Turkey: Supporting The Domestic Generic Drug Production In Turkey

Last Updated: 11 August 2015
Article by Şahin Ardiyok, Ceren Ustunel and Guniz Cicek

In recent years, Turkey made major developments in the pharmaceutical industry. Considering the Association of Research-Based Pharmaceutical Companies' (AIFD) "Ranking of Countries in Pharmaceutical Market" research in 2013, Turkey was in the 18th place and expected to be in the 16th by the end of 2018.

In 2006, the Social Insurance Institution, Retirement Fund and The Social Insurance Institution for Tradesmen and Craftsmen and Other Self-Employed People (Bağ-Kur) were united under a single roof named the Social Security Institution (SSI) by Law No 5502. This state-owned Institution's main aims are to provide the social insurances such as work accident insurance, health insurance, pensioners' insurance, survivors' insurance, etc. and to implement the social security policies. According to AIFD's research in 2014, the pharmaceutical services expenditure of SSI was $ 6.5 billion, and this number is expected to increase to $ 7.4 billion by the end of 2016. The result of a comparison between Turkish Statistical Institute's "Life Satisfaction Report" and Europe Commission's "Social Climate Report" is that while 63% of people in Europe appreciate the health services, in Turkey this percentage reaches up to 75%.

Since the ratio of imported drugs in the Turkish pharmaceutical market is 58.1%, the Turkish Ministry of Health (MoH) has adopted a policy aiming to increase the generic drug production in Turkey.  The measures set with the policy are laid out in the Action Plan on the Structural Transformation of Health Industries of the 10th Development Plan set for 2014-2018. The goal is to increase the usage and exportation of domestic medical devices, materials and medicine by creating a Committee responsible for overseeing health policy making processes and establishing an independent Turkish Health Institutes Presidency, which will enhance R&D activities through various encouragements—such as the creation of clusters.

More importantly, there is a policy (No. 5) which states that "appropriate measures will be taken to give the priority to drugs and medical devices that are produced in Turkey, in the repayment and pricing policies ..." Additionally, it is marked that "the imported products to be removed from the repayment list, will be determined under the condition of assuring that the treatment will be ensured." Thus, there is a strong belief that domestically produced generic products may be added to the repayment list to the detriment of imported products.  

Assessing the said policy's compatibility with the international trade treaties is of great importance  and thus, the World Trade Organization (WTO) provisions which became binding for Turkey after the ratification of "The Law Approving the WTO Creating Agreement" come to the forefront.

As in the price regulation of pharmaceutical products in Turkey, the Health Care Transformation Program is a milestone in the public health sector. In 2008 the aforementioned program started a way of pricing named "reference pricing" where the price is determined according to the cheapest level from one of these countries: France, Spain, Italy, Portugal, Greece; and then decreased by 11% accordingly. After this legislation, the government passed more discounts in 2009, 2010 and 2011.

The General Agreement on Tariffs and Trade (GATT) signed in 1994 is currently an attachment of the WTO Creation Agreement, and it contains provisions which are relevant to the MoH's policy aimed at removing imported medicines from the governmental repayment list. Paragraphs 4 and 8/a of GATT's Article III state that practices favouring a domestic product vis-à-vis imported products are prohibited unless the practices concerned fall under "procurement by governmental agencies of products purchased for governmental purposes."

Hence, it becomes necessary to examine the conformity of the MoH's incentive mechanism to the relevant WTO provisions by assessing whether the repayment practice could be considered a governmental procurement.

A governmental procurement is defined as the acquirement of goods and/or services needed for governmental purposes by the administration to perform its functions. However, the incentive mechanism is based on repayment of a determined percentage of a specified drug's price to the customer by the Social Security Institution. Thus, it can be argued that this incentive mechanism will be set to benefit the customer and the producing firm directly, whilst enhancing the competitiveness of the locally produced products. Thereby the repayment mechanism does not seem to fall within the scope of a governmental procurement, rendering the exception invalid for this mechanism.

For the reimbursement of generic products, a dossier needs to be prepared. There are two commissions operating for the evaluation of these dossiers. The first is the Medical and Economic Evaluation Commission, which assesses all applications and declares a decision. The second commission is the Reimbursement Commission, which finalizes the decision declared by the Medical and Economic Evaluation Commission. After the registration process, an application to SSI for reimbursement is needed. These applications are considered before the Medical and Economic Evaluation Commission and the Reimbursement Commission, and then a decision is made.   

In the research conducted by the Turkish Medicines and Medical Devices Agency, the percentage distribution of medicine consumption is determined annually based on the reimbursement conditions. Accordingly, in 2013, the drugs included in the reimbursement policy made up 4.8%, and the drugs that were not included in the reimbursement policy made up 95.2% of the ratio.

Even if the repayment mechanism is considered as a governmental procurement (especially if it is deemed to be fulfilling a governmental purpose), it has to be analysed in the light of WTO's Governmental Procurement Agreement (Procurement Agreement). However, it must be noted that Turkey is currently only an observer and not a party to the Procurement Agreement; therefore the Procurement Agreement has no binding effect on Turkey.

On the other side, another consideration is for the repayment practice to be regarded a public policy. This is because the ultimate goal of this practice is to increase generic drug production in Turkey. However, it is believed that a public policy including the measures that treat foreign generic drug producers unfairly through repayment procedures will probably be regarded disproportionate and conflicting with WTO rules.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Şahin Ardiyok
Guniz Cicek
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