Pharmacy News: Turkey Pharmaceuticals and Healthcare Report Q2 2011

Turkey Pharmaceuticals and Healthcare Report Q2 2011

Despite a challenging 2010, with pharmaceutical market growth moderated by the changes to the pricing and reimbursement environment, Turkey remains one of our favourite long-term prospects in the Emerging Europe region. With its pharmaceutical expenditure valued at over US$11bn, Turkey places fifth in our latest Pharmaceuticals and Healthcare Business Environment Ratings (BER) matrix for the 20 regional markets. While this represents a fall from the third spot held in the previous quarter, Turkey’s encouraging demographic and macroeconomic developments will continue to support its prominence as a point of interest for multinationals wishing to expand their presence in emerging markets.

Turkey’s health indicators are broadly similar to those of more developed Asian neighbours, although large variations exist within the country, with urban areas approaching European standards. While the more devastating communicable diseases have been mostly eradicated in cities, primarily due to a concerted vaccination programme for children, the burden of non-communicable diseases (primarily heart disease and cancer) will continue to provide substantial commercial opportunities for both domestic and foreign drugmakers, especially as the authorities continue to expand health insurance coverage. Indeed, Turkish Prime Minister Recep Tayyip Erdogan, whose administration has largely been responsible for wide-ranging healthcare system reforms, including the provision of free treatment of lowincome citizens, is aiming for the introduction of a nationwide system of personal healthcare, as one of his campaign drivers in the run-up to the 2011 elections. The drive shows the minister’s interest in expanding the healthcare budget, as expenditure on medical care will increase at five times the rate of total costs in 2011.

In the meantime, a strong fundamental macroeconomic backdrop will support the growth of the Turkish consumer over the coming years, underpinning our view that the Turkish economy will continue to converge with major emerging market powerhouses. This also means that people will be more willing to spend on more expensive medicines, as well as on pharmaceuticals aiming at prevention. Importantly, we also expect the steady decline in long-term unemployment rates to continue, which is testament to greater labour market flexibility, and which should also improve the availability of public health insurance funding. The availability of modern treatments should also improve with the aligning of Turkish legislation with European norms, as the country seeks integration into the community, although the issue of market access remains an area of concern to foreign companies.

Drug Company Adds to Kaluga Tax Base

British-Swiss pharmaceutical giant AstraZeneca said Monday that it will invest $150 million in building its first plant in Russia, joining other foreign drugmakers that have started local production in line with the government’s strategy to reduce dependency on imports.

The plant, to be located in the Kaluga region, will be the first full-cycle manufacturing facility in Russia by a foreign drug maker &mdash formulating drugs for a number of diseases, including cancer, heart and respiratory illnesses, producing and packaging them, the company said.

Nenad Pavletic, president of AstraZeneca Russia, said constructing their own plant, which is expected to become profitable by 2017, was more beneficial than buying and subsequently modernizing an existing facility.

“In terms of the speed of development, efficiency of the process and the size of costs, it’s more efficient to build a plant according to good manufacturing practice standards,” he said in an interview.

Construction will begin in April, with 2013 being the target for starting production, the company said. Capacity is planned to be 16 million packs a year.

Pavletic said he was confident in the potential of the domestic pharmaceutical industry, with Russia being one of the strategic markets for the company.

AstraZeneca plans to contribute to implementing the government’s plan to raise life expectancy in Russia from less than 60 years old to 75 by 2020, Pavletic said.

“There are high unmet medical needs in Russia. We believe that we can increase access to our medicines for … patients,” he said.

In 2009, the government passed a strategy to develop the drug industry through 2020, which aims to raise the share of domestically produced medicines from the current 23 percent to 50 percent over the next 10 years. A number of international drugmakers are developing local manufacturing facilities.

Last year, Swiss company Nycomed began construction of a 75 million euro ($100 million) plant in the Yaroslavl region, while French drugmaker Sanofi-Aventis took over and modernized an insulin plant in the Oryol region.

Several foreign drugmakers, including Novartis, Ipsen, Teva, Novo Nordisk and Berlin-Chemie, also plan to start manufacturing in Russia.

Pavletic praised the Kaluga region authorities for providing favorable conditions for efficient operating and a “transparent process” of formalizing documents.

Kaluga Governor Anatoly Artamonov told The Moscow Times that more foreign companies would come to the region this year, declining to identify them by name. He said in September last year that the Kaluga region was in cooperation talks with 10 foreign and domestic firms.

According to Artamonov, the Kaluga region attracted a total $1.2 billion of foreign investment last year, which would represent about 10 percent of the national total. Artamonov is counting on a minimum of $1 billion for 2011.

Last year, Kaluga region’s manufacturing volume increased by about 45 percent, and this year’s growth is expected at 30 percent, Artamonov said.

Kaluga offers tax breaks to investors, making it a magnet for foreigner companies. French cosmetics maker L’Oreal and carmakers PSA Peugeot Citroen and Mitsubishi all have production operations in the region.

The regional government is reaping the rewards, as tax revenues grew by 43.1 percent in 2010 compared with the previous year.

Artamonov has a long-term approach. “We’re not greedy in terms of tax revenues,” he said, adding that the region’s government was focused on getting stable tax revenues over many years.

Volkswagen and Samsung were among the biggest contributors to the regional budget last year, with joint tax revenues from the companies’ plants accounting for about 3 billion rubles ($100 million), Artamonov said.