A new decision, On the Pricing of Medicines for Human Use, published on 10 July 2015, has revoked the controversial 2007 pricing decision and has introduced a reference price for pharmaceuticals of 70% of the previous year's average EUR/TRY exchange rate.

Background

Prior to the publication of the new pricing decision, a 2007 Council of Ministers decision established the general framework for Turkish medicine pricing rules. Further detail of the pricing rules was set out in the Ministry of Health Communiqué, On the Pricing of Medicines for Human Use.

Turkey uses a reference pricing system. The "reference price" for a medicine is the lowest of the sale-to-warehouse prices in (i) the five EU reference countries, (ii) the country where the product is manufactured, and (iii) the country from which the product is imported, provided the product has received marketing authorization and is actually sold in these countries. Discounts are not considered.  

Under the 2007 pricing decision, reference prices were determined in Euro, and then converted into Turkish lira at a fixed exchange rate. The 2007 decision required the Medicine Price Evaluation Commission ("Pricing Commission") to convene quarterly and, as needed, extraordinarily, to revise the exchange rate in line with exchange rate fluctuations. On 2 April 2009, the Pricing Commission fixed the EUR/TRY exchange rate at 1.9595. Since then, however, the Pricing Commission failed to convene and revise the exchange rate, even though the lira devalued substantially against the Euro, putting severe pressure on pharmaceutical companies with regard to pricing medicines.

In response, the Research-Based Pharmaceutical Companies Association (Tr. Araştırmacı İlaç Firmaları Derneği or "AIFD"), a Turkish pharmaceutical industry association, sued the Ministry for the Pricing Commission's failure to revise the exchange rate. The court ruled in AIFD's favor, ordering the Pricing Commission to convene. Following this ruling, the Pricing Commission convened but did not revise the exchange rate, prompting AIFD to bring another action against the Pricing Commission for failure to adjust the exchange rate. The court again ruled in AIFD's favor and annulled the Pricing Commission's decision not to revise the exchange rate.   

What the new decision says

The new pricing decision's most significant provision, Article 2(2), states the reference price is now 70% of the previous year's average EUR/TRY exchange rate. Rules on reference countries, maximum sale-to-warehouse prices, and warehouse and pharmacy profit margins remained generally the same, with only slight numerical changes. The Turkish government revised the pricing rules to set a 70% coefficient for the EUR/TRY exchange rate to avoid implementing the previous pricing rules which did not include a coefficient.

The new pricing decision is effective immediately. As a transitional matter, under Provisional Article 1, the Pricing Commission is to publish the average EUR/TRY exchange rate for the last 90 days (rather than the previous year) by 21 July 2015, which will be the basis for reference prices until January 2016. 

Implications for pharmaceutical companies

Pharmaceutical companies must revise their product prices in line with the new pricing rules. 

Conclusion

While the long-running discussion on fixing the exchange rate appears to be resolved, the result is not favorable for pharmaceutical companies, which will continue to feel pressure from the pricing rules due to the relatively low 70% coefficient.