Türkiye can become hub for global pharma industry
Türkiye, having achieved a historic milestone in domestic arms production and excelling in the defense industry, has the potential for a similar breakthrough in the pharmaceutical sector
Health care services have developed considerably in Türkiye in recent decades. In the last 20 years, we have become one of the leaders in health care instead of lagging behind. During the COVID-19 pandemic, Türkiye has shown that it has a solid health care system, in many ways way better than many European peers. Yet, the country must expand these achievements in the health care infrastructure toward the field of medicines, medical supplies and pharmaceutical technologies. This is the next challenge of the Turkish welfare model.
Before going into analysis, let’s first briefly look at the current situation of the pharmaceutical sector in Türkiye. The Türkiye Pharma Sector Report 2023 prepared by IQVIA, a global company that conducts strategic research in the health care industry, is a good starting point for gathering some key comparative figures regarding the pharmaceutical sector in Türkiye.
LIFE EXPECTANCY
However, before delving into the report, let us examine the national indicators first. One of the best indicators of this change in Türkiye in health care is the average life expectancy at birth. This indicator has shown great strides during the Justice and Development (AK Party) years. Türkiye has become the country with the highest increase in average life expectancy in the last 20 years. While the average life expectancy at birth was 72.5 in 2002, this figure climbed to 78.6 before the COVID-19 pandemic.
On the other hand, average life expectancy has been decreasing in Türkiye as well as all over the world since the 2019 pandemic. According to the most recent data announced by the Turkish Statistical Institute (TurkStat), the average life expectancy at birth decreased from 77.7 years in 2019-2021 to 77.5 years in 2020-2022.
However, before the pandemic, this peaked at 78.6. In addition to the COVID-19 pandemic’s severe effects, this decline is considered to be due to the decline in the quality of provision of health services in recent years. Many surveys show that citizen satisfaction with public health care services has declined or stagnated in recent years, and health care services must be updated. Despite this recent glitch, data proves that Türkiye has shown great progress in the last 20 years.
PUBLIC LEADS HEALTH CARE
On the other hand, Türkiye still has a great way to catch up. According to the mentioned Türkiye Pharma Sector Report 2023, Türkiye’s current health expenditure per capita is still one of the lowest among Organisation for Economic Co-operation and Development (OECD) members, with $1,827 (TL 57,422). While the share of health expenditures in gross domestic product (GDP) was 4.6% in 2000, this rate has decreased to 4.3% in 2022. This rate, which increased until the early 2010s, has decreased steadily in the last decade.
However, in the same period since 2000, the OECD average of current health expenditure per capita has increased from 7.1% to 9.3%. It should be underlined that while the share of current health expenditures in GDP in OECD countries is 9.3% in 2022, the same rate is 4.6% in Türkiye and it is observed that the gap continues to open. It is seen that economic turmoil and inflationary pressures in recent years have contributed to the widening of the gap.
Data shows that the public sector in Türkiye is the main determinant and key player in financing current health expenditures. In 2022, 76.3% of all health expenditures in the country have been covered by the public, which shows that we are slightly above the OECD average (75.7%). For comparison purposes, we see that the country with the highest ratio of public health expenditures to all health expenditures in the OECD is Germany, with 86.5%, and the lowest ratio is Mexico, with 53%. Turkish figures show that the public sector in Türkiye and especially the Social Security Institution (SSI), which finances the General Health Insurance System, has the lion’s share in the financing of the sector and acts almost as a monopsony market player.
It should be noted that the public share of financing of health services, which was 61.7% in 2000, increased steadily during the AK Party period and rose to 76.3% in 2022. In other words, in the last 20 years, the public has taken responsibility and expanded the coverage and diversity of health care services. In addition to the wide expansion of diagnoses and treatments within the scope of public health insurance after the 2008 Social Security Reform, the high rate of investment in the public health infrastructure in Türkiye seems to have contributed to this picture.
When looked at only in terms of pharmaceutical expenditures, it is seen that the public sector saves a very high amount thanks to the strict price policy and exchange rate differentiation. Once again, referring to the mentioned report, in terms of per capita drug sales, Türkiye is the OECD country with the lowest per capita drug sales at $91 in 2022. In the same period, while the United States, the leader in this field, sold medicines worth $1,901 per capita, Switzerland had medicine sales worth $834, Canada $764 and Germany $715.
This data, on the one hand, shows that the goal of saving money and controlling expenses in pharmaceutical expenditures has been achieved in Türkiye and that the fight against drug addiction and unnecessary prescribing is being carried out strictly. On the other hand, it also shows that health expenditures are still far behind those of developed countries. This data also indicates that Türkiye is still an untouched market for the global pharma industry with its 85 million population and can become an important base for its region, with the condition of attracting the necessary investment.
As in the total health expenditures, the country with the highest share of pharmaceutical sales in GDP is the U.S., with 2.5%. Following the U.S., the ratio of pharmaceutical sales to GDP in Greece, Spain and Portugal is 2.3%, 2.1%, and 1.8%, respectively, while the OECD average is 1.2%. Türkiye ranks 29th among OECD countries with 0.9%. In other words, although Türkiye is not the worst in its league, it still needs to go a long way to become a PharmaEconomy. What is noteworthy is that, in terms of the share of pharmaceutical sales in GDP, Türkiye is ahead of some developed countries such as Israel, New Zealand, Luxembourg, the Netherlands, Iceland, Ireland and Norway. This shows the country’s willingness to allocate its scarce resources to health care for its citizens.
RAPID GROWTH
Data shows that the Turkish pharmaceutical market is growing rapidly in Turkish Lira terms. As of 2022, the pharmaceutical market in Türkiye is at $7.7 billion. This rate is expected to exceed $8 billion in the current year.
On the other hand, the growth is obvious in the local currency but not well in the U.S. dollar. The main reason for the stagnation in U.S. dollar terms is the rapid depreciation of the Turkish Lira against foreign currencies as a result of the exchange rate crisis. Likewise, the fact that the fixed drug exchange rate used in drug pricing remains at a very low level compared to the real exchange rate causes the Turkish pharmaceutical market to appear below its actual size.
In this context, the number of boxes is a better indicator of the growth of the pharma sector in Türkiye. Looking at the official data of the Turkish Medicines and Medical Devices Agency (TİTCK) on box sales volume, it is observed that the sales volume, which was 2.1 billion boxes in 2015, increased to 2.43 billion boxes in 2021 (as the latest data). This reveals that Türkiye is a growing market in its own league.
Do not let the indicators mislead you into thinking that Türkiye’s pharmaceutical industry is incomparably behind the OECD and the European Union. Considering that developed countries started the race long ago and Türkiye is in the process of catching up, and especially if we take into account the dynamism of the pharmaceutical and health sector that has developed in the last 20 years, it seems that Türkiye has a promising future in the pharmaceutical industry.
Türkiye has the potential to be a very important pharma and medical industry base for both itself and its hinterland in Africa and Asia if competitiveness is improved, price and product diversification is ensured, domestic production is supported, pharmacovigilance investments are increased and intellectual property is protected. Türkiye’s geographical location allows it to be a pharmaceutical hub and base.
A historical threshold, just like Türkiye’s domestic arms production, can be crossed.
As it has become one of the six countries that can produce its fifthgeneration warplane and a game changer in the defense industry with its unmanned aerial vehicles, Türkiye can achieve the same stride in the pharmaceutical industry. In sum, the pharma industry can be the next stride of the Turkish economy if the ideal ecosystem can be created.