Turkey is breaking World Trade Organisation (WTO) rules by allowing reimbursement for medicines only if they are produced within the country, says the EU.
According to Commissioner for Trade Cecilia Malmström, Turkey is effectively forcing manufacturers of pharmaceuticals to move production into the country if they want their medicines to be eligible for reimbursement under the Turkish health system.
In addition, Turkey is insisting on various technology transfer requirements for foreign companies that elect to move production to the country that amount to a violation of intellectual property rights.
The measures are a violation of Turkey’s WTO obligations to treat foreign companies on equal footing with domestic ones and to protect their IP, such as patents and business information, on its territory, says the EU, which has now officially launched dispute proceedings via the WTO.
“This is a clear violation of WTO rules and puts many EU jobs at risk,” said Malmström. “We hope that we will be able to resolve both cases during the upcoming WTO consultations.”
The first step of the dispute settlement consists of 60-day long consultations, and that fails the EU can request that the WTO set up a panel to rule on the issues raised.
The EU estimates that the value of pharmaceutical exports affected by Turkey’s measures is around €460m ($520m) and could swell to more than €2.5bn if no action is taken.
According to recent comments by Turkey’s Health Minister Fahrettin Koca, around 54% of Turkey’s medicines are currently imported from overseas, but the country is adamant it wants to reduce that proportion.
From 2016, the Turkish government implemented a project to encourage domestic production of medicines and make use of idle manufacturing capacity. To date that has resulted in 609 types of imported medicine being produced locally. It is expected that hundreds more will be added to that tally, boosting domestic production from around $500m to more than $1bn per year.
Turkish president Recep Tayyip Erdogan has made the development of the pharmaceutical and medical device manufacturing a priority, even as the country’s economy has slid into recession.
The national Social Security Institution buys 90% of all the drugs sold on the market and the government sets the exchange rate for drug purchases at the start of each year. As there is a difference between the official and prevailing exchange rate, pharma producers have to absorb the disparity. That affects importers but also domestic producers as the exchange rate affects the cost of raw materials.
Negotiations between industry and government can lead to shortages in any year, but the situation has been exacerbated of late by the plummeting value of the Turkish lira, according to a recent Reuters report.