As Covid-19 highlights the importance, as well as the vulnerabilities, of healthcare value chains, domestic capacity to develop, produce and provide medicines and treatments feature among the top priorities of governments across the world – and Turkey is no exception.
Ankara is looking to build on the country’s existing healthcare sector and manufacturing base to foster research and development (R&D), particularly in pharmaceutical and medical devices.
“The Turkish pharmaceutical industry has the potential to compete with developed countries,” says Süha Taşpolatoğlu, the CEO of Abdi Ibrahim, an Istanbul-based pharmaceutical multinational that is investing $8m into R&D as it aims to become Turkey’s leading producer of biosimilars, or biological medicines very similar to already approved medicines.
Turkey aims to be one of the world’s top 10 economies in health services by 2023, increasing R&D expenditures to 3% of GDP, according to Turkey’s Association of Research-Based Pharmaceutical Companies (AIFD).
Even with an established manufacturing base and healthcare sector, experts are calling for more localisation and improvements to the country’s research culture and incentive scheme to foster growth in the industry.
Exports from Turkey’s pharmaceutical sector have climbed in recent years, from about $1bn in 2017 to $1.8bn in 2020, according to Invest Turkey figures.
US-based biopharmaceutical specialist Amgen is one major player, establishing an affiliate in Turkey in 2010. Two years later it acquired Gensenta, one of the country’s leading producers of biosimilars, and has invested almost $825m in Turkey to date.
“We continue to invest without slowing down by taking the driving force of the incentive applications implemented by the government behind us,” says Güldem Berkman, the general manager of Amgen Turkey and Gensenta.
At its Turkish R&D centre, the company got a corporate tax exemption of TL14.3m ($1.25m) from 2012 to 2019 and other exemptions for capital expenditure on laboratory equipment. It also got a TL2.2m grant for product development in 2019 from Turkey’s Scientific and Technological Research Council (Tubitak).
Ms Berkman says the incentive system based on tax reductions and exemptions has enabled companies to invest. But there is a need for more cash-based financial support, especially for biosimilars that require consistent and large-scale investments.
“Timely and effective public investment in R&D is critical to having a corner in sustainability and global competition,” she says. The call for cash-based incentives is echoed by Mr Taşpolatoğlu, who notes that implementing localisation in the industry is also of great importance.
“With localisation, we can contribute to the closing of the current account deficit by starting local production of products we currently import,” he says.
Ms Berkman notes that dependency on imported raw materials and an increase in prices due to the Turkish lira’s depreciation have created operating challenges.
While there are 57 accredited life science R&D centres and more than 20 universities designated as research universities, experts say Turkey’s research ecosystem struggles to develop products and bring them to market.
“We have impressive infrastructure and funding programmes available, but the research culture is not there yet,” says Abdullah Karadağ, the vice director of Turkey’s Genetic Engineering and Biotechnology Institute and Tubitak Research centre in Marmara.
“The young population in Turkey really like innovation and want to establish and advance in specific areas. Our government resources are good but it's not enough for a product to get into the market,” he adds.
Despite challenges in spinning off research, Turkey’s life sciences researchers can be recruited on more convenient terms than elsewhere. It costs an estimated $594,886 per year to employ 50 people in a life sciences R&D centre in Turkey, compared with an average of $2.12m across 35 European countries, according to fDi Benchmark, an investment destination comparison tool.
“For foreign investors, because our labour is cheaper compared to Europe, there is an advantage,” says Mr Karadag. “There is a supportive system and some guarantees to buy products.”
Over the past few decades, Turkey’s healthcare sector has undergone rapid transformation and attracted an increasing number of medical tourists, thanks to experienced doctors and high-quality medical schools.
More than 550,000 foreign patients received treatment in Turkey in 2019, bringing in $2bn of revenue, according to figures cited by Turkey iHealth. The Turkish Ministry of Health expects the number of foreign patients to reach 1.5m by 2023.
The Ministry of Health has extensively used a public-private partnership (PPP) programme to improve healthcare access and quality across Turkey, notably in the development of new hospitals. In 2017, US-based GE Healthcare equipped Turkey’s first operational PPP Campus in the southern port city of Mersin.
“[It was] an innovative programme that has served as a model for future PPPs,” says Naël Dabbagh, GE Healthcare’s general manager for the Middle East, north-east Africa, Turkey and Central Asia (MENEAT) region. GE Healthcare went on in 2019 to equip another 3711-bed hospital in Ankara.
Mr Dabbagh says that Turkey has become a regional healthcare hub, with many health-tech companies and well-developed expertise in building hospitals.
“It has seen incredible growth and often serves as a market where we can ‘break new ground’ in terms of innovative solutions,” he says, noting the country is an “ideal place” to build artificial intelligence (AI) applications thanks to a wealth of medical imagery data.
The Turkish government has made digital transformation a strategic priority, with national strategies for AI, cyber security and other emerging technology areas.
“The Covid-19 pandemic underlined the urgency in secure data sharing for the public interest,” says Ali Taha Koç, the head of Turkey’s Digital Transformation Office. He notes that the health information system is one area that has proved its resilience and agility during the pandemic.
Beyond a well-established ecosystem of more than 6000 companies in Turkey’s medical devices and disposables market, investors are bullish on the potential of its start-ups.
Altan Küçükçınar, an Ankara-based partner at venture firm Diffusion Capital Partners (DCP), which invests in deep tech start-ups, says that alignment with European regulation and medical expertise makes Turkey a good candidate for life sciences, especially medical devices.
“The public system in Turkey is very generous when it comes to health expenses,” he says, noting that the government is often the largest buyer of life sciences products.
Turkish life sciences start-ups in DCP’s portfolio include Mikro Biyosistemler, which has developed a lab-on-chip device for the early detection of cancer from blood samples.
“When you develop a medical device with certification in Turkey, you can sell the product into Europe as our regulations are in line with European standards,” says Mr Küçükçınar.
As Turkey strives to develop domestic production and research capacity, Mr Karadağ is confident that Turkey is probably one of the best locations for investors in life sciences.
“We have problems to be solved, but Turkey is working hard towards that goal,” he says.
In association with Investment Office of the Presidency of the Republic of Turkey. Writing and editing were carried out independently by fDi Intelligence.
This article was first published in the December 2021/January 2022 edition of fDi Intelligence magazine. Read the online edition here.