Country Report: Turkey

This sponsored supplement was produced by Focus Reports.

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NAVIGATING THE CROSSROADS

The 21st century has brought much change to Turkey. GDP tripled from under USD 267 billion in 2000 to over USD 822 billion in 2013. Massive infrastructure projects created over 13,000 km of roads, 24 new airports, 88 new universities, and 650 hospitals. For the healthcare and pharmaceutical industry, this period was defined by the Healthcare Transformation Program (HTP), which saw the complete overhaul and expansion of the Turkish Healthcare system between 2003 and 2013, with three separate social security agencies combined into a unified social security institution (SGK). During the same period the private sector was expanded and brought into the national reimbursement system, and more than 98 percent of Turkey's population were brought under national insurance coverage.

Having reached the end of this transformational era, what will be the trends, dynamics, and initiatives that drive change in the Turkish pharmaceutical industry in the coming years?

Mehmet Müezzinoğlu, minister of health

THE END OF AN ERA

This transformation caused pharmaceutical sales volumes to skyrocket at a 9.6 percent CAGR between 2003 and 2013, according to the Turkish Drug and Medical Devices Agency (TITCK). The reimbursement rate increased to more than 95 percent, and patient access to healthcare services and general healthcare awareness improved each year. Of course, achieving this status quo came at a price, and after seeing healthcare expenditure begin to rise rapidly in the late 2000s, the government instituted aggressive public discounts in 2009 and 2011 to contain spending. As such, pharmaceutical expenditure grew by just three percent in real terms over the same period.

Recep Akdağ, former minister of health

"At the time we took office in 2002, Turkey was not in a good position with regards to the economy, various social issues, and of course the state of the public health system," explains the former minister of health Recep Akdağ, who led the transformation program. "The entire country was waiting and hoping for change, and the expectations for this change to happen were very high. This was both an advantage and disadvantage for us; we were able to gain strong political commitment and public support which were essential for reforms of the magnitude that were required... We were able to achieve real progress through our efforts, and together the changes that were made transformed the healthcare system in Turkey to the extent that it is now being used as a model for many developing countries." Minister of Labor and Social Security Faruk Çelik states that the Healthcare Transformation program is "now used as an example of good practice in healthcare systems around the world," and that due to the reforms Turkey has "a new social security system, which is more compatible with international standards, offers high quality services, covers the entire population, and is financially stronger than before."

Yadigar Gökalp Ä°lhan, president, Social Security Institution (SGK)

Since the transformation program's reforms ended in 2013, and with it Akdağ's ten year mandate as minister of health, the driving force for change and progress in the sector faded away. The need for a new vision for the sector arose, as well as the opportunity for the industry associations to play a role in developing the government's new strategic plans, particularly in the pharmaceutical industry. Murat Barlas, chairman of Liba Laboratories and the senior board member of the Pharmaceutical Manufacturers Association of Turkey (IEIS), explains that "the current plan for the pharma sector until 2023 was prepared by the industry and delivered to the government." This plan was published by the association in November 2011, in a report entitled 'Partnering with the Government to Globalize the Turkish Pharmaceutical Industry,' while the AIFD published a similar strategy document in 2012 titled 'Turkey's Pharmaceutical Sector Vision 2023 Report', and the two garnered enough attention that several items from their action plan surfaced in the government's own plans, including the national Tenth Development Plan.

Cem Baydar, lead consultant, IMS

"Going forward, we will be prioritizing R&D initiatives, including health studies and medical innovation," details Akdağ's successor, minister of health Mehmet Müezzinoğlu. "It is for this purpose that we founded the 'Department of Health Institutions of Turkey', which will follow developments in medicine closely. The Ministry of Health is encouraging the production of medical devices and medications in Turkey, and we will be supporting the development of vaccines, biosimilars, and other high value added medicines in Turkey." Article 1.16 of the Tenth Development Plan outlines a 'structural transformation program within the health industry,' and includes the target for 60 percent of pharmaceutical products and 20 percent of medical devices consumed in Turkey to be produced domestically by 2018. Other targets for the healthcare and pharmaceutical industries have been set under the auspices of President Recep Tayyip Erdoğan's '2023 Vision', a set of goals for the country to achieve by the 100th anniversary of the Republic of Turkey's foundation in 1923, which include aggressive targets for increasing exports and improving competitiveness for R&D investment.

Nezih Barut, chairman, Abdi Ibrahim

While much progress is being made, questions remain regarding the feasibility of achieving these goals, and the effectiveness of the initiatives that have been introduced thus far. "The vision that the government has for the pharma sector will be achievable only if it changes its perspective on the industry as it stands," argues Barlas. He explains that "today, for our government, the most important issue is the cost of healthcare and pharmaceuticals... if this perspective shifts and we are able to communicate our needs better to the government, then achieving this vision may yet be attainable." Yet, much progress is being made across the industry with numerous biosimilar development projects underway, and other investments in higher value manufacturing activities taking place. In fact, while "some existing policies are still contradictory to this 2023 vision," Pfizer country manager Elif Aral alleges that "the government has made it clear that they will support the industry moving forward, and not continue to treat it as a cost that must be contained."

Süha Taşpolatoğlu, CEO, Abdi Ibrahim

METAMORPHOSIS UNDER PRESSURE

In terms of Turkish Lira, pharmaceutical spending returned to above inflation growth in 2014, rising 10.1 percent to TRY 16.3 billion (USD 7.45 billion) in 2014, after actually falling 4.1 percent in 2012, according to IMS and TurkStat. However, local manufacturers are quick to point out that this growth is not distributed evenly across the industry. Cengiz Celayir, president of the Pharmaceutical Industry Association of Turkey (TISD), points out that "original imported products make up only three percent of the market by volume, but have a market share of 27 percent in terms of value, and this is the segment that is seeing some revenue growth at present."

Ersin Erfa, general manager, Centurion

Santa Farma chairman and CEO Erol Kiresepi argues "this is the problem faced by the local industry today. Our prices are low, and the products we're offering on the market are primarily generics...the market increase last year has primarily been a result of high value, low volume products coming from multinationals." In line with the government's heavy emphasis on R&D and producing more value added pharmaceutical products, Kiresepi asserts that "companies need to focus on building up exports, reinforcing R&D, and restructuring portfolios to account for changing market dynamics. As such, he contends "the future of local producers will lie in specialty products, OTC, and exports, all of which we're currently building up our capabilities in."

Berk Özdemir, general manager, Omega CRO

"The pricing situation is now a fact of life," says Cem Baydar, senior principal consultant for IMS in the Turkey and Near East region. Reference prices in Turkey are constructed from the lowest price in France, Greece, Italy, Spain or Portugal, converted to Turkish Lira at a rate of TRY 1.9595 per EUR, and then the public payer, the SGK, pays a discounted price, which was set in agreement with the industry consensus in 2009 at 11 percent. In December 2009 the government arbitrarily raised the discount rate to 23 percent, then to 31.5 percent in December 2010, and again to 41 percent in November 2011; the conversion rate was not changed at all until June 2015, when it was raised by 2.07 percent to TRY 2.00 per EUR, and and in July it was increased by another 3.9 percent to TRY 2.0787 per EUR, at which point the market exchange rate was approximately TRY 3 per EUR. As a result, Turkish pharmaceutical prices are now at approximately 38 percent of the lowest prices in Europe, save in a few special circumstances where alternative pricing arrangements are in place.

Faruk Çelik, minister of labor and social security

Ümit Yaldiz, head of Greater Turkey for Merck Millipore, argues that "with the change in the pricing model... companies were forced to restructure their businesses and overhaul their operating models; as such, the industry has become much more efficient, and much more competitive in the global arena, and from this perspective cutting prices was the right move and the policies have had a positive impact." Cem Baydar of IMS explains that "companies had to adapt and implemented change management programs that are now mostly completed," detailing how the top ten companies have reduced their sales forces by 44 percent over the last five years.

Fatma Taman, chair, ISPE

On the topic of spending growth, Baydar says that "the market has changed and is going in a new direction... specialty care is on the rise... and the hospital channel is outpacing the retail channel; sales in the hospital channel increased by 20 percent last year, while retail only increased by 8 percent," and will continue to grow with the "growth of private hospital chains and the opening of new public hospitals."

The healthcare system itself is growing rapidly, including the private hospital sector, which is tied closely to the public system. "70 percent of patients in private hospitals are referred from the public system and are covered [at least partially] by social security," explains Cevat Sengül, secretary general of the Association of Private Hospitals and Health Institutions (OHSAD). "18.9 percent of Turkish hospital beds and 23.8 percent of specialist physicians are in private institutions," according to Sengül, yet private hospitals "have 38.3 percent of the ICU beds and perform 53 percent of class A1 surgeries, the most complex category of procedures." Furthermore, the private sector is expected to grow significantly: Sengül expects "that by 2020, the sector's revenue will double to USD 20 billion."

Ümit Dereli, general secretary, AIFD

For the pharmaceutical industry, this means that the private hospital system represents a large and fast growing market. Ufuk Kumrulu, chairman of IV solutions manufacturer Polifarma, explains that "the private healthcare sector has been growing strongly since the early 2000s, and Polifarma identified this trend early on, so we have sold and marketed to private hospitals for many years now." According to Kumrulu, "today 30 percent of the total [parenteral solution] product consumption is in the private system, and we think the private sector's share of the market will continue to grow over the next several years."

Emin Fadillioğlu, VP and Area GM, GSK Pharmaceuticals, Turkey and Caucasus region

The public sector also continues to grow, with new hospitals being opened across the country and occupancy rates rising. "In public hospitals, the system is based on tenders," explains Kumrulu, and this tender process began to change in the last year, "as in all cities' hospital management systems, purchasing, and stock management have been consolidated underneath a single institution, which has raised the size of tenders and depressed prices."

Cenk Sokmen, general manager, Genzyme

While it is critical that Turkey invests in expanding its healthcare system to ensure that infrastructure is able to support the growing demand for healthcare services as Turkey's population ages, the country must also invest in physicians to get the best value out of those investments. "The current defining circumstance in Turkey is that we have limited human resources in healthcare and have the lowest number of doctors per capita in Europe," explains former minister of health Akdağ. UCB's managing director, Özdemir Şengören, indicates that this shortage creates significant access problems for patients. "When you drill down," she says, "you discover that in Turkey there are patients that have had an epilepsy diagnosis for many years... who still complain that they can't find ... an epileptologist, to treat them. Patients also complain that when visiting hospitals, they can't ask their physicians the questions they have because each patient has very limited time with the doctor," due to the incredible number of patients each physician must see each day.

Murat Barlas, CEO, Liba Laboratories

Murat Uslu, general manager for Actelion Turkey, echoes Şengören's comments. "The Turkish healthcare system has a lot of excellent facilities, while some others have quite a way to go in terms of equipment and workload, and this of course affects physicians' ability to efficiently diagnose patients. The number of physicians, and the number of specialists per capita is very low in Turkey, making it difficult for physicians to dedicate sufficient time to each patient."

World Medicine: An Emerging Giant

WHY INVEST IN TURKEY?

"Turkey is already an attractive investment destination for multinational pharma companies for a variety of reasons, including geographic location, market size and composition, the aging population of 75 million people and likely healthcare spending escalation in the future," explains Ümit Dereli, secretary general of the AIFD. "More importantly, the timing is right as Turkey is still in a phase of fast economic growth relative to developed economies. The timing will not remain this favorable for long, and there are a number of factors that are discouraging investment in the industry, from Turkey or abroad, at present." Dilek Bayraktar, secretary general of the innovative medical devices industry association (ARTED), adds that "the average Turkish person is still getting used to having access to publicly reimbursed healthcare services, so healthcare demand will certainly rise on both a per capita and aggregate basis. Economic growth is also expected to continue at a rate above that of the developed economies... and Turkey continues to be the most stable country in the region. On the whole, investing in Turkey makes sense; the remaining challenges are making it attractive for medical device manufacturers specifically." This situation is the same for the pharmaceutical industry, with Novartis country president Peter Catalino saying that despite the attractive economic factors, Novartis "would need to see much stronger investment incentives that were more competitive with those offered in other countries," before considering large scale investments in Turkey.

Šebnem Avšar Tuna, general manager, Novo Nordisk

In fact, some companies have recently chosen to invest in Turkey on these macroeconomic factors alone, despite the lack of competitive pharmaceutical investment incentives. Recordati recently made the decision to develop a second production plant in Turkey, with a planned investment of USD 50 million. "Turkey's entrepreneurship friendly environment is one of the two main reasons why it is the right time for Recordati to invest here," explains Ä°smail Yormaz, VP and regional director for Recordati's southeast region. "The other reason is the demand, the need that currently exists in Turkey and will grow in the coming years." He continues, saying "I do not know what will happen in the short term for the Turkish pharmaceutical environment, but I am quite certain of what will happen in the mid to long-term; the Turkish pharmaceutical market will continue to grow, because Turkey has a growing population, one of the youngest populations in Europe, and as this population ages its medical needs will increase, particularly in chronic areas. For the last 12 months Turkish pharmaceutical consumption has grown in the double digits. Furthermore, Turkey has strong human resources for pharmaceutical production with a lot of expertise, experience, and knowhow. Lastly, the surrounding region also has growing needs for medication, and given the political situation in some nearby countries, Turkey is optimally positioned to supply these markets."

Ahu Yazici, general manager, BMS

Feliz Balcay, general manager for Chiesi Turkey, echoes Yormaz, explaining that Chiesi's "aspiration is to position Turkey as a hub for management and manufacturing; Turkey is already positioned as a regional management center for many multinational pharmaceutical companies. However, there is still a need for a better framework for potential investors in manufacturing in the country." These multinationals include GSK, who relocated their regional management hub for their pharma business for the Middle East, North Africa and CIS regions to Istanbul in 2012. Other companies have since followed. Ilker Özbay, general manager for Daiichi Sankyo Turkey, explains that "since 2012, we have expanded our business to cover markets such as Azerbaijan, Kazakhstan, Algeria, and soon Ukraine and Nigeria... We prioritized this geographic expansion in 2012 because it was apparent that the Turkish market was unlikely to grow... [and this strategy] helped us achieve revenue growth in a stagnant market, and increase our profitability."

Asgar Ragoonwala, managing director, Janssen

Thus far, the Turkish government has not introduced any meaningful incentives to encourage such investments, but due to the current market access situation in Turkey, there are certain advantages to developing local production. Products manufactured in Turkey are given significant advantages at the reimbursement stage, strongly demonstrating the government's aim to achieve a local production rate of 60 percent by 2023. Yadigar Gökalp Ä°lhan, president of the Social Security Institution (SGK), explains that the institution encourages "companies to produce medications in Turkey instead of importing by providing an easier payment system... With respect to incentivizing local manufacturing, some arrangements were made for adding locally produced products to the SGK's reimbursement list, and these products will have the privilege of getting reimbursement first."

Prof. Dr. Özkan Ünal, Turkish Drug and Medical Devices Agency (TITCK)

The standard of pharmaceutical reimbursement is quite high, as Novo Nordisk Turkey's general manager Şebnem Avşar Tuna affirms. "Turkish universal health insurance provides a very strong foundation for healthcare treatment in general; ... we are able to provide modern insulins for the treatment of people with diabetes; established insulin products are fully reimbursed." Yet, for highly innovative products, "market access is the main barrier of growth for innovators, to the extent that one of our combination products was submitted for reimbursement 960 days ago and still hasn't been approved," says Ilker Özbay, general manager of Daiichi Sankyo Turkey. Under this incentive structure, of strong reimbursement but sometimes slow and limited market access, the Turkish Pharmacists Association (TEB) has become the country's largest importer of registered and unregistered drugs from abroad. However, in hope of creating a more favorable appeal for foreign companies operating in Turkey, the government has begun implementing new channels that will allow these companies to play a more active role in addressing the clinical needs of Turkish citizens. "Recently, SGK commenced an initiative to involve more Turkish affiliates of multinational pharmaceutical companies [to import]," says Gökhan Gökçe, one of YükselKarkinKüçük's founding partners. "Currently, although more so in the past, trading companies have been supplying products to TEB, after which point TEB would sell to SGK. Now, the subsidiaries of those large manufacturers in Turkey will be the ones interacting with SGK and adopting alternative reimbursement models." Such an initiative will help create a shared platform for foreign companies to expand their current commercial activities in Turkey through imports, while also expanding the range of medicinal treatments available for the local population and alleviating any supply shortages for certain medications.

Şebnem Girgin, managing director, Lundbeck

Under the leadership of Nezih Barut, the third generation of the family to run the company, Abdi Ibrahim has sought to become and be seen as increasingly innovative, and as such, the company embarked on a 50-50 joint venture with leading Japanese innovator Otsuka in 2012. Tuna Yavuz, general manager of the joint venture, called Abdi Ibrahim Otsuka, argues that this strong "reimbursement system poses other challenges, as reimbursement payments are currently made according to the product class, meaning that the social security institution will buy and pay for illegal generic copies of patented drugs; the responsibility of enforcing a patent falls on the patent holder, who must sue the patent violator, resulting in costly and extended legal battles."

Nobel: The Global Turkish Brand

GMP requirements and inspection timelines also indirectly encourage local production. Daniel Lucas, managing director of Lilly Turkey, explains "that since 2009, a Turkish GMP certificate is required prior to an application for marketing approval, which requires an onsite inspection and thus has significantly delayed the registration process." Yavuz claims that "to expedite product approvals, we decided to establish local production of our products using Abdi Ibrahim's facilities; this accelerated the GMP certification process significantly."

Cengiz Celayir, president, TISD

Many other firms have and are utilizing the option to localize production through toll-manufacturing agreements with local manufacturers. "Lundbeck is very proud to have taken action, and has transferred technology and brought innovative manufacturing activities to Turkey," affirms Şebnem Girgin, the managing director of the company's Turkish affiliate. "With our local manufacturing partner, Pharmavision, we have completed the technology transfer necessary to produce our innovative antidepressant product and we obtained marketing authorization for this molecule as a locally manufactured product at the end of 2014." According to UCB Turkey's managing director Özdemir Şengören, "93 percent of our sales by volume are produced in Turkey, mostly in our established brands. This is very critical for a small company like UCB, and for our size we have made some very effective investments in partnerships with Pharmavision, Bilim, and Adeka. In terms of 2023 objectives, we have efficiently localized production and helped to increase the Turkish manufacturing capacity utilization rate."

Mehmet N. Pisak, vice chairman & CEO, Imuneks Farma

However, it is important to recognize that Turkey does recognize foreign GMP certificates in theory, if there is mutual recognition of Turkish GMP certificates in the country in question. At present, Turkish GMP standards are not widely recognized, and this is limiting the export potential of the Turkish industry, for both Turkish producers and multinationals considering investing in the country. According to Özkan Ünal, president of the Turkish Drug and Medical Devices Agency (TITCK), this situation is in the process of being resolved. "Turkey applied to become a full member of PIC/S in 2013... At present, we are aiming to become a full member of PIC/S in one year." The expectation is that as a fully accredited PIC/S member, Turkey will be able to establish mutual recognition agreements with other members more easily, and in Ünal's words, "once this accreditation comes through it will bring many new opportunities to our pharmaceutical manufacturers in export markets."

Uğur Bingöl, managing director Ibrahim Etem Menarini

QUALITY AND CAPACITY

With 78 pharmaceutical manufacturing plants registered in Turkey in 2013, owned by 74 separate companies, 16 of them multinationals, the number is continuing to grow with investments in greenfield facilities from both Turkish and multinational players continuing.

Hatice Demiray, managing director, MSD

Yet, according to Cengiz Celayir, president of the Pharmaceutical Industry Association of Turkey (TISD), "roughly 30 percent of conventional dosage form manufacturing capacity is idle." Thus, "we have the capacity to export... and there are many companies that do some contract manufacturing on the side," which has in effect prevented the establishment of pure contract manufacturing organizations in Turkey, apart from a single example, Pharmavision. As Murat Barlas, chairman of Liba recounts, this is not a new situation. "It started in the 1990s... at that time we realized that there is a huge unfilled capacity in Turkey. In competitive areas, there were so many similar products that most of them did not bring any added value, and instead, many pharmaceutical products were becoming more like commodities."

The distribution of this excess capacity is far from uniform. Menarini's Turkish subsidiary, Ibrahim Etem Menarini, "would like to be a source for Menarini affiliate in the region," according to managing director Uğur Bingöl, but "due to our very high utilization rate of our facilities we do not have the capacity to become a true manufacturing hub." Currently the affiliate "exports a small number of products to countries like Azerbaijan, Afghanistan, Kosovo and Somalia." Bingöl continues, saying "having a very high level of utilization, one of the highest in Turkey, also means that we are constrained in terms of developing domestic business as well, as we have very minimal excess capacity to use for new products or to contract out as a toll manufacturer. However, this is of course a positive situation in terms of efficiency, and we are proud to be working two or even three shifts for some production lines."

Polifarma: From Parenteral to Hospital Solutions

One of the most sophisticated and technically advanced manufacturers in Turkey, Deva, shows that demand for manufacturing varies significantly across different dosage forms. "We can produce nearly all pharmaceutical forms, from tablets and capsules, to inhalation products, sterile injectables, creams, suppositories, etc," says CEO Philipp Haas. He explains that Deva's utilization rate "varies significantly from one area to another; in some production lines we are quite full, while in others we have a lot of capacity left... on average we're at about 50 percent capacity across the board... however, in some key areas... we will soon be reaching the limit." Deva's technical capabilities and versatility has been critical to the firm's recent success, as "this has allowed us to take on business opportunities that other Turkish firms are unable to, as we have licensed product portfolios from Roche and BMS, in 2008 and 2010 respectively, that contained a wide variety of individual products... We were able to do these deals because we can produce all of the products."

Manufacturers who have entered the Turkish pharma sector more recently, such as Pharmactive and World Medicine, have significant excess capacity, with which they can develop exports. World Medicine recently "made the decision to build factories in Turkey," due to "Turkey's geographical position and the political situation in the surrounding region, as well as the support from the Turkish government for the development of pharmaceutical production," according to founder and chairman Rovshan Tagiyev. "One production facility has now been finished (with plans for another three to be built in Turkey), which has a production capacity of 70 million units in various dosage forms that produce a range of solids, liquids, softgelatin capsules, semiliquids, sterile eye drops, and antiasthmatic inhalers," explains Tagiyev, and "despite the fact that World Medicine has strong sales in the countries that we export to, because our Turkish production facility is quite new we still have excess capacity to support our expansion." Pharmactive's facility is significantly larger, "with a production capacity of 330 million units per year, of which we are utilizing approximately 15 percent at present, and hope to increase this to 18 to 20 percent by the end of the year if things go well," general manager Köksal Ülgen details. Erol Kiresepti, chairman and CEO of Santa Farma, also introduces his firm's new facility, saying that the new plant will be located in an 80,000 sq meter area outside of the city, with a closed area of 42,000 sq meters... [and upon completion] "it will have a capacity of 150 million units per year. This is, by definition, the newest and most modern facility in Turkey."

Özdemir Şengören, managing director UCB

In addition to facilitating trade with the CIS and MENA regions, this new asset was meticulously designed in such a way to allow the company to eventually penetrate a developed market where many Turkish brands have dreamed of going, but few have actually gone-the United States. "We've been working with two international advisors to design the production facility in compliance with the anticipated changes to the FDA and EU GMP changes coming in the next few years," highlights Kiresepi. Ultimately, the aim of "this new plant will be to attract business not only from Turkish companies operating in the local market, but also international companies looking for superior and costeffective manufacturing capabilities combined However, Muzzaffer Bal, general manager of Ali Raif, highlights the importance of current export developments explaining that "until only a few decades [earlier], Turkey paled in comparison to other emerging countries with regards to export volume... The economy was still in its early onset of globalization and exhibited more closed-border commerce-and the pharmaceutical industry was no exception.

Elif Celik, general manager, Eczacibasi Baxter

The effects of globalization on Turkey's economy have been self-evident-increased trade activity, and in turn GDP, multicultural exchange of skills and labor, and an accelerated rate of industrialization. But, perhaps less obvious, are the effects on local Turkish pharmaceutical players and their strategies to drive commercial success. "Traditionally it's been 50% in-licensing and 50% proprietary production. But as the local environment became increasingly accessible, with less stringent import controls and more favorable incentives for FDI, many of our former licensors either acquired their own Turkish distributors or established an affiliate office in Turkey," recounts Bal.

Murat Uslu, general manager, Actelion

Founding partner of Yüksel KarkinKüçük, Gökhan Gökçe agrees. "In the interest of profitability, efficiency, and long-term sustainability, many of these pharmaceutical and medical device companies are [now] contemplating going direct to market," leaving domestic pharmaceutical players such as Ali Raif to shift from primarily licensors to proprietary manufacturers-strictly to maintain a competitive positioning in the market. "We had the opportunity to work with upwards of 20 MNCs at one point-enabling us to obtain several market leading positions across Europe over the years. Now we've extensively pursued our own R&D and production initiatives-producing approximately 75 percent of our own generics, with the remaining portion of our portfolio attributed to in-licensing," details Bal. with the geostrategic advantages of Turkey based operations."

Köksal Ülgen, general manager, Pharmactive

MOVING UP THE VALUE CHAIN

With the Tenth Development Plan specifically aiming to encourage the production of medicines with "high value added," Turkey's government is seeking to create production of several categories of products, including vaccines, blood products, and biosimilars in Turkey. In pursuit of this goal, a few subsidy programs and public private partnership projects have emerged, and several multinationals have made significant investments to support the achievement of this goal.

Philipp Haas, CEO, Deva

Partnerships between Turkish pharmaceutical producers and multinationals are also on the rise under a variety of structures, but general manager Tuna Yavuz explains that Abdi Ibrahim Otsuka will be the only joint venture offering "the opportunity to manufacture several products within Otsuka's portfolio of highly demanded, blockbuster drugs such as Samsca, Pletal, and Abilify, which brings high 'value added' activities to Turkey, and will help to build pharmaceutical exports."

Pharmactive: Adapting to Demand

On the vaccine front, Pfizer has taken the lead. As Elif Aral, country manager for Pfizer Turkey explains, "in the last five years we developed a new, much more advanced facility to manufacture Prevnar, a vaccine that won the US Prix Galien in 2011. The new Prevnar manufacturing facility, developed in partnership with Mefar, is only the third manufacturing site for Prevenar in the world after sites in the US and Ireland, and is the first locally manufactured vaccine in Turkey," with the first commercial batches completed in 2012.

Muzaffer Bal, general manager, Ali Raif

As for biotech and biosimilars, Genzyme Turkey's general manager Cenk Sokmen explains that "at the moment, Turkey does not have the necessary infrastructure for biotech manufacturing, however, looking at the president's 'Vision 2023' strategies and relevant development plans it is clear that there is certainly the political will, the technical knowhow, and overall capability to accelerate our industry to the top ten." The government entities directly engaged in biotech and biosimilar development projects include the Scientific and Technological Research Council of Turkey (Tubitak) and several ministries. Ersin Erfa, CEO of Centurion, says "the government has been very supportive of companies developing biotech manufacturing, providing some financial support and cooperating in the regulatory environment. Of course there are other countries with more robust incentive programs, but overall Turkey has offered an effective set of incentives, and clarity as to their policy agenda to minimize uncertainty, which is much more than we could have said a few years ago. As a Turkish company that wants to invest in Turkey, they've done more than enough to encourage us to do so." Furthermore, the Turkish Drug and Medical Device Agency (TITCK) "is supporting the development of the Turkish biosimliar sector by developing an appropriate regulatory access approach that will allow biosimilar products to be evaluated more quickly and effectively," according to the agency's president, Özkan Ünal.

Ufuk Kumrulu, chairman, Polifarma

"Another program was created with the purpose of providing financial support to promising biotech projects," explains Hasan Ulusoy, chairman of Nobel, "and after a competition in which 23 companies submitted 28 projects, Nobel's submission was selected as the only project worthy of this support." As of June 2015, a second project was approved under this program, submitted by Atabay. "We signed the agreement and have already started work on the development of an oncological biosimilar product from scratch, with Tubitak as a partner." Ulusoy's goal is to "bring the product to market by 2023, which means beginning phase II trials by 2019."

Cevat Şengül, secretary general, OHSAD

For Atabay, assistant vice president Zeynep Atabay explains that "for this project we will be working with Marmara University, Boğaziçi University, and Istanbul Technical University and their molecular biology and biotechnology research center, Mobgam. 50 percent of our R&D expenses will be reimbursed... through Tubitak, who is also a partner for this project, and overall the expected timeline is 48 months, but we will be eligible for government support for an additional 12 months, which we will likely need."

Dilek Bayraktar, secretary general, ARTED

On the production side, several companies are already developing biosimilar manufacturing facilities, to be used for manufacturing products in conjunction with foreign partners. Erfa explains that Centurion, currently the market leader in many plasma derivative categories, is now "working with a strong and reliable partner, Amega Biotech from Argentina, to develop a new biotechnology manufacturing plant." This facility "will produce, fill, and finish injectable biosimilar products, and we hope that its development will be finished in about 30 months."

Tuna Yavuz, managing director, Abdi Ibrahim Otsuka, Turkey

Abdi Ibrahim, the leading Turkish pharma company by revenue, began construction of AbdiBio, a greenfield biotech manufacturing and R&D facility with a planned cost of USD 100 million, in June 2015. "The facility we are building will be capable of carrying out the full biosimilar production process, from cell culture growth or fermentation to purification, then fill and finish processes," explains CEO Süha Taşpolatoğlu. "The facility will likely also perform a toll manufacturing function for some clients at the fill and finish stage." He continues by saying that the primary goal is "to be able to work with biotechnology companies from all over the world to codevelop new biologicals, and to carry out the full production process."

Peter Catalino, country president, Novartis

THE INDUSTRY'S CRITIQUE

Despite the progress the Turkish pharmaceutical industry is making in terms of producing higher value products, developing biosimilar production, and the exciting advancements in R&D, there are still clearly many issues to be solved in Turkey. The government is taking effective steps to support the industry in achieving many of its targets, but they have done little so far to improve other aspects of the environment for investment and innovation, particularly with respect to pricing. Of course, the industry recognizes that the government introduced mandatory public discounts for good reasons, as Feliz Balcay, general manager of Chiesi Turkey, explains. "The expansion of healthcare services [under the healthcare transformation program] had an impact on total healthcare expenditures; pharma spending soared and austerity measures were introduced to manage the total pharma budget."

Elif Aral, country manager, Pfizer

Containing spending has become particularly important in the context of healthcare sustainability, due to Turkey's aging demographic structure. BMS Turkey general manager Ahu Yazici claims that "the system has spread itself very thin by trying to invest in all areas of healthcare, and therefore is not able to invest meaningfully in any area. Ideally, all healthcare costs must be controlled and balanced, including hospital costs, treatment costs, and other categories, with drug costs as only one component." Balcay agrees that the Turkish "healthcare system is in need of better budget allocation in order to sustain their services. Innovative medicines and solutions should be assessed using a value-based pricing approach, as well as based on clinical outcome and safety."

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While the industry does see some progress on reforming pricing practices, there are still doubts as to the government's true intentions. Yazici explains that "we are also seeing the possibility of change for the pricing of certain product types, as the SGK is now discussing [various] alternative reimbursement models with the industry and other government stakeholders." Pfizer Turkey's GM Elif Aral clarifies: "they invited the industry to develop proposals for alternative payment systems, and while there are no concrete examples yet, discussions are moving forward." While some are quite hopeful that these discussion may represent progress, and that these 'alternative models' could be designed to include value-driven pricing mechanisms, others such as Raf Vrints, Celgene Turkey's general manager, maintain that "it is very important that we ensure these discussions do not become another cost containment exercise, and this may be difficult because we have seen this is still the SGK's mentality."

Orhan Mutlu Topal, managing director, Keymen

Making progress on any of these points may be difficult due to various communication challenges, and a lack of clarity surrounding who in government should take the lead on various issues. Incesu notes that "it is very important to work closely with the key decision makers, to build real and strong partnerships with stakeholders, as well as to maximize the level of investment for our patients... We are in constant contact with not only the ministry of health, but also the ministry of labor and social security, the ministry of development, ministry of industry, the treasury, and many other government stakeholders. The challenge is addressing the right need to bring all parties together and create a valuable program for our patients." For Şebnem Avşar Tuna, general manager of Novo Nordisk Turkey, "my most important responsibility is to continue to communicate with regulators and public servants... and to help find solutions that allow us to bring innovative products to patients in Turkey, while achieving a sustainable financial outcome."

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Ultimately, the Turkish government and its relevant stakeholders strive to keep its citizens' best interests in mind when reforming existing regulations and introducing new policies. "The Turkish life sciences industry is not so different from other developing countries' markets," says Sevi Firat, founding partner of Firat Izgi. "The Turkish government has made R&D in pharmaceuticals a priority and we see this as a way to break from the past difficulties the pharmaceutical market faced here. This is an area which generates jobs and income, while showing that Turkey is strong in terms of R&D globally and [that it] will become a rising star in its region."

Erol Kiresepi, chairman & CEO, Santa Farma

FRAMEWORK FOR R&D INVESTMENT

Multinational R&D investment in Turkey, particularly investment in clinical trials, has been quite limited relative to the size of the Turkish pharmaceutical market. Turkish R&D spending totaled TRY 14.8 billion (USD 7.77 billion) in 2013, just 0.95 percent of GDP according to TurkStat; President Erdogan's 'Vision 2023' includes the target to increase this ratio to three percent of GDP by 2023. R&D spending on all healthcare related topics has grown at a CAGR of 8.3 percent per year since 2009, reaching TRY 2.217 billion (USD 1.16 billion) in 2013, with pharmaceutical investment on pharmaceutical clinical trials accounting for only TRY 85 million (USD 45 million).

Filiz Balcay, general manager, Chiesi

One of the major limiting factors for pharmaceutical R&D investment in Turkey is the small number of certified clinical trial research centers capable of carrying out early phase trials; in a country of 75 million, there are only six such centers, with one of which only opened in May 2015. As such, Turkey is not particularly competitive in R&D when compared to countries with robust, often government funded, research infrastructure, and as such the ratio of pharmaceutical R&D spending to pharmaceutical expenditures in Turkey is low relative to many other countries. According to AIFD chairman and GSK VP and Area GM Emin Fadillioğlu, "our level of investment in R&D is USD one billion lower than it would be if our R&D share matched our share of [global] expenditures." At present, the Tenth Development Plan includes targets to increase the number of clinical trial centers to 13 by 2018, and "to increase the number of clinical trials by 25 percent each year until 2023," according to TITCK president Özkan Ünal.

Philippe Méa, general manager, Servier

Lundbeck Turkey general manager Şebnem Girgin indicates that the company has "been extremely satisfied with the quality of the neurology and psychiatry centers in Turkey when it comes to R&D cooperation, and we have identified a few as key centers for future global studies in this area," demonstrating that expertise and capabilities do exist to support more investment in clinical trials. Founded in 1997, the key player in the Turkish clinical trial industry is Omega CRO, the first Turkish CRO, and according to CEO Berk Özdemir, "the only truly full service CRO in Turkey; other local CROs have limited services and outsource work to us." As he explains, "the Turkish clinical trial area has changed a lot since Omega CRO was founded; at the beginning we didn't have a solid regulatory framework, then we had solid regulations but the timelines became too slow, and now we have optimal regulation with optimal timelines." Regarding the current clinical trial environment, Özdemir admits Turkey is "still not very competitive, it is difficult for us to substantially increase the number of global trials we can attract... [However], there are some very good projects underway in line with the Vision 2023 goals, and the Ministry of Health recently hosted a workshop in Izmir on how to attract more clinical trials."

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Yet, one multinational has taken a strong interest in bringing high value R&D activities to Turkey, going beyond clinical trials and bringing basic drug research to Turkey. "AstraZeneca has signed a collaboration agreement with Koç University, that gave us responsibility for preclinical testing and research for a few candidate molecules, as well as access to their broader open innovation chemical library," according to Burak Erman, head of the Drug Research Center at Koç University. AstraZeneca Turkey's country president Pelin Eriştiren Incesu explains that "some of the projects have progressed very well, and the Turkish scientists involved have travelled to AstraZeneca HQ in Cambridge to present their findings, and we remain confident that one or two of these projects will proceed to the clinical development phase, and maybe become the first drug of Turkish origin in the coming years." AstraZeneca's support of this project demonstrates that the company is "on the right track to building scientific leadership," one of the three pillars of AstraZeneca's current global strategy, according to Incesu.

Ismail Yormaz, VP and regional director South East, Recordati

TURKISH INNOVATION

Apart from R&D efforts in the field of biosimilars, several locals and multinationals are taking strong innovative steps. Mehmet Pisak, one of the former owners of Mustafa Nevzat, which was sold to Amgen in 2012, and now CEO of Imuneks Farma, contends "supergeneric product development makes a lot of sense for Turkish companies. Combination products are the starting point, which are very popular in Turkey right now, and we as Imuneks Farma have three of them with marketing authorization in Turkey. Further down the road, a few of the larger Turkish players might be able to develop a molecule from scratch." Imuneks has four patents, two approved and two pending, for "a rare disease product... another is in ophthalmology, and two others are for antiviral products. The first two were just approved in the US and EU." Pisak continues, "These are drug repositioning projects, where we took an existing molecule and targeted a new indication with a new formulation... We're maybe three years away from bringing at least one of these products to market."

Sven Schmidt, country division head, Bayer

Larger Turkish companies like Abdi Ibrahim and Nobel are also investing in innovation, with combination products being the best example of value added products that have reached the market; as Hasan Ulusoy, chairman of Nobel describes, "most R&D in Turkey is done in the context of generic development, while there is some product innovation in terms of combination products and improved formulations." Abdi Ibrahim fits this description. CEO Süha Taşpolatoğlu recounts that the company's R&D unit has "developed several generic products which are the first generic versions of the molecule worldwide, and several of the products developed by our team are sold in Europe by our [multinational] partner companies," and is beginning to make headway in "value-added product development, specifically in combination products; we have already launched our first [combination product] on the Turkish market and have others in development."

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Nobel is working to innovate on a higher level, as Ulusoy explains. "Nobel has started some elementary research for an original product, and in this respect I believe we are the only Turkish company to have invested so much in R&D. Currently this product is in a phase I clinical trial."

Pelin Incesu, president, AstraZeneca

According to CEO Ersin Erfa, Centurion is also working on "the development of a new orphan drug, a new molecule to treat pulmonary sarcoidosis... This new molecule is currently in phase III of clinical development, and we hope that it will become the first molecule to be developed by a Turkish company to reach the market, which should occur within the next two years."

Daniel Lucas, general manager, Lilly