Despite a challenging pricing and reimbursement situation, BMI still believes the market is attractive in the long term as higher y-o-y growth rates return from 2013/14. In contrast to European markets where manufacturers can expect to achieve higher prices, but with a stagnant growth outlook, Turkey offers strong growth potential if drugmakers are able to accept a price that is considerably below the European average and turn a profit on the low margins available.
Headline Expenditure Projections
- Pharmaceuticals: TRY16.39bn (US$9.11bn) in 2012 to TRY17.16bn (US$8.89bn) in 2013; +4.7% in local currency and -2.4% US dollar terms. Local currency forecast unchanged from previous quarter.
- Healthcare: TRY96.98bn (US$53.88bn) in 2012 to TRY109.66bn (US$56.82bn) in 2013; +13.1% in local currency and +5.5% US dollar terms. Local currency forecast broadly unchanged from previous quarter.
Turkey's Pharmaceutical Risk/Reward Rating (RRR) score for Q114 is 56.5, down from 58 in the previous quarter. Turkey's comparative ranking remains unchanged. The country is again ranked the fifth most attractive business environment out of the 20 markets surveyed in Emerging Europe. Turkey's large drug market, coupled with the sector's long-term growth potential, means that the country scores relatively well for rewards in spite of a slight downward adjustment to our appraisal for this quarter. In terms of risks, several rounds of pricing reforms mean that the country scores closer to the regional average.
Key Trends And Developments
- In August 2013, Russian biotechnology company Biocad signed a definitive agreement with Turkish pharmaceutical company Kocak Pharma. Under the terms of the agreement, Kocak Pharma will gain exclusive rights to supply Biocad's biosimilar version of Roche's cancer drug MabThera (rituximab) in Turkey for five years. MabThera is used to treat B-cell non-Hodgkin's lymphoma in adults. Kocak Pharma will be also be responsible for providing data required to register the drug. Kocak will supply Biocad's drug in Turkey under its own brand name.
- In October 2013 it was announced that the Turkish health ministry planned to introduce a new drug pricing list due to the recent shortage of drugs in the country, according to Hakki Gursoz, the vice-president of Economic Research from the Turkish Medicines and Medical Devices Agency of the Ministry of Health. The new drug list is scheduled to be introduced by end-2013.
BMI Economic View: Although the short-term outlook has improved, we remain fundamentally bearish on Turkey's medium term economic growth potential relative to consensus expectations. While credit growth will prop up private consumption over the short term, an erosion of consumer purchasing power will prevent stronger gains. The Turkish lira remains 13.5% below its 2013 peak against the US dollar, contributing to core inflation surging from 5.4% year-on-year (y-o-y) in April to 7.0% in September. With the CBRT easing policy rates once again, we do not foresee any period of sustained appreciation, implying imported price pressures will keep headline consumer price inflation elevated while straining the balance sheets of domestic firms.
BMI Political View: The "democratisation package" announced by Turkish Prime Minister Recep Tayyip Erdogan makes historic strides in extending religious and ethnic freedoms. However, the package has been widely criticised by all major opposition parties and it is unlikely to alleviate growing political and social divisions in the country or significantly advance a fragile peace process with the Kurdistan Workers Party.