Cablegate: Differences Among U.S. Firms Give Rise to New

Published: Fri 28 Feb 2003 06:14 AM
This record is a partial extract of the original cable. The full text of the original cable is not available.
E.O. 12958: N/A
REF: (A) ANKARA 1275 (B) 02 ANKARA 8635 (C) 02 ANKARA
5150 (D) 02 ANKARA 3512
Sensitive but Unclassified - not for internet distribution.
1. (SBU) Summary: With Turkey's new AK government just
having marked its hundredth day in office, representatives of
American pharmaceutical companies indicate they have not yet
judged the time ripe to raise the intellectual property and
pricing issues that have beset them in recent years. Despite
this, they see some grounds for hope. Eli Lilly Managing
Director Roberto Giusti argues that in contrast to its more
"nationalistic" predecessor, the current government's
intentions are good, though it has little concept of the
scale of the issues confronting it in the pharmaceutical
area. Giusti argued that advancement of U.S. pharmaceutical
interests remains hampered by continued divisions within the
industry. Differences over the relative weight accorded to
such issues as prolonging the reimbursement lifecycle of
older off-patent brands has divided such industry leaders as
Eli Lilly and Pfizer, with the former joining with
like-minded companies to form a new "Association of Research
Based Pharmaceutical Companies" (AIFD) in January. Now
completing its registration procedures, the group will make
an introductory foray into Ankara later this week.
Meanwhile, Giusti encouraged the USG to continue to host
regular gatherings of the industry, noting that outside these
sessions "there is very little dialogue." End Summary.
2. (SBU) A New Association: In a February 27 meeting with
P/E Chief and Commercial Specialist, Eli Lilly General
Manager Roberto Giusti (joined midway through the meeting by
Akzo Nobel General Manager Edward Lysen) outlined the goals
of the new research-based association (of which he is Vice
President). (Note: The Group's ten members make up 20
percent of the sector, accounting for a significant 190
million USD in investment in Turkey in the past two years.
End Note.) They stressed that neither IEIS (the Drug
Manufacturers Employers' Association) nor TISD (the Turkish
Drug Manufacturers' Association) makes representation of
innovation or of research-based interests their top priority,
and that AIFD aims to fill that gap. Pointing to "big
picture" in Turkish healthcare expenditure, Giusti argued
that while the total is deficient (closer to that of Bulgaria
than that of Greece), it is also seriously skewed. Much of
it, he suggested, is a "subsidy" to domestic industry, in
that while imported drugs routinely face price
discrimination, Turkish manufacturers receive reimbursement
far above comparable world prices for their "copy drugs" (or
generics). As a result, cost containment (encouraged by the
IMF) has targeted new and innovative products, resulting in
price discrimination against them. (Thus, vitamins, e.g.,
are subsidized, while new cancer drugs are not.) Giusti
stressed that the new association is not overtly seeking an
end to the subsidies, nor to the reimbursement lifecycle
issues on which he suggested Pfizer is focused. Rather the
group believes these "business interests" should be lower
priorities than the industry's "legitimate entitlements":
full implementation of intellectual property rights and the
discontinuation of disciminatory practices against imports.
In Giusti's view, the defensibility of the "local subsidy" or
reimbursement lifecycle is not the key issue; rather the
issue is their "inappropriateness" at a time when data
exclusivity is not provided and when price discrimination
continues to exist.
3. (SBU) Continued Differences: Giusti noted that the
association's members are not exclusively foreign, but
include three Turkish research-based firms. Founding
companies include Novartis, Sering AG, Novo, Bayer, Solvay,
Lundbeck Astrazeneca, Sanofi-Synthelabo, Organon and Lilly.
Outside the new organization are those with "other
interests": generic manufacturers, with their vested interest
in the current reimbursement system, and Pfizer. (In a
separate meeting with Pfizer's Pricing Director Feyza Tevruz
earlier in the month, these differences were only indirectly
touched upon, with Tevruz noting that Pfizer did not share
all of Giusti's criticism of the reimbursement system: while
it agreed the system was "not perfect," it could live with
it.) Giusti also expressed frustration with the lack of
transparency in the GOT's reimbursement decisions, suggesting
that some other foreign firms had benefited from their access
to decisionmakers to win special breaks. Part of the
problem, he suggested, is a lack of communication within the
industry, and he encouraged the USG to hold pharmaceutical
roundtables (like that of late November at the Consulate) on
a more regular basis. Lysen echoed the point, noting that in
his past assignment, roundtables hosted by Embassy Tokyo had
been extremely helpful in keeping the industry informed about
developments and on the same page in their advocacy efforts.
4. (SBU) Still too Early: Giusti and Lysen echoed what Tevruz
and Pharmacia-Upjohn Country Director Muhittin Bilutay
suggested earlier in the month: the time is only now becoming
ripe to press the new Minister of Health on the data
exclusivity and price discrimination issues, particularly
given staff changes in the Ministry. Giusti was hopeful that
the new government would be more open to the industry's
position than its predecessor. The Ecevit government, he
argued, saw issues through a "nationalistic" prism and was
predisposed to back domestic industry at the expense of its
foreign counterparts. That may not be true of AK: he
suggested that the government's intentions are "good," but
that it is not aware of the extent of things that need to be
changed. Giusti said he will make an initial trip to Ankara
this week to introduce the new association and distribute the
new issue paper it has prepared (copy e-mailed to desk and
Embassy Ankara). Bilgutay similarly indicated that the
industry is just now beginning to raise the price issues that
have seriously harmed it in Ankara. The Import subcommittee
of the Pharmaceutical Manufacturers Association (PMA) planned
to meet with the Health Ministry's new Director General of
Pharmaceuticals in mid-February to raise its concerns about
import pricing, and to determine whether she planned to
adhere to the action plan her predecessor had adopted to
address the issue. Bilgutay stressed the seriousness of the
situation, noting that regulations that had cut the companies
margins on imports from 36 to 16 percent (10 percent profit
and 6 percent cost), when coupled with inflation and lags in
reimbursement cycles, had seriously harmed the industry.
5. (SBU) A Tender Trap?: Bilgutey also flagged his concern
that new tender regulations may apply to purchase of
pharmaceutical products, putting further downward pressure on
already low reimbursement prices. Neither Giusti or Tevruz
raised this issue, however.
6. (SBU) Comment: Serious divisions persist among U.S. and
other international companies active in the Turkish market,
though there is underlying agreement that intellectual
property issues need to be addressed, as is reflected in
PhRMA's latest submission. Given the positive feedback on
the roundtable Mission organized in November (the third in
the past year), we will seek to organize such sessions on a
regular basis, though perhaps not quite as often as the
monthly session Giusti suggested. A goal at some of these
sessions would also be to encourage dialogue between American
and Turkish pharmaceutical companies, something the
American-Turkish Council has also attempted to organize. End
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