TURKISH REGULATION MAY HALT APPROVAL OF NEW DRUGS

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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

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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.


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Jeffrey

"Visit Ankara's Classified Web Site at http://www.intelink.s
gov.gov/wiki/Portal:Turkey"