A BRIEF LOOK AT THE PHARMACEUTICAL SECTOR

As is known, as a result of developments in science and technology each passing day, the pharmaceutical sector continues to show progress, and it is predicted that the sector could develop further with new discoveries. Thus, while access to medicines increases for broad segments of society, average human life expectancy increases with each passing day. However, although some diseases have not yet reached a definitive solution, progress is being made that will enable patients to live a higher quality life. When we consider the size of the global pharmaceutical sector, North America holds the largest share at 64.1% in the sales of newly produced medicines. This is followed by the European Union at 18.1% and Japan at 7.1%. When looking at spending by country, the United States stands out in first place, followed by China and Japan. The top 5 countries with the largest share constitute two-thirds of the global pharmaceutical market, which reached USD 1.2 trillion as of 2018. The United States accounts for nearly half of the global pharmaceutical market. In 2018, global pharmaceutical industry expenditure was at USD 1 trillion 200 billion level, while this figure is expected to rise to USD 1.3 trillion with approximately 5% growth in 2019. A market of USD 1.5 trillion is projected for the coming five years. Over the coming five years, growth is expected to be led by developed economies and through new products, while in developing economies, the market is predicted to grow more slowly compared to the previous five years due to China, India and Brazil sources. On the other hand, growth in the sector is expected to be strong in Turkey, Egypt and Pakistan over the coming five years, and these economies are defined as pharmerging markets.

Pharmaceutical Market in Turkey

Approximately 10 of the world's most important pharmaceutical companies operate in Turkey. The pharmaceutical sector in our country is defined as a sector that competes globally thanks to its production structure that generates high added value and possesses advanced technology. Due to the production level that has reached a certain potential, employment and foreign trade volume, the sector has recently gained an important place in the announced incentive packages. According to IEİS data not yet formalized; the Turkish Pharmaceutical Market reached TRY 30.9 billion in value in 2018 and TRY 2.3 billion in box volume. The reference medicine market completed 2018 at TRY 21.02 billion in value, while box volume sales reached 0.93 billion boxes. The equivalent medicine market reached TRY 9.92 billion in value in 2018 and 1.37 billion in box volume. Imported products in the market closed 2018 at TRY 16.03 billion in value and 0.38 billion in box volume. Domestically manufactured medicines reached TRY 14.91 billion and 1.92 billion box sales in 2018. Based on IEİS data, the sector, which closed 2018 at approximately the above basic volumes; We see that the Turkish pharmaceutical sector reached a size of TRY 30.94 billion in value in 2018 through hospital and pharmacy channels. This level represents 11% annual growth. In the reference medicine market, box volume sales increased by 1.7% to 0.93 billion boxes. In the equivalent medicine market, box volume sales grew by 4.9%, reaching 1.37 billion boxes in volume.

Regional distribution of global pharmaceutical sector sales, 2017

Turkey Pharmaceutical Market Foreign Trade Volume

Turkey's pharmaceutical sector foreign trade volume has shown an increase in recent years. Following a temporary decline in 2016, pharmaceutical exports continued to increase and in 2018 rose by 30.7% compared to the previous year, reaching USD 1.2 billion. Pharmaceutical imports in the same period increased by only 0.6%, exceeding USD 5 billion.

Turkey pharmaceutical sector foreign trade (million USD)

Production in Turkey's Pharmaceutical Market

According to data from the Turkish Pharmaceutical Industry Employers' Association, most of the facilities producing to international standards in Turkey are located in the Marmara Region. Total industrial production slowed from a strong growth rate of 8.9% in 2017 to 1.6% in 2018. On the other hand, within industrial production, the production of basic pharmaceutical products and materials grew by 6.5% in 2018, following the 7.4% growth in 2017.

Source: TURKSTAT Annual average changes

Research and Development

In Turkey's pharmaceutical sector, the number of accredited R&D centers, which was only 4 in 2010, rose to 32 by the end of 2018. Through the progress these centers will provide, the sector makes an important contribution to reducing Turkey's dependence on foreign medicines. As the number of R&D centers increases, expenditures in the sector rise in parallel. R&D expenditures in the pharmaceutical products and materials manufacturing sector, which includes the pharmaceutical sector, rose from TRY 3.4 billion in 2010 to TRY 15.9 billion by the end of 2017. With the increase in R&D centers in the pharmaceutical sector and the continuation of increased expenditures, it is expected that the sector's added value will see significant increases. Source: IEİS, Ministry of Industry and Technology Pharmaceutical sector accredited R&D center numbers

Source: IEİS, Ministry of Industry and Technology Pharmaceutical products and materials manufacturing sector R&D expenditures (billion TL)

Opportunities in the Pharmaceutical Sector

• Rapid population growth, an increase in average life expectancy, changing demographic structure and low per capita medicine consumption mean that the sector will continue to grow in the coming years. • Increasing health tourism and government incentives provided in this regard make a major contribution to sector growth. • High growth rates in developing markets worldwide are changing market distribution, and this situation is likely to create a favorable impact for Turkey. • The reference price system created within the framework of the health transformation program and the discontinuation of medicine sales in hospitals is developing the retail market. • Regulations and tax applications that make it difficult for medicines to enter from abroad to support domestic production create an opportunity environment for domestic producers. • Thanks to significant progress in molecular biology and recombinant techniques, biotechnological drug production has accelerated and important opportunities still exist in this field. • Turkey was accepted as a member of the "International Council for Harmonisation of Technical Requirements for Pharmaceuticals for Human Use" (ICH), which includes Switzerland, the United States, the United Kingdom, Ireland, Germany, Canada, Japan and Australia. Through this membership, all inspections conducted by the Ministry of Health Turkish Medicines and Medical Devices Agency will be recognized worldwide, the quality and safety of medicines produced in the country will be certified and technical barriers to opening medicines to the global market will be eliminated. • The trend of opening to new markets in exports provides sector producers with opportunities not yet utilized. Hakan Orhan / Pharmaceutical and Healthcare Sector Leader / KPMG Turkey Source https://assets.kpmg/content/dam/kpmg/tr/pdf/2019/04/sektorel-bakis-2019-ilac.pdf