Turkey has overcome the crisis, but the pharmaceutical industry is still stuck in the crisis!
When Turkey has fallen under the influence of the global economic crisis in 2009, our Government, having difficulties with respect to sources and budget, has started the implementation of a practice named global budget for drug expenses within the scope of the Medium-Term Plan (MTP) and a ceiling level for drug expenses has been determined. Within this framework, global drug budget has been projected as 14.6 billion TL for 2010; 15.56 billion TL for 2011 and 16.67 billion TL for 2012. The drug prices in our country, which had already been limited to 66% of the reference country prices, are now under the current cheapest prices in the European countries by 30-50% as a result of the price discounts. Moreover, in order for achieving the budget targets, additional discounts were applied to drug prices, by 12% at the end of 2009, and by 9.5% at the end of 2010.
Our industry is experiencing the consequences of this implementation very hardly. Employment losses, revisions in the business and investment plans, changed and dragged-down targets became the common destiny of the pharmaceutical industry.
In fact, as of 2010, our country began to grow, getting over the crisis. Same positive course is continuing this year. However, while a recovery and growth is being experienced in many sectors, the pharmaceutical industry makes no headway. While the conditions determining the MTP, parameters, and growth expectations are changing positively, destiny of the pharmaceutical industry, which is one of the most strategic sectors of Turkey, does not change. Targets of the Global Pharmaceutical Budget do not change. We, as the pharmaceutical industry, cannot overcome the crisis and recession. The pharmaceutical industry, always supported the radical health reform in Turkey, is now on the limit of it is able to provide.

The pharmaceutical industry also carries the burden of exchange rate difference!
In addition to these austerity measures and discounts, all burden of the exchange rate difference arising from the value loss of TL against Euro is carried by the pharmaceutical industry. The current periodic Euro exchange rate had been set to 1,9595 TL as of April 2009 in accordance with the decision of the Price Evaluation Committee dated February 13, 2009. As of September 9, 2011,the 3-month average Euro exchange rate has been increased to 2,41 TL and therefore a difference of 23% with the base exchange rate of 1,9595 TL has occurred, however the new exchange rate has not been reflected in drug prices and budget.
According to the 2009 Medium-Term Plan figures, while the total Global Drug Budget for 2010, 2011 and 2012 is approximately 24 billion Euro calculated according to the exchange rate of 1,9595 TL, as of September 9, 2011, this figure corresponds to 19,5 billion Euro, according to the 3-month average Euro exchange rate. In other words, an approximate reduction of 4,5 billion Euro has been experienced in the Global Drug Budget because of the exchange rate difference, and this additional burden is again carried by our pharmaceutical industry.

There is a limited increase in the public drug expenses
As AIFD, we have continuously emphasized that the share of drugs in the public healthcare expenses is reducing. The figures confirm this opinion. Although an increase in public prescriptions of been 10% has been occurred between October 2010 and May 2011, the public drug expenses increased only by 1%. In the period between January and May 2011, while public prescriptions have increased by 17%, cost per prescription have decreased by 9,5%.
A successful series of reforms carried out by our Government within the scope of the “Health Transformation Program” which is being implemented since 2004 have led to a significant improvement in access to the healthcare services. While the annual average number of admissions to health institutions was 2,9 in 2002, this figure was increased to 6,5 and 7,6 in 2008 and 2010 respectively. While prescriptions were written for 48,4 million person in 2008, this figure have been 52,7 and 52,9 million person in 2009 and 2010 respectively.
In our country, the amount of the drugs in boxes which are reimbursed by the public has increased by 122% between 2002 and 2010. The ratio of the drug expenses to GDP, which had reached to 1,7% with the economic crisis in 2009, has reduced to 1,38% in 2010.
The fact that the public drug expenses exhibited a limited increase and is well below the significant increase occurred in the number of prescriptions clearly shows that the savings that can be made through discounts in drug prices should come to an end. There is a point which should never be forgotten. In Turkey, the increase in the healthcare expenses does not arise from the drug prices. As all data demonstrate, the healthcare expenses increased because the access to the healthcare services has become widespread and strengthened. Therefore, now the other treatment items contributing the healthcare expenses should be carefully reviewed and the areas in which savings can be made should be identified.

Our Expectations and Targets
The Global Drug Budget should be updated with the new MTP deflator and growth figures of our country which is rapidly overcoming the crisis. It is crucial for our industry that the Euro value which is fixed to 1,9595 TL be updated based on the new periodic exchange rate according to the Cabinet Decision.
Our industry has already made all possible self-sacrifice with respect to the prices.
We think that if the VAT rate for the drugs and drug raw materials is equalized at 1% would support the Global Drug Budget by bringing minimum burden to public, and would remedy the injustice being experienced by the local manufacturers. Moreover, I would like to emphasize that structural reforms and regulations should be implemented for a budget which would optimize the use of the limited resources of Turkey.
Let me repeat the message I gave at the beginning. A successful series of reforms carried out by our Government within the scope of the “Health Transformation Program” have led to a significant improvement in access to the healthcare services and drugs in our country. Now it is time to improve the quality of this services and to reduce gradually increasing difference between our country and USA and Europe particularly in access to innovative treatments.
In order for this ambitious yet required initiative be implemented, an important mission falls to Turkey’s pharmaceutical industry. However, our industry needs long-term, transparent and predictable government policies and support when setting its investment and growth targets. The pharmaceutical industry needs to overcome the financial bottleneck it is stuck in and look to the future with confidence again.
A pharmaceutical industry which has resolved its problems and financial bottlenecks to achieve a common target for the pharmaceutical sector of our country would make the technological investments required for Turkey, develop and manufacture more value added products and therefore improve our country’s position in the international competitive environment through the export capacity it would create.
It is not an utopia for Turkey to increase the investments in the fields such as oncology drugs and biotechnological products, to realize global information and technology transfers which are the most important yields of research based pharmaceutical investments, to develop researchers through opportunities of participation in global R&D networks and to transfer the global R&D funds into the country.
Finally, I would like to emphasize that AIFD is willing and ready to collaborate with the Government and all sectoral stakeholders to ensure Turkey to become a country providing widespread and high-quality healthcare services and manufacturing and exporting high added value medicines.

September 9, 2011