 09 ANKARA 1740 This cable is sensitive but unclassified. Please protect accordingly. ¶1. (SBU) Summary. A new Turkish Ministry of Health (MOH) regulation that takes effect March 1, 2010 will make marketing approvals for new pharmaceuticals contingent upon either an inspection by the MOH itself (which MOH admits it does not have the capacity to perform) or an inspection certificate issued by a "competent authority of a third country that is party to a mutual recognition agreement with Turkey." As there are not currently any countries meeting that criterion, this will effectively stop all new marketing approvals. The intent of this regulation appears to be fourfold: 1) boost local production, 2) allow easier access for Turkish generic pharmaceutical exports to third country markets, 3) build up Turkey's internal inspection capacity, and 4) help control costs. Particularly relevant to the cost control goal is an exception that the MOH can grant for "lifesaving drugs" and vaccines, and MOH officials have already hinted that companies willing to be flexible on the price of their products may find the drugs more easily classified as lifesaving. Although foreign pharmaceutical firms are trying to engage the MOH in negotiation, coming on the heels of last year's rancorous pricing negotiations, this new regulation is yet another blow to the already fragile position of the pharmaceutical industry in Turkey. End summary. ¶2. (SBU) We recently met with representatives from various pharmaceutical firms (both U.S. and European),who raised concerns about a Turkish MOH regulation on marketing approval for pharmaceuticals issued on December 31, 2009 and effective on March 1, 2010. The principal point of concern with this new decree is that the MOH will only accept Good Manufacturing Practices (GMP) certificates issued by the Ministry itself or by "competent authorities of third countries that are parties to a mutual recognition agreement with Turkey." This is a sharp change from the previous regime, where the MOH had been willing to accept GMP certificates issued by reputable foreign inspection agencies, including the FDA and European Union inspectorates. ¶3. (SBU) GMP certificates attest that a specific production line for a specific drug has been inspected by a competent inspection authority and found to be up to international standards. Even if a given facility has already been inspected for a different drug, it must still be re-inspected whenever a new drug is introduced. If the manufacturer changes the production site, a new inspection is also required. Because these inspections are time-consuming and most inspectors are looking for the exact same things, many countries will accept certificates issued by foreign agencies, especially those belonging to the Pharmaceutical Inspection Cooperation Scheme (PIC/S),which certifies that inspecting agencies meet international standards for education and training of their inspectors and quality of inspections. Note: FDA is not a member of PIC/S, but its inspections are considered to be of similar quality and are accepted by many countries. End note. ¶4. (SBU) The issue with the new regulation is not that Turkey would like to conduct its own inspections, but rather that it lacks the capacity to actually perform them. The MOH currently has only 11 inspectors for the entire country, and they are also charged with inspecting non-pharmaceutical sites such as food production facilities. The majority of their time is therefore absorbed with inspecting local production sites, leaving very little possibility that they will be able to travel overseas to inspect the 273 foreign plants that industry says currently produce for the Turkish market. ¶5. (SBU) If Turkey actually had any mutual recognition agreements for GMPs, its own lack of capacity would not be a problem, but we and industry are unaware of any country that has signed such an agreement with Turkey. Nor is it likely that any country would be willing to do so, as such an agreement would mean that Turkey's own pharmaceutical exporters would be able to use their MOH-issued GMP ANKARA 00000143 002 OF 003 certificate to apply for marketing approval in that third country. As MOH's inspection unit does not meet the standards for inclusion in PIC/S, this would mean a country would have to be willing to open its market to potentially unsafe or inferior drugs. Industry analysts estimate that it would take 5-7 years of effort to get MOH's capacity to the level where a mutual recognition agreement could even be discussed. ¶6. (SBU) Why, then, is Turkey pursuing this path? From discussions between MOH officials and industry representatives, there appear to be four principal motivations: -- Boost Local Manufacturing: If a new drug cannot be imported, locally-produced generic alternatives will be able to capture greater market share. The MOH also has claimed it has the discretion to waive the requirement for foreign drugs produced locally, so if a firm is willing to locate its manufacturing facility in Turkey it may be able to obtain either an exemption or a quick inspection by MOH. If companies agree to this, it would help boost employment and presumably lower costs. The downside of this strategy is that the most innovative and effective drugs will simply not be sold in Turkey, posing significant risks to public health and raising the possibility that Turks will seek treatment or try to purchase drugs outside of Turkey. -- Allow Easier Access for Turkish Exports to Third-Country Markets: Turkey has a relatively large generics industry that is keen to export to other markets, especially in the U.S. and Europe, but these firms have had difficulty obtaining inspections from FDA and/or European inspectors. The MOH appears to believe that it can pressure foreign regulators into accepting Turkish GMP certificates instead of conducting inspections and is basing its stance on the principle of reciprocity, ignoring the differences in the quality of inspections. -- Build Up Turkish Inspection Capacity: MOH officials acknowledge that they lack the capacity to perform the required inspections (there is already a backlog of nearly 300 marketing approvals),but are keen to improve their capability. They believe (with some justification) that the new regulation will provide a greater incentive for industry to work with them on improving their inspection arm. They ignore, however, the estimated 5 to 7 years it would take to build up that capacity. -- Control Costs: As was clear during the recent negotiations on pharmaceutical pricing (reftels),the GOT is serious about trying to control its pharmaceutical expenditures and the MOH views marketing approval as a bargaining tool in price discussions. Under the regulation, the MOH can waive the requirement for a local inspection for MOH-defined "lifesaving drugs" and vaccines. As almost all drugs can in some way be classified as "lifesaving", MOH officials have already hinted to industry representatives that those companies most willing to be flexible on price might find their drugs exempted. This safety valve also ensures that if there is a drug that Turkey genuinely wants to have on the market, they can allow it in while still observing the letter of the law. ¶7. (SBU) Comment: At this point, the industry is still hoping to arrive at a negotiated compromise with MOH, although they have asked us to raise the issue with our GOT interlocutors as appropriate. As the GOT appears to be emboldened by its recent "success" in forcing an onerous compromise pricing deal on the industry, however, there is reason to be pessimistic that it will back down on this issue. From the GOT perspective, it gets the best of both worlds -- access to drugs that they truly want and a powerful bargaining tool to lower prices. In the event that some country calls the bluff and actually signs a mutual recognition agreement, then Turkish exporters get easier access to a new market and the only cost to Turkey is in returning to the status quo ante. The pharmaceutical industry has been remarkably willing to accept abuse from the GOT over the past year (suggesting that their profits are still healthy enough to make Turkey interesting),but at some point their tolerance will dry up and Turkey will find itself cut off from the most innovative and effective drugs. End comment. ANKARA 00000143 003 OF 003 Jeffrey "Visit Ankara's Classified Web Site at http://www.intelink.s gov.gov/wiki/Portal:Turkey"