Brief Report on Turkey Pharmaceutical Market

8/2/2019 Brief Report on Turkey Pharmaceutical Market

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Turkey: A top tw ent y player

grow ing at an ex c ept ional rat e

Turkey: A top t w ent y p layer

grow ing at an ex c ept iona l ra te

Doctor Maymun by Mehmet Gleryz, 1976. Eczacibasi Ila Collection

Turkey ReportOctober 2005

Turkey remains a country between two worlds. Not only isit straddled between Asia and Europe, it also boasts a very strongand modern western industry and infrastructure together with amore informal economy estimated at 40% of GDP, more typical ofan emerging market.

Health status does not escape this dichotomy: on the one hand,unlike many developing economies, nearly 90% of Turkey's

population is covered under the national social security system; onthe other hand, the health status of its population is not as good asthat of other middle-income economies. Despite positivedevelopments over the past ten years, life expectancy (68.7 yearsin 2004) is still ten years shorter than the average of OECD'scountries. The most relevant indicator of Turkey's poor healthstatus is the country's abnormally high maternal and infantmortality rate. Although the latter drastically decreased from 52.4per 1,000 in 1990, to 38.3 per 1,000 in 2003, it is still nearly eighttimes higher than that of the US. Another example of Turkey's poorhealth planning is the heavy disparity in health indicators thatexists between urban and rural areas.

Universal health coverage, which should be finalized inautumn 2005, will enable 10 million Turks previouslyexcluded from the three existing social securities to haveaccess to health insurance. In the process those threeinstitutions also should be merged under a single umbrellaorganisation, hence ensuring homogenous coverage for theentire population.

In order to increase accessibility to medications, one of the

first measures to be instituted was extending reimbursementpatients for treatments purchased in non-state-hospitalpharmacies, explains Prof. Akdag. Previously, 30 millionworkers, pensioners and their families were trying to get theirdrugs from only 300 hospital pharmacies. Now they are able toget their drugs from 18,000 pharmacies.

Patients used to line up for hours at badly stocked statehospital pharmacies and often could not get the prescribed

90% o f t he Tu rk i sh popu la t i on a l ready

has hea l th insu rance . Un ive rsa l Heal thcoverage is on the w ay

But there are signs that the government, led by Prime MinisterRecep Tayyip Erdogan, leader of the Justice and DevelopmentParty or AK, is committed to changing this situation. The budgetof the Ministry of Health (MOH) was increased to 3.2% of theGDP in 2004 from 2.3% in 2002. Acknowledging the need forthorough reform of its health system, the government hasembarked on a major reform program: the Healthcare TransitionProgramme, whose goal is to modernize and rationallyrestructure the health system, including health services deliveryand financing.

Prof. Recep Akdag, pediatric professor and Minister of Health,explains the three most important aspects of this plan: The

Health Transition Programme will enable patients to accessphysicians and treatments more easily . The most important partis spreading the family practitioners throughout the country. Thesecond issue is to ensure that state, insurance and institutionalhospitals are opened to all citizens, more disciplined and turnedinto autonomous institutions. The third component is to offeruniversal health coverage, a measure which is underway . Headds: Over the last three years we have shown steadfastcommitment to implementing a serious healthcare transition

programme. Our policy on pharmaceuticals is closely related tothese issues.

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Turkey Report October 2005

The Health Transformation Programme also led to a law fixingthe status and role of family practitioners. Prof. Akdag believesthat increasing the systematic use of family practitioners is anessential part of the program and these practitioners also couldhelp reduce the government's burden by promoting rationaldrug usage: We believe that family practitioners will promotethe rational use of drugs within the use of a regular recordingsystem. The rational usage of drugs should compensate for the

extra expenses. We will use more necessary drugs and stopusing unnecessary drugs.

The need to increase and better control primary health care isessential and must adapt to social conditions in Turkey resultingfrom geographic and demographic factors such as isolated rural

in those areas with deficient health services; we have sent healthpersonnel working on a contract basis with higher base salariesand are putting emphasis on family planning, infant andmaternal care, explains Prof. Akdag, For example, we offer

financial support to the lowest income under the condition that

they attend regular health control encounters with doctors, andhave started a distribution campaign for free protective doses ofiron and vitamins for babies.

By enforcing the Health Transformation Programme, thegovernment of Turkey hopes to not only improve the nationalhealth care situation, but also to attract more investment in thepharmaceutical sector, explains Prof. Necdet Unuvar, theundersecretary of health at the MOH: Our policies should easethe accessibility of drugs to 70 million Turkish people, and willturn into an advantage for producers, wholesalers and

pharmacies alike.

populations in remote regions and anaging population and sociologicalchanges resulting from a rapid andpoorly planned urbanization, whichled to the creation of ghettos. Anotheri ssue resul t s f rom the h ighconcentration of providers such as

hospitals, pharmacies or doctors in thethree largest cities Istanbul, Izmir andAnkara.

The Health system deficiencies areparticularly significant in Easternparts of Turkey. In those regions, notonly is primary care very poor butlong lasting security issues limit thedelivery of healthcare services. Wecannot tolerate people who preventthe distribution of healthcareservices, and in this context we arelooking for more understanding andsupport from the Western world,remarks Prof. Akdag.

But he also stretches new efforts thegovernment is doing in these regions: Despite our limited resources, wehave invested and paid more attentionProf Recep Akdag, Minister of Health

treatment. With the new possibility of purchasing products fromregular pharmacies, accessibility to medication has improveddrastically. In order to finance these changes, pharmaceuticalcompanies were asked to give extra discounts of 11% for drugsthat have been available for more than six years and 4% fordrugs available less than six years.

This measure was praised by most stakeholders: patients, health

professionals, pharmaceutical manufacturers and pharmacists.But it also was so successful and triggered such growth inpharmaceutical sales that some fear the financial burden on analready notably cash-short government could become tooheavy in a country where pharmaceutical expendituresrepresent 50% of the overall healthcare budget (even though

The new reference-pricing system also takes into accountthe the Euro/Turkish Lira exchange rates by implementingprice adjustments when variations exceed 5%. This featureshould protect pharmaceutical companies products and thepatients against an often-devaluating Turkish Lira. In return

for these efforts the government agreed to shorten theregistration period for new drugs by allowing maximum of210 days to study an application; previously this could havetaken more than two years.

Another possible cost containment measure recommendedby many would be the implementation of an OTC regulationthat doesn't exist yet in Turkey. This seemingly very logicalsolution would automatically write off up to US$500 millionfrom the government's health bill. Having the 18,000members strong pharmacist association opposing thismeasure, the government doesn't seem to be going in thatdirection, although it doesn't reject the idea either.

drug usage per capita remains muchlower than in the rest of Europe) andcould lead to cuts in the currentlyguaranteed 80% reimbursement ratesor to delay the reimbursements.

Nevertheless Prof. Akdag isconfident that such outcomes areonly temporary and, should becompensated for by rational drugusage and the 2004 implementationof a new pricing policy, whichguarantees patients the cheapestdrugs in Europe through an objectivereference-pricing system.

The new system uses a referenceprice for an original medication thatis the cheapest price available in fiveEU count r ies . Gener ics a re

automatically priced at 80% of theoriginal drug. If the Turkish price fora drug is already the cheapest onethere is no price increase. This newpricing system resulted in a 14%price decrease, and today drugs are anaverage 14.5% cheaper in Turkeythan in the rest of Europe.




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On October 3rd of this year, the accessiontalks started between Turkey and the EU.Turkey is now facing a great challenge:Turkish accession inspires littleenthusiasm throughout and plenty ofdownright opposition among some EUmember's electorate.

But Turkey already has been linked to theEU for ten years through the CustomUnion Agreement, which was signed in1995. In an unique situation Turkey

accepted the Agreement beforebecoming a full member of the Union.The Agreement actually created anexceptional situation: under it, Turkeywas to implement data-exclusivitybeginning January 2001. However thiswas never done.

Two years ago disagreement about data-exclusivity emerged and resulted in thecreation of the AIFD which representsthe innovators in Turkey. For AltanDemirdere, the jovial president of AIFD

With a growing population of 70million, the implementation of universalhealthcare coverage and average annualdrug consumption per capita of only

US$85, Turkey is one of the world's mostpromising pharmaceutical markets.During the past two years partially as aresult of the government's HealthTransformation Programme, whichsubstantially increased access tomedicine, the growth in pharmaceuticalsales reached 25%, and this trend isexpected to continue until 2008.

On the economic front, Turkey isexperiencing unprecedented macro-economic stability. While the country'sGDP experienced an outstanding

average 9%-growth in 2004, long-timeplagues, such as inflation, have beenracketed down to historic single-digitfigures for the first time in decades. TheTurkish Lira even was revaluated againstthe euro and the dollar in 2005.

Today Turkey is among the top-15largest pharmaceutical markets in theworld and still growing at a double-digitrate. In 2004 the total ex-factory marketreached US$6.3 billion, and US$9billion in retail sales, which makes thecountry a far more promising market

than Russia, the other regional giant,or any EU newcomer.

About 300 companies (including 53foreign owned capital) are active in asector that employs 23,000 workers. Allthe big pharmaceutical companies arerepresented in Turkey, but the marketleaders are local Abdi Ibrahim andEczacibasi.

With 5,000 products available on themarket, and one of the world's highest

generic penetration (55% in volume and40% in value), competition in Turkey isfierce. But talking about generics inTurkey can be different because the very

notion of generics is not well understoodby the public: generic brands are so strongand well-established that the public oftensees no difference between a generic and apatented drug. As a result, the marketingand sales effort that generic companiesdevelop to support their sales in Turkey iscloser to that required for patent holders.

In the past, foreign companies used toenter the Turkish market through

For t he pas t t w o years sales are inc reasing in

doub le d ig i t s f i gu rescontracting local companies and givingthem licences both for manufacturing anddistribution. But this now has changedand most international companies haveterminated their contracts and establishedlocal subsidiaries instead. They noweither manufacture their products inTurkey or import them. Imports haveincreased by 207% between 1999 and2004 and represented 38% of the entiremarket in value and 14% in volume in2004.

On the regulatory front, Turkey is gettingsignificantly closer to the standards ofdeveloped countries, as importantdevelopments have occurred over the pastten years:

- In 1995 the patent legislation wasapproved.- In 1996 the Customs Union Agreementwith the EU was signed, and the Generics'Registration law was introduced.- I n 1997 b i oequ i va l ence and

Turk ish De ligh ts : Unprecedented Macro-Econom ic Stab i l i t y

% 35

% 4

% 10

% 51

Or ig inal , impo rted Gener ic , impo rted

Original, local Generic, local

% 32 % 28% 6

% 34

Or iginal , impor ted Gener ic, im portedOriginal, local Generic, local

ONE OF THE HI GHEST GENERIC PENETRATIONS IN TH E WORLD

Breakdown of Market by ValueBreakdown of Market by Volume

Sourc e IEIS / IMS 2004



bioavailability studies conducted inTurkey became mandatory for registeringgenerics.- In 1999 patent legislation entered its

implementation phase.- In 2001 Turkey became a member ofCADREAC (Collaboration Agreementbetween Drug Regulatory Authorities ofEuropean Union Associated Countries).- In 2004 reference-pricing systemlegislation was introduced.- In 2005, new registration legislation anddata exclusivity principles wereintroduced.

ONE OF THE HI GHEST GENERIC PENETRATIONS IN TH E WORLD


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Turkey Report

Blent Eczacibasi, President of IEIS, chairmanand CEO Eczacibasi

T he p ressu re o f compe t i t i on

and t he expo r t d r i ve i s push i ng

t h e c o m p a n i es t o w a r d s m o r e

i n t ens i ve R&D, w e need t o

become more i nnova t i ve

implementing a compulsory generic-substitution system, among others..

IEIS is asking the government to focus ona systematic licensing procedure wherecompetition in the generic industry wouldbe enhanced. There would be some declinein prices with a positive impact on the

public finances, but this needs to becomplemented with a faster incorporationof generic products into the reimbursementscheme, complements Turgut Tokgoz,general secretary of the IEIS.

Eczacibasi also notes that Turkey boastsstrong competitive advantages comparedto other countries where the genericindustry is in lower stages of development,mainly in terms of human capital and

physical infrastructure. Eczacibasi addsthat he hopes industry players will use these

advantages to increase their exports: thereis a great potential for the Turkish genericindustry, far exceeding the actual figures ofUS$ 145 million. Industrial capacity is inplace with 96 production sites (12 foreign-owned) throughout the country. GoodManufacturing Practices and GoodLaboratory Practices are the universal rule.

Although very attractive, another challengefacing Turkey is its capacity to attractForeign Direct Investment. Turkey has hadvery poor results in this area and forexample only attracted 1% of international

pharmaceutical investments in recentyears. The pace of regulatory change,chronic economic instability, corruptionand bureaucracy have often frightenedinvestors away.

But a more important obstacle might beTurks themselves. Most companies arefamily-owned and although most haveprofessional and institutional managementand lengthy experience in cooperating withinternational companies, very few of theseplayers actually consider opening up thecompany shareholding or selling off their

company.

There are few examples of this happeningin the past: notably, the takeover of Ilsan byGerman Hexal in 1999 and that of Fako byIceland's Actavis group nearly two yearsago but these remain exceptions. Still,international companies are eyeingtakeover opportunities in Turkey. Manyactually predict that there will be a furtherconsolidation among the many smallerTurkish players, which could result infuture investment opportunities.

and head of Novartis Turkey, thisseparation did not mean a divorce butrather the end of an odd situation that didnot reflect the global trend where on oneside there are research-based companiesand on the other side there are genericcompanies.

The problem being that local genericcompanies had the majority of seats in theboard of the old association, so it was themwho were representing our interest withthe government. It was an awkwardsituation, as they were on one handrepresenting us, but on the other handopposed to topics such as data-exclusivityor patent, which are very important to usinnovative companies, he recalls,adding: Obviously we still have commonissues and we still work together on themwith the government. But concerning theissues of patent, data exclusivity and someother topics, it was clear that we haddissensions.

Although a central concern, the issue ofdata-exclusivity has not hamperedNovartis' business development. TheSwiss company enjoys a leading positionin the market among the multinationals:We are among the top 10 biggestoperations within the group. All of

Novartis' business units and divisions arepresent in Turkey: Novartis Pharma existswith all its business units, so does Novartis

Consumer Health. With the take over ofHexal Ilsan, there is now also Sandoz inTurkey, which I believe is the secondlargest Sandoz subsidiary worldwide afterGermany, explainsDemirdere.

Nevertheless, for Demirdere solving theissue of data-exclusivity is crucial forfurther developments in the industry: Ifthese issues were to be sorted out, thiscould enable us to attract more foreigninvestment to Turkey and R&D activitiesin phase II-III or IV, or even at an earlierstage. Research is not any longer done

from A to Z in one country, computerizedmolecular modelling or animal tests couldbe conducted here for example. With goodacademicians, proper cost structure,

flexibility and hard work, research programs could start in our country aswell.

Blent Eczacibasi, one of the sector's mostrespected and charismatic voices,chairman of the Eczacibasi Group ofcompanies and president of the IEIS (oneof the two associations representing the

l o c a l ( a n d o f t e n g e n e r i c )manufacturers), agrees with Demirdereon the need for developing R&D: The

pressure of competition and the exportdrive is pushing the companies towardsmore intensive R&D, we need to becomemore innovative. The generic industry isvery competitive; companies need to be

dynamic, responsive, agile and good in product development. The sum of allthese elements means becoming asuccessful international player.

He outlines the advantages for Turkey inpromoting generic drug use: Ourgovernment could follow the example ofother European countries in promotingthe use of generic products and activelyinitiating public generic purchasingcampaigns. Other measures also couldbe considered, like reducing the delay

for authorizations and the registrationof products today this takes an averageof 2 years; the automatic inclusion ofg e n e r i c m e d i c i n e s i n t o t h er e i m b u r s e m e n t s c h e m e s , , o r

Altan Demirdere, president of

AI FD, heads one of Novart is'

top ten country


October 2005WW W.focusreports.net


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There a re 300pharmaceu t ica l compan ies

i n Tu r k e y w i t h 9 6produ c t ion faci l i t i es

Kamil Gknar heads one of the sole

medium size company t o manufacture

at full capacity

Erol Kiresipi, managing director, Santa Farma

The t rue s t reng th o f Turk ey 's pharmaceut i ca li ndus t r y a t t he m om en t i s p r oduc t i on

Choos ing Indust r y in Turk ey

Anyone visiting Turkey will be charmed by theamazing beauty of Istanbul and its 365 mosques, by thediversity of its landscapes, by the richness of its culture, and

by the number of factories! Turks just love to produce. Turkeyhas 96 pharmaceutical production facilities, of which only 12are foreign-owned.

Today, except for minor exceptions, almost any kind ofpharmaceutical product, in any form, probably could beproduced in Turkey. Multinational companies, such as Novartis

industrial production is at the core of their success: The truestrength of Turkey's pharmaceutical industry at the moment is

production. Our target is to fill up idle capacity. You have to

produce!, he insists. The other strategic move Kiresepirecommends is the development of R&D: Turkish generics needto leverage their skills in R & D in order to become orientedtoward value-added generics. We believe that it is fundamental forlong-term success.

Although Santa Farma's portfolio of 65% in licensed products and

or Roche, local Giants, such as AbdiIbrahim or Eczacibasi, or medium-sizedcompanies have assumed the long-termrisk. Today Turkey's productionfacilities rank as one of the world's mostmodern.

35% of branded generics should shiftrapidly to a more balanced half and half,Kiresepi remains a strong believer ininternational alliances as key to the future ofmiddle-sized companies worldwide: Iflocal companies in different countries

Kamil Gknar, chairman of Yeni Ila, and a strong believer in

the necessity to sustain an industrial base, took the courageousdecision to adapt their operations to Good Manufacturing andGood Laboratory Practices in 2004. Meanwhile many small-and medium-sized companies had to shut down theirmanufacturing operations because of the financial burdens ofthe upgrading. As a result, Yeni Ila has become a criticalsupplier for local players who turn to him to manufacture theirproducts. His company is working at full capacity and produces25 million boxes of 51 different product types annually, in theform of effervescent granules, suspensions, emulsions, syruptablets, sugar-coated pills, powders, sachets, ointments,

combine forces, they can survive Look what happened in Italy

and Spain where the market restructured and many localcompanies disappeared. These are two perfect examples thatillustrate why local companies need to form alliances Turkey isa growing market. Medium-sized players should always have astrategic ally here in order to successfully enter the local market.

Santa Farma should have a comparative advantage in the race forforming partnerships as it already enjoys a long and fruitful

capsules, and micro-pellets.

The solid production department is expected to be expandedsoon from 600 sq. meters to 2,500 sq. meters. With thisexpansion, and with the upcoming registration of eight to 10new products in the pipeline that should complement its now-aging portfolio of 20 in-house products, Gknar predicts thatYeni Ila's sales should triple or quadruple in value over thenext three years. Yeni Ila also has applied for EU certificationfor their new facilities, in order to reinforce their market sharein contract manufacturing for multinationals.

For Santa Farma's managing director, Erol Kiresepi, too,

history of collaborating with multinational companies, whether inmanufacturing or licensing products. Last year the company

thcelebrated the 40 anniversary of its partnership with Organon. Italso enjoys a long working relationship with Johnson & Johnson.

In the past, such collaborations have shaped the industrial cultureTurkey and contributed to raising the overall quality level.Adapting procedures for the Americans and the Dutch gave us thebasic philosophy and mindset. Now, it is easy for us to adapt tochange in a way that facilitates top European levels of GMP inTurkey. We have high quality management, and workers who arevery well trained, recalls Kiresepi.

Foreign companies' input also was very important for Turkey astheir presence contributed to raise the standards of the sector andof its employees to international practices, in a country wherepractical education is generally lacking in universities.




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This is an incredibly interesting and challengingmoment for the Turkish pharmaceutical industry. Phenomenalstructural changes are in the works that will afford consistentand broad access to medicine for the whole population. We arealso seeing radical changes in the regulatory environment

here with alignment to EU laws both in drug registration andto some extent with intellectual property rights. These macrochanges represent a significant transformation, marvelsJeremy Morgan, managing director of Lilly Turkey.

Morgan acknowledged that he was surprised by the attitude ofthe government elected in 2001. Many feared it would bepopulist and hostile to business, especially foreign-ownedcompanies: As a populist government that reacts to publicopinion, the least painful thing might be leverage the current

poor image of the research-based pharmaceutical industryand to use this leverage to drive a dialogue with us for deeperdiscounts or more restrictive access to new medicines.Overthe past year, I am pleased that the Turkish government has

engaged all sectors in active dialogue about the changes,states Morgan.

Lilly's products, which have been available in Turkey for thepast 41 years, are benefiting from this positive situation; thecompany's sales should reach US$110 million this year. Thenew product drivers of double-digit growth will be in the areasof depression, stress, urinary incontinence, ADHD,osteoporosis, diabetes, and erectile dysfunction (ED). Nextyear, Lilly also is set to introduce new cardiovascular, cancer,and diabetes therapies into the Turkish market.

But Morgan also knows that in Turkey, nothing lasts forever:As everything stabilizes toward the end of year, we expectoverall significant cash growth in the market. However,knowing the government's history, my guess is that they willcome back to all components of the pharmaceutical sector

(pharmacists, wholesalers, innovators and generic producers) with proposals to further adjust one or acombination of prices, access to drugs in primary care,

pricing discount schemes, or OTC policy.

For an executive who developed his career in the much morestable markets of the US, France and the UK, keeping up withthe constantly evolving Turkish environment was certainly agreat challenge, and the last 20 months taught Morgan what noacademic training or corporate procedure prepares you for:proactiveness; The pace of change here does not allow you todeal with 101 corporate processes. You have to feel, and be,much more empowered, he concluded.

Keep ing Up w i th t he Pace o f Change

Spec ia l i t y -Care Spurs Grow t h

Thanks to a strong reputation Liba, amedium-sized local player, hasmanaged to create strong partnershipswith companies like Alcon, Gerot andEbewe, and import their products to theTurkish market. In a concentratingmarket, each time it is more challengingfor a company the size of Liba (whosesales should topple Euro 16 million(US$ 19.5 M) this year), to find the ideal

partners a company with a very gooddevelopment that does not need a global p r e s e n c e , t h e r e f o r e n o t y e t internationalised; and with interesting

products in the pipeline .

Until 1994 Liba, a company created in1945, also was manufacturing genericsin all kind of areas: analgesics andcough and cold products amongstothers. But market changes andimplementation of GMP and GLPregulations in the mid 90s forced thecompany to totally rethink its

in-house product ion. Stoppingproduction did not mean the end ofLiba's brand. Idle capacity was alreadyavailable in these years, enabling Libato have its products manufactured byTurkish companies using the most up-to-date techniques and processes. Thiswas very important for a company,whose core values include quality andethics.

Another strategic decision was to shiftto speciality-care markets, rather thantry and compete in the therapeuticclasses. Murat Barlas, president of Liba,who like many of his generation waseducated at the famous German Schoolof Istanbul, explains this strategy: Wedecided not to compete with the

pharmaceutical giants of the sector incrowded segments and decided insteadto stay in niche fields where ourcompany name has been recognized forits history and reputation. Liba's

positioning.

Due to the large financial investmentsrequired by these new regulations Liba'smanagement team decided to abandon



Lale Barlas, one of Liba' s

founders was the fir stw oman pharmacist in

Turkey

As a l eade r t hepace o f change in

Turkey hast a u g h t m e t o t r y

t o b e m u c h m o r ep ragma t i c and

rap id in dec ision -m a k i n g

Jeremy Morgan, managing

director, Lilly Turkey


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strategy to target niche markets withinnovative or generic products couldpay off since growth in speciality care ispredicted to outpace that of primarycare. Barlas already is expecting 25%growth for next year, and hopes that newproducts waiting for registration willboost development.

Growth in speciality care also shouldguarantee outstanding results for Swissbased Roche in upcoming years. InTurkey, as elsewhere in the world,Roche is refocusing its activities andshif t ing from primary-care tospeciality-care products. As a highlyspecialized company, Roche istransforming its focus in Turkey toreflect its global positioning. According

to George Hadjiev, the recentlyappointed Bulgarian-born generalmanager of Roche Turkey, future areasof emphasis should include oncology,virology and transplantology. He hopesthat the development and launch ofmultiple medications in these areas willgive Roche Turkey a 70% speciality-care orientation by the end of 2008.

The personal targets Hadjiev has set are

Turkey and Russia offer outstandingopportunities in Central and EasternEurope, currently the regions havingthe best growth potential worldwide.But for pharmaceutical companies,working in Turkey, where practices are

becoming more regulated and alignedwith those of the developed world, andwhere a health insurance system is inplace, is far easier and lesschallenging than operating in Russia,Hadjiev says.

He recently transferred to Istanbulfrom Moscow. In Russia he spent morethan two years establishing adevelopment center, and he hopes toestablish an similar affiliateddevelopment centr in Turkey as longas the pending legislation creates the

right environment. Surprisingly,weaker legislation in Russia mighthave helped in getting the necessaryapprovals for doing so, he explains.Nevertheless he was surprised by thefact that the Turkish Minister of

Health was very aware that asimplification in bureaucratic

procedures would help in attractingm o r e R & D p r o j e c t s f r o mmultinationals.

high: Over the next three years, I aspire tomake Roche Turkey number three for

Roche Europe, he says. We are aiming atdoubling our sales in 3 years. Our salesshould top US$ 670 million, and we couldvery well be challenging Novartis for the

position of number-one innovativecompany by then, he adds. Roche'soncology business already is growing at arate of 30%. All of Roche's new productsshould be introduced to the Turkish marketby the end of 2007, and should account for70% of the company's growth.


George Hadjiev pl ans to

double Roche's sales inTurkey w ith in 3 years


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In 2004, Turkey 's expor t of pharmaceutical products barely reachedUS$145 million, with Ilsan Hexal, thefully-owned subsidiary of the German-

based generic manufacturer Hexalgroup (recently purchased by Sandoz),alone accounting for 50% of totalnational exports.

Considering Turkey's idle productioncapacity and the numerous advantagesof its geographical positioning, it's hardto explain the lack of interest from bothlocal and international companies inusing Turkey as a regional productionhub and develop exports especially inlight of the spectacular results in thoseareas for industries like textiles or

automotive. It is true that countrywideTurkey only opened up in the beginningof the 80s and paperwork for new

free time, by accepting the data exclusivityat early stages, by delaying the marketauthorizations and by discriminating local

products vs. the imports at the pricingprocedure, which led to an increase of theshare of import medicines from 7% to 50%in the last 15 years, Ulusoy asserts.

In spite of the above-mentioneddisadvantages from the past, a few Turkishcompanies, such as Nobel could manage acertain growth and have nominatedthemselves as a potential partner for theglobal market. In the roots of thesedevelopments there are some key elementslike the skilled personnel in the country, adeveloped business understanding at themanagement level and the logistic

advantages of Turkey, he adds. But Ulusoyis betting strongly on the resilience of theTurkish managers to catch up.

Nobel Ila, headquartered in Istanbul, ranks14 in sales in Turkey according to IMSsurveys, with a market share of 3% and totalsales of nearly US$200 million for 2005.According to Ulusoy, Nobel has alreadybecome a multinational company. Hementions investments in twelve othercountries in terms of production sites andmarketing organizations, a sales force of200 outside of Turkey, and products under

registration in Turkey and over 40countries. Besides finished products,Nobel's sister company, Ulkar Kimia, alsoproduces and markets API to both local andinternational markets. It is the largestTurkish manufacturer of modified-releaseproducts in the form of micro pellets.

player, you have to step outside yourfrontiers. Erman Atasoy, the ChiefExecutive Officer of Abdi Ibrahim,Turkey's leading pharmaceuticalcompany, confirms: Being the marketleader in Turkey for some years, weshould also be a player competingoutside of Turkey. Our long-term


products registration might seem to be asetback, but most industry experts andplayers agree the only plausibleexplanation for this situation is thatthings were going so well in the localmarket, that no one really bothered tolook outside.

Mr. Hasan Ulusoy, chairman of NobelIla A.S offers another explanation,poor or nonexisting incentives toexport: It took some time for Turkishcompanies to unders tand theimportance of exports. But it needs alsoto be mentioned that there has neverbeen an incentive by the Turkishau thor i t i e s t o encourage t he

pharmaceutical companies as it is in India, China or South Korea.Unfortunately the governments havedone the opposite by cutting the patent-

success will depend on this strategyrather than on our leadership in Turkey.Our actual position doesn't guaranteethe strength of the company in the

future.

Abdi Ibrahim has taken steps to exportits products. The most significant is its

plan to build a manufacturing plant inAlgeria. Erman Atasoy also notes that inless than a years time, the company hasmanaged to register products in the verycomplicated Russian market. Thecompany's workforce has started

Cons ide r ing t h e i d le p r od uc t i on capaci t y i ns t a l l ed i n

Tu r key , and t he num er ous advan t ages o f i t s geog r aph ica l

pos i t i on ing i t i s ha r d t o exp la in t h e l ack o f i n t e r est f r om

bo t h l ocal and i n t e r n a t i ona l compan ies t o use Tu r k ey as a

r eg iona l p r oduc t i on hub

Hasan Ulusoy, chairman, Nobel Ila

There has never been anincen t i ve by the Turk ish

au thor i t i es t o encourage thepharm aceut i ca l compan ies

Sedat Birol, vice president, Eczacibasipharmaceutical division

Ou r Ta r ge t i s t o g r ow ou rex po r t s by 30 t o 35 % ev er yyear , f o r t he nex t f ou r years

The Nex t B ig St ep: Deve lop ing Ex por t s

Whether it is too late for Turkish companiesto catch up and bridge the gap, only timewill tell. Nevertheless, more and morecompanies facing decreasing margins inthe local market have decided to putexports at the center of their developmentstrategy for the coming years. Not onlyshould this allow the most successfulcompanies to earn much needed hardcurrency in an industry highly dependenton raw material imports, thus vulnerable interms of foreign currency risks, but alsoacknowledge that to become a real big



marketing products in Moscow, andAtasoy hopes that distribution will soonstart in St. Petersburg and Siberia. Healso mentions that licences have beengiven to companies in Lebanon andIndonesia.

Objectives are clear: Exports shouldcatch up with national sales in the nextten years, and then of course the share ofour Turkish activities should decreasein our portfolio. Atasoy has gatheredexperience in the global pharmaceutical


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industry, working for Novartis in Turkey,India and Switzerland. He also likes toremind his visitors that Abdi Ibrahim isalready a multinational that represent over40 companies from different parts of theworld, and that Turkish companies have astrong record of marketing their brandssince Turkey is a branded generic market.

The Eczacibasi Group, Abdi Ibrahim'simmediate competitor, also is eyeingexport development as the next bigchallenge for the company. Tango loverand former tennis champion Sedat Birol,the vice president of the Pharmaceuticaldivision of Eczacibasi, makes no secret oftheir intentions: Our Target is to grow ourexports by 30 to 35 % every year, for thenext four years, he declares. In 2004alone, exports rose from US$17 to US$27million. 70% of which went to the EUmarkets, mainly to Germany, Denmark

and the UK. The target and the strategyset by the group is clear: for the last 2

years we have started on registeringnew products in the EU 15 plus the new10 EU countries. This should trigger areal jump in our exports in the years2006 and 2007, he explains, adding:Without the EU or the US market, you

cannot count on steady and regulargrowth.

Birol explains the strong focus on theEU and the US, by the volatility of theirother markets. Eczacibasi has alreadysold their products to 30 differentcountries but encountered somedifficulty in working with some of them,for example sudden import restrictionlegislation approved in Tunisia or thecollapse of the Iraqi market.

One of the difficulties faced by

Eczacibasi and other Turkish companiesfor exporting their brand, according toBirol, is that Turkey doesn't enjoyinternational recognition as a qualitypotential manufacturing place yet. Buthe is confident that their productionoperations, one of the most modern inthe world, is their best publicity.

The Pharmaceutical division of theEczacibasi Group comprises threemanufactur ing companies , twomarketing companies and two servicecompanies. Last year Eczacibasi'snational market share grew by eightpoint. According to IMS its nationalmarket share reached 5.2% in sales inMay 2005. With 85 products to belaunched in the next three years thecompany should expand its productrange to three new therapeutic areas:asthma, oncology and diabetes.


advantages and accumulated experiencein order to gain market share in the exportmarke t , espec ia l ly in the mos tsophisticated ones: MN Pharmaceuticalswill be a pioneer in entering the regulatedmarkets. We are not targeting the massmarket in the EU or in the US, since ourcost base is not competitive with that of

India or China, but there is substantialupside potential for niche marketing ofmore sophisticated products like ourinjectables . So far it has madeapplications in the UK and Germany.

With this strategy MN Pharmaceuticalshould soon be able to raise exports fromUS$20 million to US$150 million,according to Sezen, who predicts thatoutstanding development in the Turkishmarket will help his company becometruly multinational: The Turkish genericindustry is an undiscovered world for

Europe and the US, but they have startedto take great notice of us due to the

explosive growth in the past two years.

When Mustafa Nevzat Pizak firstproduced an ampoule in Turkey in 1930,he could not possibly imagine that thefuture of the family business still wouldbe strongly related to injectable products75 years later. Time and productionpractices have changed at MNPharmaceuticals, the company that stillbears his initials. The company stillproduces injectable ampoules no longerfrom a small laboratory but in one of themost modern and largest plants inEurope.

MN Pharmaceutical has also developedstrong knowledge in the field oflyophilised injectables, and in theirproduction processes which involve themost complex processes in the industry.This constitutes a strong barrier,

protecting MN Pharmaceuticals fromme-too competition, according toCengiz Sezen, chairman of the companyand grandson of Mustafa Nevzat.

Besides, thanks to a four-decades-longcollaboration in toll manufacturingLilly's products, MN Pharmaceuticals

already works under the higheststandards and they are already used to thestringent FDA-regulation. Some of theAPI lines of Unifar, a sister company,already are FDA approved. One ofTurkey's last API producers, Unifar'sproducts are approved for distribution incountries like France, Germany and theUS and the company has been successfulin selling registrations to EU genericcompanies. Sezen believes MNPharmaceuticals should use these

Company Focus:

MN Pharm aceut ica ls

Cengiz Sezen, chairman, MNPharmaceuticals

MN Pharmaceuticals has been manufacturing Lilly's products in Turkey for more than 40 years



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Erol Frik was living a quiet life as anengineer in Canada with his wife andchildren and had totally chased away theidea of returning to live in Istanbul. He

never really expected to take over the reinsof the family company, but when his fatheroffered it to him, he couldn't resist giving ita try.

From Canada he brought back more than just memories. Soon after his arrival atDoctor Frik Inc., the company created byhis grandfather, he implemented acompletely new management style.Decisions no longer were taken by a topman that noone would dare contradict, butby a board of directors. In Turkey, peoplehave a problem differentiating respect

from close communication. Very fewpeople would go to their boss and tell themabout a problem. If people always tell youhow great you are, you end up losing touchwith reality, explains the most North-Americanised Turk in the sector.

He put in place a very horizontal, informal


Erol Frik back f r om Canada

shak ing men t a l i t i e s


Frik Inc. is now entering the urology andCNS areas. The future launches of20 to 30new products, mostly in CNS, andawaiting registration at the ministry of

health, guarantees a reservoir of growth.Frik points out the even greater potentialimpact, both in sales and in profits, of thecompany's introduction of these newdrugs: some of them will be priced in theeuro 12 to 15 range while Doctor Frik Inc.traditionally has marketed less expensiveproducts in the euro 1 to 2 range.

but resu l t s -or ien ted Canadianmanagement style, a true revolution fora company that was stagnating at onlyfive million units sold annually as of

three years ago. His father first lookedupon this managerial change withskepticism, and changing the mindsetand habits of employees was probablythe hardest task, according to Frik, nowchairman of the board.

Nevertheless, his efforts paid off: salestripled over the last three years andshould reach US$30 million in 2005; inthe first quarter of 2005, Doctor FrikInc. became the second fastest-growingcompany in Turkey, behind Bayer, withsales value up 92%. What was

remarkable about this is that wemanaged it only by increasing the salesof our existing products. Normallygrowth is fueled by new products, but wehave managed only with the existingones, explains Frik.

Traditionally a gastro company, Doctor

Manager ia l Revolut i on


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Turkey ReportOctober 2005WW W.focusreports.net

Yekta Alper, general manager at Cegedim Turkey, recalls thatwhen he worked at Roche in 1998 and selected Cegedim as asupplier of outsourced SFE solutions, the French-based

company hardly had entered the Turkish market, and Pfizerwas its sole client. The company rapidly complemented itsclient portfolio through contracts with Sanofi, Organon andAventis. Last year it added Schering-Plough and Bilim. Thelatter was its first contract with a local player.

The backbone of Cegedim's outsourcing solution is a platformcalled OneKey database, which according to Alper, issubstantially better than the ministry of health's database.OneKey has about 4,000 users in Turkey, and the database isfuelled by an average 1,800 daily updates through dailyreporting by sales reps and constant contact with Turkey's90,000 doctors.

Considering the need for communication in such a vastcountry the market for SFE solutions looks very promisingwith multinationals, but also with local companies, whichdistribute branded generics and counts with many sales reps.This justify the particular effort Cegedim is paying atattracting local companies. This year the company secured itssecond contract with a local pharmaceutical manufacturer.

In Turkey, SFE services still account for about 90% ofCegedim's euro 2.5 million (U $3million) incomes, which isstill very low compared with Cegedim's core European

markets. But the concept is still very new to the market; and itis sometimes hard to convince local companies, whichtraditionally increase headcount to increase sales, that SFEscan lead to efficient solutions. Alper is confident, though, thathis efforts are starting to pay off: We are seeing success inidentifying the need for outsourced products, he says butadds but many potential clients still need to find the budget

for it.

In 2004, Cegedim launched interactive marketing services,using marketing solutions such as telephone surveys, directmailing services, monitoring of market studies and doctor'ssegmentation. Alper claims that, in Turkey, Cegedim runs thelargest call center dedicated to the pharmaceutical industry.

Turgut Grsoy, chairman and CEO of Probil, a Turkishcompany and Cegedim's competitor, also assesses the need ofthe industry: This industry has explosive potential for us,he says, adding that Growing domestic companies are opento outsourcing solutions. The trend is clearly growing asinternational companies have been the pioneers of this way of

Boom ing SFE Solut ions Dem and


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Trgut Grsoy, chairman and CEO, Probil

t h i s i n d u s t r y h a s ex p l o s i v e

p o t e n t i a l f o r u s

thinking. Probil started supplyingthe pharmaceutical industry six yearsago, confident of its advantage as alocal company already entrenchedthroughout the country. For example,Grsoy points out that Probil offerssupport for PDAs through 50 offices

in Turkey.

Probil is Turkey's number-one CRMprovider and is very active in theinsurance, finance or telecomsectors. Market knowledge is key.Our CRM software has lots of successstories in different sectors, stretchesGrsoy. The pharmaceutical sectorstill only accounts for US$2 millionout of Probil's 45 million sales, butGrsoy is confident that Probil willbe able to repeat the successes that ithas experienced in other sectors:

One year of consulting with industryexperts went into launching our

pharma-specific CRM. We now have five customers using this hostedapplication with no investment fromthem, continued Grsoy.

Grsoy counts on Probil's leadingposition in e-learning to gain marketshares: Over the last few years wehave developed customized e-l e a r n i n g s o l u t i o n s f o r

pharmaceutical companies todevelop the sales sk i l l s o f

representatives, he says. A year anda half ago Probil launched its ProbilPharma, a total solution combiningspecialized CRM parts, businesscontinuity and disaster recovery ande-learning.

Yekta Alper, general manager, Cegedim Turkey

O u r O n eK e y d a t a b a se i ss u b s t a n t i a l ly b e t t e r t h a n t h e v e r y

da t abas e o f t he Mi n i s t r y o f hea l t h

With 40% market share in distribution and sales of US$ 4 billion, Hedef Allianaceis Turkey's biggest company in the pharmaceutical sector in sales terms. We werethe last warehouse to come on the market in 1993, the chairman, Ethem Sancakrecalls. At the time nearly 600 warehouses serviced the industry but the notion ofservice was seldom developed: pharmacies had to go to the warehouses to getsupplies, it took a minimum of 24 hours to distribute simple drugs and there was nocold chain. Today Hedef supplies the country's 18,000 pharmacies.

Hedef rapidly revolutionized the sector and seven years later had taken a leadingposition. Today the company's warehouses are based no more than two hours awayfrom the most distant pharmacy, according to Sancak. Hedef shares the marketwith Selcuk Ecza Deposu who holds another 31% and with TEKB, a regroupment



Tur key 's Dis t r ibut ion Giant


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Turkey Report October 2005WW W.focusreports.net

of cooperatives that hold 11% of marketshares. But the latter is rapidly losingground. The remaining market share iscontrolled by a few regional distributors.

Persuaded that with the consolidation ofdistribution worldwide, European giantswould end up coming to compete in Turkey,Sancak decided to be proactive andcontacted American and Europeandistributors to suggest an alliance. He wassurprised to discover that US distributorsonly focused on the very profitable homemarket, which he thinks could be an error in

the long-run. Sancak decided to sell 50% ofthe company to Alliance Unichem, an Italyand UK joint venture, and in return bought asubstantial (four to five%) share of thecompany which ranks 60 on the FinancialTimes Index. Not bad for a man who doesn'tspeak English!

The Turkish subsidiary, Hedef Alliance, isnow in charge of developing the group'sbusiness in Egypt (where they recently tookover the largest distributor), Bulgaria, SubSaharan Africa, and Russia.

Ethem Sancak,chairman, Hedef

Alliance

Exec ut ive Ta lk s

Zin ta K rum ins , m anag ing d i recto r , Boehr in ger I nge lhe imTurkey is developing rapidly not only in processes, procedures and laws, but

also in opportunities for business

Turkey generally ranks in th e top t en globally for Boehringer I ngelheim's new pr oducts

Elc in Erg un , genera l m anager , Serono

We came in 1998 and it was the right decision. There was a clearneed to introduce innovative drugs to the market

In Turkey Serono focuses on infertility and mult iple sclerosis treatments

Eng in Kap , manag ing d i r ecto r , Wy e th I l a cl a r i

There is a well-educated and talented group of people inTurkey scientists and executives

Prevnar and Tygacil should fuel Wyeth's growt h in Turkey f or 2005- 2006

Exec ut ive Ta lk s


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Brief Report on Turkey Pharmaceutical Market

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