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Tim W Hayes  03/02/2007 04:29:05 PM  From  DB/Inbox:  Tim W Hayes

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UNCLAS    SENSITIVE     ANKARA 00293

SIPDIS
CX:
    ACTION: ECON
    INFO:   PA RAO FAS MGT PMA FCS POL DCM AMB CONS

DISSEMINATION: ECON /1
CHARGE: PROG

APPROVED: ECON:TGOLDBERGER
DRAFTED: ECON:RKIMBRELL
CLEARED: IST:SSO, FCS:JF, ECON: AS, AS

VZCZCAYI125
PP RUEHC RUCPDOC RUEHIT RUEHDA RUEHBS RUEATRS
DE RUEHAK #0293/01 0431223
ZNR UUUUU ZZH
P 121223Z FEB 07
FM AMEMBASSY ANKARA
TO RUEHC/SECSTATE WASHDC PRIORITY 0916
INFO RUCPDOC/USDOC WASHDC PRIORITY
RUEHIT/AMCONSUL ISTANBUL 2099
RUEHDA/AMCONSUL ADANA 1640
RUEHBS/USEU BRUSSELS
RUEATRS/DEPT OF TREASURY WASHDC

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. 
 
-------------------------------------------- 
14TH LARGEST MARKET FOR PHARMACEUTICAL SALES 
-------------------------------------------- 
 
¶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. 
 
----------------------- 
LOW PRICES, HIGH VOLUME 
----------------------- 
 
¶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 
------------------------------------------- 
 
¶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. 
 
---------------------- 
AND SPEAKING OF IPR... 
---------------------- 
 
¶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. 
 
----------------------------------- 
SITUATION NOT PERFECT BUT LUCRATIVE 
----------------------------------- 
 
¶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