In recent years, Turkiye’s pharmaceutical industry has grappled with significant economic challenges, not least of which is the frequent upward revision of the pharmaceutical Euro exchange rate.

Last month, Turkiye’s Official Gazette published a Presidential Decree amending the Decision on Pricing of Medicinal for Human Use legislation, whereby the pharmaceutical Euro exchange rate will increase by 23.5%, from Tl17.55/€1 to Tl21.67/€1. The change in the Euro exchange rate has sparked interest among industry experts since it is the first update to be implemented this year, following two sharp increases in July and December 2023. The increased value of the Euro for pharmaceutical pricing purposes will likely result in a corresponding rise in drug prices. While multinational pharmaceutical companies and pharmacies are set to benefit from higher revenues, patients and local pharmaceutical manufacturers will once again bear the financial implications of the growing Euro exchange rate disparity.

Pharmaceutical prices in Turkiye have always been a controversial issue. Since 2004, Turkiye has used international reference pricing (IRP), also known as external reference pricing, to price medicines. As such, the price of an imported drug is determined by using the lowest ex-manufacturer price among a basket of five European reference countries (France, Greece, Italy, Portugal, and Spain) and the country from which the drug is imported. The currency is then converted into Turkish liras, which is calculated using a specific government-set Euro exchange rate, known as the pharmaceutical Euro exchange rate. Given the Turkish lira’s extreme volatility, the fixed pharmaceutical reference Euro rate is deliberately set below the real market exchange rate and used to avoid any fluctuations in the real exchange rates as a form of price control to ensure affordability. Historically, the Euro exchange rate for medicines was calculated and adjusted once every year by the price evaluation commission in the Turkish Medicines and Medical Devices Agency (TITCK). The determined exchange rate would generally be kept at 50% of the real exchange rate. However, since 2021, the exchange rate has been adjusted incrementally by around 2–3 times per year to accommodate for local currency depreciations. Thus, the gap between the pharmaceutical exchange rate and the real Euro rate has widened significantly in recent years, placing an immense financial strain on pharmaceutical companies based in Turkiye and resulting in higher drug prices for end users.

Due to the exchange rate practice, Turkiye has one of the lowest drug prices in Europe. There is a significant difference in the reference price of a product in Euros, which forms the basis for prices in Turkiye, and the actual price in Turkish lira because of the exchange rate. In this context, countries that reference Turkiye in their IRP system have started to inquire about the prices in Turkish lira, as opposed to the reference prices in Euro, because of their low value in global currencies. According to GlobalData’s IRP matrix, 12 countries, including Russia, South Korea, Azerbaijan, and Egypt, formally reference Turkiye for drug pricing under IRP, while five countries, including China, informally reference Turkiye. An unrealistic exchange rate results in a lower price set in Turkiye than IRP rules would dictate, thereby also affecting the price of the same product in countries that benchmark Turkish prices. This is because the policy artificially suppresses drug prices in Turkiye.

For example, the ex-manufacturer price of MSD's cancer immunotherapy Keytruda (pembrolizumab) in Turkiye is €2,377.73 ($2,491.77). When this is converted into local currency using the real currency rate (Tl35.9737/€1), the real market price is set at Tl85,535.75 ($2,472.76). However, if the pharmaceutical exchange rate is set at Tl21.670/€1, the government will set the price of Keytruda at Tl51,525.41 ($1,489.55), creating a 40% price gap. As such, the lower market revenues for pharmaceutical companies operating in Turkiye will be far less for the same product than in other markets.

The erosion of profit margins and low prices means Turkiye has become a relatively unattractive market for international pharmaceutical firms exporting their innovative products to the country. In recent years, several pharmaceutical companies have either threatened or decided to withdraw their products from the Turkish market, citing the increased gap between the government-set exchange rate and the real exchange rate. Consequently, Turkiye has experienced acute drug shortages, notably for cancer therapies and antibiotics. Nurten Saydan, president of the All-Pharmacist Employers' Union (Tüm Eczaci Isverenler Sendikasi, TEIS) has attributed the nationwide shortages to the medicines exchange rate and stated that this policy severely restricts patient access to innovative medicines. In comparison to other European countries, the rate of access to on-patent originator products in Turkiye is low.

For local pharmaceutical companies based in Turkiye, this dynamic has rendered the importation of certain medicines financially unsustainable. These firms procure drugs or raw materials/active pharmaceutical ingredients (APIs) at the real Euro exchange rate. However, they can only sell the products at prices determined using the lower pharmaceutical exchange rate, leaving them to bear the financial burden of the market difference and eroding their profit margins.

Nonetheless, the 23.5% increase in the pharmaceutical exchange rate implemented in October is anticipated to result in a drug price hike, offering some relief for pharmaceutical companies marketing their products in Turkiye. If the upward trajectory in the Euro exchange rate for medicines is to continue, drug shortages will become a further persistent issue, and Turkiye will be further deprioritised for global launches of novel therapeutics.

Unlike other sectors, pharmaceutical prices in Turkiye are not determined by free market conditions, but by the country’s trivet pricing system, which comprises three complex layers: the IRP system, the fixed pharmaceutical exchange rate, and public discount practices. The “protectionist” pricing system has become critically problematic in the current high-inflationary economic environment in Turkiye. To address Turkiye’s rising inflation rates, the Central Bank of Turkiye (Turkiye Cumhuriyet Merkez Bankasi) increased the base interest rate to 50% in March 2024 and has kept the rate unchanged since. The increase in the interest rate is a signal of a definite and sustained departure from President Recep Tayyip Erdogan’s previous “unorthodox” economic policy of decreasing interest rates to control inflation—an approach that is contrary to conventional economic theory and subsequently led to severe depreciation of Turkiye’s currency during 2021. The Central Bank reached a highly anticipated decision on the key interest rate on November 21, when it was decided that the policy rate will remain unchanged at 50% for the eighth consecutive month. Top officials from the Ministry of Finance have revealed that the economic environment in Turkiye is expected to gain some stability starting from H2 2025 following a few turbulent years of soaring inflation rates and local currency depreciation.

This article is produced as part of GlobalData’s Price Intelligence (POLI) service, the world’s leading resource for global pharmaceutical pricing, HTA and market access intelligence integrated with the broader epidemiology, disease, clinical trials and manufacturing expertise of GlobalData’s Pharmaceutical Intelligence Center. Our unparalleled team of in-house experts monitor P&R policy developments, outcomes and data analytics around the world every day to give our clients the edge by providing critical early warning signals and insights. For a demo or further information, please contact us here.