The Pharmaceutical Industry in Turkey – 2

In this new article, we will give more details about the pharmaceutical industry in Turkey.

Biotechnology – Biotechnological drugs

It is one of the most popular investment areas in the sector. Turkey as well as in the whole world interests and investments in these areas in a rapid upward trend. When 46 per cent of Turkey’s imports of drugs thought to create biotechnological products, more it is revealed the importance of the issue. In 2019, a total of 15 medicines, 11 references and 4 biosimilars, entered the market in the biotechnological drug category. Thus, under 113 brands in Turkey under the biotechnology and pharmaceutical markets 256 24 form reference mark 84 similar biological drug form; In total, 340 forms of drugs were reached.

Foreign trade

It continues to show an increase in the foreign trade volume of the pharmaceutical industry in Turkey. In 2019, the sector’s foreign trade volume exceeded 6 billion USD. The rate of increase in the sector’s import volume was 9.2%. The sector, which imports the US $ 4.8 billion in 2019, differs from general economic trends in this sense. The sector’s share in total country exports was 0.8% and its share in imports was 2.4%.

Production

Despite the serious stagnation in domestic economic activity in the second half of 2018 and in the first half of 2019, the pharmaceutical industry maintains its strong growth trend. Turkey’s industrial production, despite the rapid growth in the last quarter of 2019 the year when viewed from year to year for the same index closing 0.6% contraction in the pharmaceutical industry are pointing to the growth of 12.9%. This rate, which shows the fastest growth since 2015, has increased the average growth of 2014-2019 to a striking level of 11.7%. The industry is expected to continue its growth trend with the strength it receives and the increasing demand from the motivation to increase domestic production. Moreover, the relatively weakening position of TL forms a basis for maintaining this trend by supporting the export volume.

Employment (Pharmaceutical jobs)

The pharmaceutical industry in Turkey provides employment approximately to 40,000 people, operates mainly in the Marmara Region. Pharmaceutical jobs are predominantly about population density and logistics, but access to trained staff is another prominent variable. A significant number of employees in the sector are graduates of higher education. In Turkey, there are nearly 300 higher education institutions that provide expert personnel to the sector and whose educational focus ranges from pharmacy to biology. The sector has an innovative structure by nature and most of the sector employees undertake works outside the production process (sales, marketing, pricing).

R&D in the pharmaceutical industry in Turkey

The R&D process in the pharmaceutical industry is a long and costly process, from the invention of the molecule to be a safe and effective drug that can be offered to the public. The cost dimension of the process can be clearly understood with the knowledge that approximately 20% of the R&D expenditures made on a global scale are made by the pharmaceutical industry. As of May 2019, there are 32 R&D centres in Turkey. The rapid increase of this number, which was only 4 in 2010, constitutes an important base both in terms of feeding the capacity increase required by the sector and creating added value. The industry’s R&D spending also grows at an average annual compound rate of 20%. As of July 2018, our country ranks 13th in Europe and 23rd in the world with the number of clinical researches. The share we receive from the global volume is 1.3% in terms of the number of researches.

SWOT analysis of the pharmaceutical industry in Turkey

Strengths
• Low demand flexibility and high profitability
• Innovation power and consumer control
• The ability of public authorities to adapt quickly to changing demands
• Relatively strong local production capacity and high technology usage
• Reference price implementation and regulations that support retail
• Ability to attract a qualified workforce.
Opportunities
• Upward population and demand trends (both domestic and international)
• Health tourism and government incentives
• Arrangements to support domestic production
• R&D processes accelerating and relatively cheap with developing technology
Weaknesses
•  The sector’s dependence on imports and its financial vulnerabilities
•   Increasing competition
•   Increasing demands for price suppression
• Licensing problems that may occur especially in imported drugs
Threats
• The intensity of legal regulations that reduce predictability and can cause short-term problems
• Relatively low capital accumulation leading to lagging behind in international competition while not allowing long-term and high-cost R&D activities to be strong enough.
• The savings measures of the public sector, which is the biggest buyer
• The negative effects of coronavirus, especially on the supply chain

The pharmaceutical industry in Turkey increased by approximately 30% in 2019 and is expected to reach a size of $ 40 billion. The main factor behind the growth in TL terms was the price increases arising from the exchange rate regulation this year. This trend has been observed in the last few years. The increase in box sales has been more parallel. Difficulties are observed especially in the increase of biotechnology reference products in terms of quantity.

Expectations & Comments

Regardless of the global and local trends, demand for the drug continues to increase day by day. However, the negative effects of the environment created by the coronavirus, especially on the supply chain, pose threats in terms of production and transportation to the drug. It is not easy to predict the effect of coronavirus on both the demand and the supply side.

Thanks to the geopolitical position of our country, the ability to diversify export markets stands out as another advantage. We believe that the steps of the Turkish pharmaceutical industry to become a regional production centre will continue this year as well. In addition to the drug, the expectation that investments towards vaccination will come to the fore is dominant. Among the target countries for the new period for export, the USA and the Turkic Republics markets stand out.

Although the sector has a positive outlook in the short and medium-term, R&D investments must continue without slowing down in order to compete globally in the long term. Otherwise, it will not be possible to talk about a permanent improvement in the sector’s foreign trade deficit. In order to have a voice in sustainability and global competition, it is critical to make the necessary R&D investments in a timely and effective manner. The relative relief of financial conditions may be an important factor for R & D investments to rise again.

In 2020, the main factor that will affect the sales performance of the sector will be the Euro rate used in determining drug prices in the reference price system. The mentioned Euro exchange rate was determined as 3.8155 by increasing 12,10% following the Presidential Decree published on February 19, 2019. With the assumption that trends in the past years will continue, it can be estimated that the sector will grow by 15% in 2020 and will exceed TL 45 million accordingly.

Sources: KPMG

http://www.ieis.org.tr/ieis/en/

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