The OTC pharmaceutical market in Turkey
Summary
- The global economic crisis has resulted in decline of real GDP rate growth to 5.6% which resulted in low consumer confidence and a decline in the spending power of people in Turkey. However, the Turkish government has started to implement several corrective measures to improve the economic situation of the country which included the introduction of free trade agreements (FTAs) in 2009.
- In 2009, the OTC pharmaceutical market in Turkey reached around $1.7bn witnessing a Y-o-Y growth of around 8%. Analgesics with 2009 sales of $242m and a market share of 25% led the market in Turkey.
- The growth of the OTC market in Turkey was stagnant, even though the H1N1 epidemic has resulted in increased sales of OTC products. Moreover, the new pricing regulation has also led to the decrease in prices of all OTC products in the country.
- The guidelines on OTC products are not very clear in Turkey but some OTC products are reimbursable. Turkey uses reference pricing system to regulate the prices of OTC products. In the new healthcare pricing method, the number of base countries was increased to ten from five, resulting in the decline of prices of the medicines.
- The Turkish government's initiative to ban smoking in enclosed public spaces resulted in an increased demand for smoking cessation products. Economic recession and intensified competition were other key drivers of the OTC market in Turkey.
Turkey
Overview
The
population in Turkey is characterized by the high numbers of young people, with
over 50% of the population aged below 30 years. According to 2010 estimates,
the median age of Turkish population is 28 years. In 2009, the population of
Turkey was reported to be 77 million, 70% of which are aged 0–39 years. The
mortality rate for infants in Turkey is higher than that of other emerging
countries, and the older population as a proportion of the total population is
forecast to increase due to declining fertility rates and increasing life expectancy.
Turkey is dominated by an urban population, with around 70% of Turks residing
in urban areas. The real GDP growth rate declined to -5.6% in 2009 from 4.7% in
2007, as a result of the global economic crisis. The Turkish government is
taking corrective measures to revive the economic condition of the country,
such as the implementation of free trade agreements (FTAs) with an aim to
encourage foreign and domestic investment.
The
healthcare system in Turkey is not as developed as in other European nations,
with total healthcare spending of around 3.5% of GDP in 2009. The number of
physicians per capita is lower than the OCED average, which implies a higher
dependency on drugs supplied by the pharmacies. The Turkish government is
introducing reforms in the healthcare system to provide all individuals with
appropriate healthcare facilities.
Turkey's OTC pharmaceutical market
The
OTC pharmaceutical market in Turkey was valued at $1.5bn in 2009, having
witnessed year-on-year growth of 7.9%. In 2009, the analgesics category led the
market with a share of around 25% by value, followed by the cough, cold and allergy
category at 21% and vitamins and minerals at 16%. New pricing regulations have
led to a decrease in the prices of all OTC products in the country. As a
result, pharmacies stopped stocking the medicines with an aim to buy it after
the discount was applicable. In Turkey, the government also reimburses OTC
drugs. Most OTC products are only allowed to be dispensed through pharmacies,
although some such as vitamins and minerals and medicated skin care products
can be sold through supermarkets and grocery stores.
The
leading OTC players in Turkey include Novartis, Abdi Ibrahim and Nobel. The
companies have to depend on physicians and pharmacists to promote their
products due to advertising restrictions on OTC products. Indeed, due to these
advertising restrictions, local companies have an added advantage over
international players as they have been operating for a long time and have
already gained considerable consumer mind-share. In Turkey, the dominant
distribution channel for OTC products is pharmacies, as according to the
regulations most OTC products are not allowed to be dispensed through any other
channel.
Market segmentation
In
2009, analgesics was the leading category in the Turkish OTC pharmaceutical
market with around a 25% market share by value, followed by the cough, cold and
allergy category at 21% and vitamins and minerals at 16%. Unlike other emerging
countries, the traditional medicines category has failed to achieve a
significant market share in Turkey. Lifestyle products such as vitamins and
minerals and weight loss products reported a slight decline in 2009, due to the
decline in disposable income as a result of the global economic crisis. In
2008, the government imposed a ban on smoking in public places which also
contributes to the increase in sales of smoking cessation products.
Regulatory framework
The
Ministry of Health is the regulatory body responsible for formulating the
guidelines for drugs in Turkey at the national level, while provincial health
directorates are responsible for the administration of healthcare guidelines at
the provincial level. However, Turkey is facing a major challenge due to the
lack of co-ordination between different agencies. The regulations for OTC drugs
in Turkey are not very clear, however, the government reimburses some OTC
medicines through national insurance. Direct-to-consumer advertising for the
reimbursed OTC products is not permitted. The pricing of OTC products is
regulated by the Ministry of Health, unlike other emerging markets.
The
Turkish government derives the price of OTC products using reference pricing
method, by averaging the prices of the product in five different countries.
However, after the implementation of the new healthcare reforms, the number of
base countries from which the prices are generated is expected to rise to
include some East European countries. In these countries the prices of the
products is much lower, and thus would result in the reduction of prices in
Turkey. This legislation has been an area of concern for OTC companies as this
may lead to declining profit margins.
Growth drivers
Economic crisis and government initiatives
The
economic crisis in 2008 was instrumental in driving the OTC drug market in
Turkey. The crisis resulted in a stressed population, and that stress has led
to various diseases including insomnia and digestive problems. This, in turn,
led to increased sales of digestive remedies and sleeping aids. In the same
year, the Turkish government imposed a ban on smoking in public places. This
has resulted in an increased demand for smoking cessation products in Turkey.
Additionally, the H1N1 epidemic also increased the market for cold, cough,
fever and pain management categories.
Intensified competition from local players
The
OTC market in Turkey is very fragmented with the presence of a significant
number of local players along with a large number of multinational players.
Indeed, the growing OTC market in Turkey has resulted in the launch of
unbranded products by the local players.
New avenues for advertising
Although
the mass advertising of vitamins and minerals supplements, weight loss products
and other nutritional products is permitted, the marketing of other OTC
products is permitted only in conferences and seminars. Now companies have
started to look at pharmacies as a source of advertisement for their products
through the 'pharmacy broadcast system', a new system which will enable
companies to advertise in pharmacies. Presently, however, the Turkish
government allows only the advertisement of food supplements, vitamins and
medicated skincare products which are sold in pharmacies.
