How are pharmaceutical prices set?

Since 2004 the prices of pharmaceutical products in Turkey have been determined through a reference pricing system. Several EU member states have been used as reference countries. Marketing authorisation holders request the maximum sales price of a pharmaceutical product subject to Ministry of Health approval. The reference price is the "sales price to warehouse" in reference countries, excluding discounts. The lowest sales price of a medicine is used as a basis for setting the price in Turkey. The reference price is determined in euros and converted to Turkish lira.

The Price Evaluation Commission (PEC) was established in 2007.(1) It is coordinated by the Ministry of Health and comprises representatives from:

  • the Ministry of Finance;
  • the Ministry of Development;
  • the Undersecretariat of Treasury; and
  • the Social Security Institution.

The PEC is responsible for determining the periodic euro value used to evaluate the prices of medicinal products for human use.

Under Turkish law, the PEC must evaluate the value of €1 when determining medicine prices. The PEC assesses the prices of medicines in accordance with EU prices and decides on the euro rate to be applied.

Several important cases regarding PEC decisions have recently been finalised. The PEC was found to have violated its obligations under the law, thus allowing the parties that had suffered from the decisions to demand compensation.

Decisions

In 2009 the PEC defined the periodic euro value as €1 to TL1.9595. In 2011 the Association of Research-Based Pharmaceutical Companies (AIFD) asked the PEC to re-evaluate the periodic euro value in accordance with currency changes. The request was rejected, resulting in an annulment case filed by the AIFD in which the court ruled in its favour and found the implicit rejection to have been unlawful.

In 2013 the PEC convened to re-evaluate the periodic euro value and did not alter the 2009 value. This resulted in a second court case that was recently finalised. The PEC changed the periodic euro value in 2015 to €1 to TL2 and rejected another application by the AIFD. This resulted in a third court case, also recently finalised.

In the second case, the PEC's decision to maintain the periodic euro value at TL1.9595 was found to be unlawful. Examining the PEC's duties, it was decided that the Ministry of Health must(2) execute authorisation, permission and pricing of medicines in accordance with special legislation.(3) This legislation designates that the PEC, under the Ministry of Health's coordination, is responsible for the evaluation of the periodic euro value by convening ordinarily every three months or extraordinarily by invitation, when necessary. If the periodic euro exchange rate differs from the periodic euro value by more than 5%, the PEC must meet extraordinarily and may decide to increase or reduce the price of a medicine accordingly.

During the case, the PEC argued that due to the global financial crisis of 2010 to 2012, it had applied alternative measures instead of altering the periodic euro value. However, the court found that as of April 29 2013, €1 equalled TL2.35, which was 10% more than the 2009 rate. Therefore, the exchange rate had changed more than 5%. As a result, the PEC should have met extraordinarily, but failed to do so. Although the price increase would result in increased public expense, other measures would allow the PEC to rebalance its spending. Therefore, the second court decision found that the PEC had failed to perform its duty to execute its obligations under the relevant legislation. The first case was also annulled as a result and the PEC's appeal applications were rejected.

The third case is similar to the second, in which the AIFD and the Pharmaceutical Manufacturers Association of Turkey had applied to the PEC following its 2015 decision to define the periodic euro value as €1 to TL2 and subsequently filed a lawsuit after the application had been rejected. The third court decision found that:

  • the periodic euro rate was €1 to TL2.94 on the date of the relevant PEC decision; and
  • the determined periodic euro value should have been updated on the decision date.

The court also stated that although the PEC has discretionary power, it remains bound by the principles established by law. Thus, the court found that the implicit rejection of AIFD's application had been contrary to the law. The decision was confirmed on appeal.

Comment

Following the above cases, it was found that the PEC had failed to fulfil its duties in evaluating the periodic euro value and that the pharmaceutical sector had suffered as a result. At present, the periodic euro value is €1 to TL2.6934, as determined by the PEC on February 2 2018. The Turkey Central Bank's euro sales price was €1 to TL4.7 as of the decision date.

A key takeaway from this dispute is the amendment to the price determination method. According to the new Council of Ministers Resolution on the Pricing of Medicines for Human Use,(4) the periodic euro value to determine medicine prices will be 70% of the annual average of the Turkey Central Bank's euro sales price for the previous year.

For further information on this topic please contact E Sevi Firat or Ata Umur Kalender at Firat Izgi Attorney Partnership by telephone (+90 212 235 25 25) or email (sevi.firat@firatizgi.com or ata.kalender@firatizgi.com). The Firat Izgi Attorney Partnership website can be accessed at www.firatizgi.com.

Endnotes

(1) Council of Ministers Decision on Pricing of Medicines for Human Use (2007/12325) dated June 12 2007.

(2) Health Services Fundamental Law 3359.

(3) Council of Ministers Resolution on Pricing of Medicines for Human Use (2007/12325), promulgated in the Official Gazette 26568 on June 30 2007.

(4) Council of Ministers Resolution 2017/9901, dated February 6 2017.

This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.