Foreigners buying drug firms one by one, local producer says

BOSTON - Anatolia News Agency

The Turkish pharma market is promising for investors, Canan Karabağlı (inset) says.

Turkey’s local pharmaceutical companies are being sold one by one to foreign multinationals as they suffer from the payment and price policies of the Social Security Institution (SGK), the top Turkish executive of a leading domestic pharmaceutical firm has said.

“Nearly 10 Turkish pharmaceutical firms were acquired by foreigners in the last 10 years. This is the way [we all may be taken over] one by one,” Candan Karabağlı, the chief executive of Abdi İbrahim, told reporters at the BIO International Convention 2012 in Boston, noting that Turkish pharmaceutical firms were stuck in a difficult financial situation because the SGK has not paid exchange rate differences and has reduced drug prices.

“Turkey is a very important market. Turkey’s demographics are very important. Some 60 percent of the population is under 30 years of age and life expectancy is increasing. Average life expectancy has hit 73 years. Several chronic ailments will increase as our lifestyles have changed,” she said.

Foreign firms see Turkey as a market that is very dynamic and has a growth potential that is akin to that of China, India, South Korea and Mexico, said Karabağlı. That is why foreign firms are acquiring Turkish firms so that can hopefully benefit in a future local market following a possible change in government policies, she added.

“Domestic firms do not have the financial capacity [to withstand the current situation],” she said.

The foreign acquisitions of local pharmaceutical firms may have a positive effect on the current account deficit, but it will not lead to any technology transfer, she said.

Exchange rate

There is a 25-30 percent difference in the exchange rate compared to last year, she said, adding that this should be paid to the pharmaceutical firms according to the SGK’s regulations.

“There is an extra financial burden between $1.5 billion and $2 billion on the Turkish pharmaceutical industry due to the difference in the exchange rate. This should definitely be paid. Also, the SGK has reduced drug prices regardless of the exchange rate. The reduction rate was about 20 percent at the end of 2009 and about 10 percent at the end of 2010 and 2011,” she said. “It is not bearable anymore. Local firms are being sold one by one. In this case, the domestic pharmaceutical industry is not given a chance to develop. Now the prices are way below the world average. Turkey has become one of the cheapest countries in terms of drugs in the world.”

‘Other side of coin’

There is a misconception that the pharmaceutical industry is after “higher revenues than in the past,” which is wrong, she said.

“When a firm starts to invest in an original drug today, it can go to market after an average of 10 years. The period is three or four years for generic drugs. The investment totals between $800 million and $1.5 billion and [it might come] onto the market after 15 years. Meanwhile, the firm makes all the investments [before it gains any return]. The firm tries to get a return on its investment in a patent period of 20 years. The state just does not want to see this side of the story in drugs,” she said.