Turkey – The Strategic Importance of Contract Manufacturing in Turkish Pharmaceuticals

August 7, 2014 10:28 am0 commentsViews: 185

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Contract manufacturing, historically an important facet of Turkey’s pharmaceutical manufacturing industry, has grown in significance in the past four years, driven by a change in the regulatory environment and investments from the private sector. These changes along with the high standards of quality are enabling Turkish manufacturers to compete globally. Contract manufacturing has long existed in the backdrop of the Turkish pharmaceuticals industry. There were a few companies dedicated exclusively to contract manufacturing, but most of the work was done opportunistically, with manufacturers identifying a specific opportunity or under-capacity and addressing it. Today, the size of the latter still outweighs the former. Only six companies are nearly exclusively dedicated to contract manufacturing. The number of pure contract manufacturers – those that do not also manufacture their own products – is even smaller. This appears set to change.

The attractiveness of contract manufacturing to these businesses has been backed by the strategic role that it has played as a springboard for manufacturers. Contract manufacturing allows for scalability. Baran Tokdemir, CEO of Idol Pharmaceuticals, one of the industry’s few exclusive contract manufacturing businesses, said, “investing in a country directly is not an economic way of entering into a country’s markets for many companies. There are far too many costs associated with manufacturing directly. Contract manufacturing, however, allows for these companies to establish a presence within the market before they decide to scale their operations and create a local manufacturing presence.” For these reasons, GlaxoSmithKline, which stands as the industry’s seventh largest pharmaceutical business by revenue in 2013 and lacks any manufacturing facilities within the country, has initiated a partnership with Idol Pharmaceuticals, wherein the company will first focus on the production of vaccines for the multinational and later enter other fields. Şefik Renda, CEO and general manager of Birgi-Mefar, the market leader in contract manufacturing, comments that, “The advantage of using a contract manufacturer is fixed costs. As a CMO, we are providing services and processes that are well setup, meaning you have a greater chance to start production at optimum costs and high quality. This is why we do not recommend companies to establish their own manufacturing facilities. ‘We strongly believe the role of contract manufacturers will expand and be more important in the future. Pharmaceutical companies should focus on R&D and Sales rather than manufacturing. Compliance costs in relation with fixed costs are quite high for individual companies and the fixed exchange rate has also made it more difficult for companies to do their own manufacturing.”

The importance of these partnerships has risen in recent years. In 2010, the creation of a Turkish equivalent to Good Manufacturing Practices (GMP), a standard that has been in place in Turkey since 1985, changed market access dynamics for those distributing their products into Turkey. “The advent of Turkey’s system of regulating manufacturers with the country, Turkish GMP standards, resulted in many businesses no longer being able to enter the country purely through distribution. This regulation necessitated that those that wish to enter the Turkish market do so in such a way that ensures that their products are compliant with local standards,” explains Tokdemir, of Idol Pharmaceuticals.

Köksal Ülgen, general manager of Pharmactive, which plans to dedicate 40% of its new $120 million manufacturing facility to contract manufacturing, further explains how this system evolved. “In response to the introduction of Turkey’s own manufacturing standard, European nations issued a requirement that all Turkish manufacturers that distribute their products into Europe must undergo plant approvals by the Ministry of Health of the relevant country to ensure their compliance with European GMP standards. In response to this, the Turkish government issued a reciprocal decree, mandating that all foreign manufacturers that wish to sell their products in the Turkish market must comply with Turkish GMP standards. This decree closed the Turkish market to many pure distributors. As a result, participation in the Turkish market today requires local manufacturing. This has given rise to the importance of contract manufacturing within the country.

Consequently, numerous manufacturers have either expanded their existing contract-manufacturing businesses or invested in the development of greenfield operations, like Pharmactive did in 2011. The attendant rise in competition associated with the growth of contract manufacturing has resulted in the development of an industry that competes strongly on the basis of quality. This has meant that a greater emphasis has been placed on the importance of certification related to information security, specialization in certain fields such as cold chain management, and the introduction of new manufacturing technology.

Though a division has long existed between those that conduct contract manufacturing as a side business and those that operate exclusively as contract manufacturers within the industry, this divide has been exacerbated by this shift in the market, the result of which has moved the issue of the perceived conflict of interest that exists in manufacturing both one’s own products and conducting contract manufacturing to the foreground. Today, guaranteeing the security of client information has become critically important. Mehmet Baharoğlu, business development manager of Birgi Mefar, explains that, “Our biggest advantage is that we do not own any product licenses. This includes all of our subsidiaries as well, therefore we are a sole CMO. We have a true conflict-of-interest-free environment. We start all of our partnerships by signing confidentiality agreements for 5 to 10 year periods. We truly understand the importance of this topic and keep all documents in accordance with the confidentiality terms which we set-forth upon through our agreements with our clients. We are able to maintain and build our partnerships on a long-term basis because confidentiality is a key success factor for us.”

This has drawn some contract manufacturers like PharmaVision to seek international certification and implement strict information management systems. Fatma Taman, general manager of PharmaVision, comments that, “A distinct characteristic of PharmaVision is the fact that it solely functions as a contract manufacturer while also being the first company in the Turkish pharmaceutical sector to receive the TS ISO/IEC 27001 Information Security Management System Certificate, encompassing all the divisions of the company. We consider the information received from our customers as assets due to the nature of our business and provide a high level of confidentiality, integrity and availability. From the customer’s perspective, this certainly avoids the risk of dossier duplication. We sustain our Information Safety Management System by involving our complete workforce, protecting the continuous workflow, preserving the business continuity and increasing collective awareness through inter-company seminars, risk management studies and internal audits. By means of this internationally auditable certification, we are proud to provide our business partners with high confidentiality commitment that substantiates how much we value our customers”

A second consequence of the shifting position of the contract-manufacturing industry in Turkey has been that, as demand for contract manufacturing services within the country have broadened, so have the manufacturing capabilities of the country’s manufacturers. For Idol Pharmaceuticals, this has meant the introduction of new technology. Tokdemir of Idol Pharmacetuicals explains that, “Idol Pharmaceutical’s strategy for growing within the Turkish market will focus on specialization rather than diversification. For this reason, Idol Pharmaceuticals has invested in developing facilities capable of producing vaccines and lyophilized products. This will remain our strategy for the next three years.”

Birgi Mefar has also emphasized the introduction of technology into its facilities so as to better accommodate the changing needs of Turkey’s pharmaceutical manufacturers. “Currently client demand is moving towards more biotech products, freeze-dried and pre-filled syringe products,” explains Şefik Renda of Birgi Mefar. “The profitability ranges are much higher in those segments compared to ampoules and vials; however, it is not easy to convert a facility from producing ampoules to pre-filled syringes. One of Birgi Mefar’s advantages is that its facility covers almost all of these products ranges. We have global companies that are our clients, as well as smaller companies, so our know-how is very extensive across all product segments.” Aside from the areas in which it already has strength, Birgi Mefar is considering expanding into lyophilized products, as Idol Pharmaceuticals has done.

It appears that the technological capabilities of the industry’s contract manufacturers will be the grounds upon which these businesses will henceforth compete. This dynamic has, in fact, extended beyond these company’s manufacturing capabilities to the way in which their operations are supported. An additional area in which Birgi Mefar has led the industry in is in the adoption of cold chain technology, which ensures that the temperature of a product is kept unbroken throughout the product’s supply chain, within its manufacturing operations and logistics arm, Defar. Mehmet Baharoğlu, business development manager at Birgi Mefar, notes that, “Birgi Mefar has a cold supply chain management system beginning from the raw materials stage up to or including shipping, covering all warehouses, production processes and packages. The chain is monitored at all times and we have full compliance at temperatures down to -70°C for storage.” The high level of scrutiny that the industry has placed on ensuring the confidentiality of client information and the investments that market leaders Birgi Mefar and Idol Pharmaceuticals have made in the development of new technological offerings so as to better accommodate the needs of the industry have left Turkey’s pharmaceutical manufacturers in an excellent position as the nature of interest in both Turkish pharmaceuticals and pharmaceuticals manufactured in Turkey becomes more international.

[Source : gbroundup.com]

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