In my last commentary, I was involved in analyzing the Turkish pharmaceutical reimbursement system, which is primarily controlled by the public. I have explained the trivet of the fixed-currency rate and the reference price system, and determined profit rates as the base of the Turkish pharma and medical pricing system. I explained that the Turkish system is a protectionist mechanism and how the fixed-current rate affects the Turkish pharma sector. Moreover, I explained that the system has so far worked in favor of the public sector and facilitated the Turkish government to save tens of billions of euros.
So far so good! So, what's wrong with this system? The problem is that a system that was originally introduced to control public expenditures has now reached an unsustainable point and is in serious crisis. The Turkish system is quite illiberal compared to the developed pharma markets, as the government has a rigid price control policy. The balance between achieving sustainability of the welfare state and supporting the pharma sector has recently been seriously broken, and the system has started choking the sector. News about some drugs not being available in the market and some pharmaceutical companies and warehouses not supplying drugs to the Turkish market – even some completely withdrawing from Türkiye, frequently invades the public. This is an outcome of a problem deep-rooted in the pharma reimbursement system.
Let's acknowledge the progress. Under President Recep Tayyip Erdoğan's leadership, Türkiye has made significant progress in access to medicine and health care services, especially after the Healthcare Transformation Program of 2003 and the Social Security Reform of 2006. Today, medicine and medical treatment are more accessible than ever in Türkiye.
In the past, accessing medicine in Türkiye was marred by long lines at pharmacies, conflicts between private pharmacies and public bodies, outdated practices in Social Security Institution (SGK) run hospitals, patients paying out of pocket and later waiting for refunds, and shortages of qualified medication and medical devices. However, reforms over the last two decades have transformed the system. The introduction of a service provider selection system, streamlined medicine distribution and increased accessibility have revolutionized medicine procurement. Health care coverage has expanded significantly, with over 99% of the population now covered by General Healthcare Insurance, often with minimal out-of-pocket expenses. The COVID-19 pandemic showcased the quality of the Turkish health care system, demonstrating its capability to rival European countries and even surpass many in various aspects.
However, these positive developments also brought about a huge increase in the public health care and pharmaceutical budget. Managing the public pharmaceutical budget has become a huge policy in itself. Since we are a country with a 5 billion euro ($5.36 billion) foreign exchange deficit in pharma, the exchange rate to be used in pricing medicines has gained special importance. Thus, the public implemented the trivet of fixed-currency rate, the reference price system and determined profit rates in pharma reimbursement.
However, this policy has reached its limits and now requires review. This is evident as there are four main suppliers in the pharmaceutical field: local manufacturers, exporters, warehouses and pharmacies. In an environment where drug prices are tightly controlled, pharmaceutical companies are discouraged from importing drugs, warehouses may withhold stock and patients struggle to find foreign-origin medicines in pharmacies. In some areas, the threat of a black market has emerged due to this stifling system. What initially began with good intentions has now begun to suffocate the market. Reports across various media outlets regarding the scarcity of many drugs, particularly cancer drugs, in the domestic market stem from this underlying issue.
Access to health care and medicine is a human right. However, this does not mean that we should be the unregulated market for pharmaceutical companies or that multinationals should be able to manipulate the market. Taking the pharmaceutical budget under control and using scarce resources effectively is a necessity for a country like Türkiye, which has a very extensive health care system. Türkiye does not have money to burn. However, saying "Let's take it under control" does not mean, "Let's make an excessive restriction that will intoxicate the pharmaceutical ecosystem." If we miss finding a balance, there is a risk of making it impossible for pharmaceutical companies to invest in our country and making our country a drug-poor country. So, this is a matter of finding the right balance.
As a result of attempts to restrict a global sector by strict national policies, drug manufacturers and importers, on the one hand, and pharmacies, on the other hand, are experiencing various problems. The most obvious of them is fixed euro exchange and resulting prices. The drug price system based on low exchange rates in Türkiye is starting to become a health problem due to the withdrawal of some drugs from the market. Alongside actors in the sector, the Turkish Pharmacists Association (TEB) has been calling for a long time for a solution to this problem.
Industry representatives state that the fixed pharma exchange rate, which was not a problem when the lira was stable, has become a serious problem after the currency crisis and hindered the financial sustainability of companies. Some pharmaceutical companies decided to withdraw many drugs from the Turkish market to prevent the decrease in drug prices in other countries that consider Türkiye as a reference price. As other markets are starting to use Türkiye as a reference in price calculations, companies are preventing the formation of a “Türkiye price” by withdrawing the drug from the market to prevent the prices falling in those countries, which are much more important markets for them.
Another problem created by the current pharma pricing system in Türkiye is the problem of so-called “parallel exports,” which is the problem of drugs purchased at retail prices in Türkiye and exported to other countries through a backdoor system. Although Türkiye has attempted to overcome this problem by making pharmaceutical exports subject to prior authorization, drug trade can still be carried out unofficially, through suitcase trading.
Another side effect of the current system is that direct access to patients has increased. Some drugs, whose registration processes have not yet been completed in Türkiye, can be brought from abroad through the TEB and SGK. According to the latest list published by the relevant body of the Ministry of Health, on Jan. 27, 456 trademarked drugs in 405 additional substances can be brought from abroad. We see that direct supply has increased rapidly recently.
Yet, another major problem is that some companies are carrying out shady campaigns to circumvent the system. If not the major ones, some companies, in collaboration with law offices, carry out extensive campaigns to reach patients in secrecy and enable them to file lawsuits to obtain medicines that are not yet licensed in Türkiye or are not within the scope of reimbursement. Thus, these companies go around the system by incentivizing patients to file suits in an organized manner. Although unethical, it is understandable that some companies whose profit margins are narrowing through normal means are forced to take improper paths. In addition, some companies engage in behind-the-scenes, shady relationships with marketing agencies and television channels to sell their medicines and run targeted publicity campaigns. Some critics say that the popular news of “SGK not providing cancer medicines" must be considered once again with this perspective.
I refrain from discussing the professional and ethical aspects of all this, but it is clear that the current system needs an intervention. Stricter control of parallel exports and bringing the euro exchange rate to the current value are the demands of pharmaceutical companies. However, fulfilling this demand would mean an immediate increase of tens of billions of dollars in public health care expenditures.
On the other hand, steps such as determining the exchange rate at a more sustainable balance, encouraging foreign pharma actors to develop innovative drugs for chronic diseases within the country, facilitating drug licensing processes, supporting and encouraging companies that export through Türkiye or carry their production to Türkiye and updating the licensing rules in generic drugs are urgent requirements.
There is no one-sided solution to this problem. The solution is for both the public and companies to take one step toward each other and establish a balance for a sustainable market. As pharmaceutical companies, the SGK and pharmacies are stakeholders of the same ecosystem, and all parties must engage in productive communication and strategic planning in a win-win solution for patients, market actors and public bodies.
Indeed, the main concern of actors in the pharmaceutical sector is feeling "unheard." They aspire to engage in mutually beneficial dialogues with policymakers, bureaucrats and decision-makers. Industry representatives lament their inability to access decision-makers, lack of consultation and being perceived not as partners but as adversaries.
On the budget side, according to the official data of SGK, the amount paid for prescriptions in 2023 is around TL 200 billion. The amount paid in all of 2022 was TL 102 billion. This means an increase of over 100% compared to the previous year. The projected amount in 2024 is much higher than this; it seems likely to reach TL 400 billion. While imported drugs constitute only 9.6% of the drugs sold in Türkiye on a box basis, their share in terms of amount goes up to 45.3%. These figures show that the solution to the pharmaceutical euro exchange rate problem is not only a matter of public health but also a matter of macroeconomic stability for the country. Ensuring the sustainability of the generous Turkish health care system and using the country's scarce resources effectively is important to provide each of its citizens with the quality health care they deserve.
Realizing the potential of the country for being the leader of pharmerging markets and for being a medical production hub in its region, the sector must be supported extensively, and regulated properly and a suitable infrastructure must be infused. This should be a strategic aim for the country, as the country has the potential to be a rising star in the pharma and health care sector globally within a few decades.
In sum, the Turkish pharma pricing system needs to be reformed in many aspects and to be provided with a structure that is sustainable, protects the rights of patients and enables the development of the pharmaceutical industry. The challenge is essentially just like the challenge of switching its economy to a floating exchange rate regime in the late 1990s. Visionary steps taken with courage can make Türkiye a production base for the pharmaceutical industry of its region and place the pharmacy sector among Türkiye's foreign exchange earning sectors, just as the tourism sector. As long as bold steps are taken based on cost-effectiveness and Türkiye's potential in pharmaceutical production is trusted, and if managed well, liberalizing the Turkish pharmaceutical and medical pricing system without harming the stability of the welfare regime would greatly benefit the country’s economy.
