Turkish Government Convinced by Pharma Industry to Modify Drug-Price Decree; Prices Still to Drop Significantly

Pharma Industry Negotiates Lower Price Cuts from Turkish Government

The Association of Research-Based Pharma Companies (AIFD)—which promotes research and development (R&D) in the pharma industry in Turkey—has managed to convince the government to amend its newly announced pricing decree. The changes are:

• An additional 12% discount will be applied to innovative drugs supplied to the Social Security Institution (SSK)—Turkey's public health insurer. As per the previously announced decree, the discount rates were to rise by 13%, bringing the total SSK discount rate to 24%. The current one-percentage-point reduction will mean that the discount rate now stands at 23%.
• The current modification will see generic drugs priced at a maximum of 66% of its innovative counterpart. Previously, as per the price decree announced in September 2009, generic drugs were to be sold at a maximum of 60% of the cost of the branded molecule.

AIFD Studies Used During Negotiations

The AIFD conducted surveys on how the price decree would affect pharma firms' investment in Turkey and subsequent patient access. These studies are likely to have proved useful in the organisation's negotiations with the government over the issue. Some of the key takeaways from these studies were:

• 84% of the senior executives at the 40 research-based pharma firms surveyed felt that access to innovative drugs would be hampered. According to Engin Guner, vice-chairman of AIFD, the interruptions would probably affect high-value drugs used in the treatment of cardiovascular, diabetes, and cancer conditions.
• 84% felt that their company was unlikely to undertake new investment in the country, given the new development.
• 52% responded that layoffs in their companies could exceed 20%, given the reduced Turkish investment plans of their firms.

Outlook and Implications

The AFID has managed to modify the government's pricing decree just in the nick of time, as the policy becomes effective today. The modifications will see the innovative pharma industry receive a price reprieve of 1 percentage point and 6 percentage points for the generic industry. The news has also seen some improvement in the stock price of Turkish pharma firms, with shares of Eczacibasi Ilac (Turkish subsidiary of Czech firm Zentiva) rising by more than 12% yesterday after the news on the amendment was revealed.

However, it should be noted that the price reprieve is relatively insignificant compared to the price cuts still set to take place, which will inevitably be followed by contraction in the Turkish pharma industry. The price decree is set to affect 4,000 drugs across the country and push over 10,000 pharmacists towards closure.

While the AIFD's efforts are commendable, pharmacists have continued to go on strike over the changes, as even with the amendments their margins will dwindle. It seems that the government has chosen an easy way out by modifying its planned drug-pricing norms only slightly, and not taking on board other major compromises that the AIFD proposed, including: increased co-payments on non-critical over-the-counter (OTC) treatments, reducing the subsidies on OTCs, and a one-time temporary emergency discount to the SSK by the pharma industry to help the former ride out the recession. These moves are set to save the government 2 billion Turkish lira (US$1.3 billion). One possible point to take comfort for the pharma industry lies in the fact that the price cuts are a temporary measure until the government rides out the storm of the recession.

The drug-price decree in question was announced in September as part of the government's new Medium-Term Program, which is set to save monies for the government and also make generics more affordable to the masses, given the current economic downturn (see Turkey: 5 October 2009: Turkish Pharma Industry Outraged by Government-Instigated Price Cuts Affecting All Drugs).

Related Articles

• Turkey: 27 November 2009: Pharmacists Protest as Turkey's Drug-Price Decree Roll-Out Approaches
• Turkey: 5 November 2009: Delays in Implementing Higher Drug Discount Rates in Turkey as Big Pharma Plans to Downsize