Developing a Common Understanding of the “Multiple Dimensions” of How Data Exclusivity will Impact the Turkish Pharmaceutical Industry and Health Care.

Developing a Common Understanding of the Developing a Common Understanding of the “Multiple Dimensions” of How Data Exclusivity will “Multiple Dimensions” of How Data Exclusivity will

Impact the Turkish Pharmaceutical Industry and Impact the Turkish Pharmaceutical Industry and Health Care EconomicsHealth Care Economics

January 19, 2004January 19, 2004

Amsterdam Athens Beijing Chicago Emeryville Hong Kong JohannesburgCambridge Frankfurt

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Paris San Francisco São Paulo Seoul Shanghai Stockholm Tokyo Toronto ZurichSingapore

Copyright © 2003 Monitor Company Group, L.P. — Confidential — XXXCAS-COD-Prez-Date-CTL 2TPA-XCL-TurkeyData-1-15-04-PG

Executive SummaryExecutive Summary A wide range of perspectives on a complex set of factors (such as starting date of “DE” application, A wide range of perspectives on a complex set of factors (such as starting date of “DE” application,

time horizon of DE, location of registration, pipeline dynamic) that influence “data exclusivity” time horizon of DE, location of registration, pipeline dynamic) that influence “data exclusivity” implementation need to be aligned toward a implementation need to be aligned toward a ““unified viewunified view””

A A rigorous frameworkrigorous framework which captures all the variables and the dynamics between them along the which captures all the variables and the dynamics between them along the time dimension suggest that of 1288 active substance (3,162 products) in market today only 7 (when time dimension suggest that of 1288 active substance (3,162 products) in market today only 7 (when location of registration location of registration is is EU) to 12 (when location of registration is Turkey) will determine the impact EU) to 12 (when location of registration is Turkey) will determine the impact between 1995 to 2002; between 1995 to 2002;

However the future impact will be determined by how the However the future impact will be determined by how the new environment will influence new environment will influence competitive behaviorcompetitive behavior in terms of the speed at which new molecules enter the Turkish marketplace, in terms of the speed at which new molecules enter the Turkish marketplace, how pricing dynamics between generics and innovators will evolve, and how speedily generics how pricing dynamics between generics and innovators will evolve, and how speedily generics respond to introduction of new substancesrespond to introduction of new substances– Impact on the Generics Manufacturers in terms of lost revenues could range between $100 million Impact on the Generics Manufacturers in terms of lost revenues could range between $100 million

to $270 million a year, while gains to innovators could be in the range of $270 million to $600 to $270 million a year, while gains to innovators could be in the range of $270 million to $600 million — implying a concerted effort for million — implying a concerted effort for a smooth transition to a “new industry structurea smooth transition to a “new industry structure” ” is is desirabledesirable

– In the same spirit the impact on health care costs could vary (depending on how DE is In the same spirit the impact on health care costs could vary (depending on how DE is implemented) significantly, $200 to $500 million on the sixth year after line application of DE, implemented) significantly, $200 to $500 million on the sixth year after line application of DE, suggesting that suggesting that data exclusivity impact is not negligibledata exclusivity impact is not negligible..

Government along with Industry, must together evolve a Government along with Industry, must together evolve a consensus consensus between different interest between different interest groups on the likely scenarios that are more realistic, and together work out a balance and rigorous groups on the likely scenarios that are more realistic, and together work out a balance and rigorous implementation plan for data exclusivity adoption in Turkey, in building implementation plan for data exclusivity adoption in Turkey, in building a robust pharmaceutical / a robust pharmaceutical / health care platform in globalizing Turkish economyhealth care platform in globalizing Turkish economy


Objective and Critical Questions for Objective and Critical Questions for the Undertakingthe Undertaking

ObjectiveObjective Develop an objective assessment of the potential impact of Develop an objective assessment of the potential impact of “Data Exclusivity” in Turkey from multiple perspectives“Data Exclusivity” in Turkey from multiple perspectives

Critical QuestionsCritical Questions What might the impact of adopting “data exclusivity” / EU intellectual property What might the impact of adopting “data exclusivity” / EU intellectual property

protection be on: protection be on:

1.1. Government budgets? Government budgets?

2.2. The generic industry?The generic industry?

3.3. Innovator companies and their activities in Turkey?Innovator companies and their activities in Turkey?

4.4. Patient welfare?Patient welfare?

5.5. Overall economic / social benefits / costs?Overall economic / social benefits / costs? What broad scenarios exist for the adoption of “data exclusivity” / EU intellectual What broad scenarios exist for the adoption of “data exclusivity” / EU intellectual

property protection and how does the impact vary by scenario?property protection and how does the impact vary by scenario? What actions might the various players consider to prepare for the likely changes?What actions might the various players consider to prepare for the likely changes?


Adopting Various Views and InsightsAdopting Various Views and Insights

PhRMA (2 meetings)PhRMA (2 meetings) U.S. Department of TradeU.S. Department of Trade U.S.-Turkish CouncilU.S.-Turkish Council PfizerPfizer

U.S.U.S. EU-CommissionEU-Commission Turkish Representation Turkish Representation

in EUin EU EFPIAEFPIA EGAEGA

EuropeEurope Merck Sharp and DohmeMerck Sharp and Dohme GSKGSK PfizerPfizer EczacibasiEczacibasi FakoFako YASEDYASED Government Departments: Government Departments:

– Patent officePatent office– Ministry of Foreign Ministry of Foreign

AffairsAffairs– Ministry of Economic Ministry of Economic

AffairsAffairs Association of Research-Association of Research-

Based CompaniesBased Companies

TurkeyTurkey

We have discussed our approach with multiple organizations to ensure We have discussed our approach with multiple organizations to ensure various perspectives / insights are capturedvarious perspectives / insights are captured


Steering CommitteeSteering Committee

Steering Committee included both representatives of the multinationals/original manufacturers and local generic manufacturers from Turkish Pharmaceutical Manufacturers Association.

MembersMembers Faik Somer - Merck Sharp & DohmeFaik Somer - Merck Sharp & Dohme Muhtar Tanrıöver - Glaxo SmithKlineMuhtar Tanrıöver - Glaxo SmithKline Sedat Birol - EczacıbaşıSedat Birol - Eczacıbaşı Nurettin Turan - FakoNurettin Turan - Fako


Bottom-Up ApproachBottom-Up Approach

MacroeconomicMacroeconomic Impact Impact

MicroeconomicMicroeconomic (Firm level) (Firm level)

Impact Impact

Healthcare / Social Security Costs Employment GDP contribution of industry Global industry competitiveness FDI flows Access to innovation Patient welfare Compliance to Multinational

Standards

Industry structure, entry / exit Market shares, concentration ratio Generic producers / innovators

profitability — pipeline dynamics Firm level / industry growth Investments, R&D

Rules of Competition in

Knowledge Economy

European Union

Requirements

Turkey (and Developing

Nations) Point of View

Innovators Point of View

Generic Industry’s

Point of View

Our bottom-up approach has allowed an assessment of both Our bottom-up approach has allowed an assessment of both macroeconomic and microeconomic impact using a subset of the following macroeconomic and microeconomic impact using a subset of the following factorsfactors


Aligning Multiple Perspectives and Interests Aligning Multiple Perspectives and Interests Five Points of View and InterestsFive Points of View and Interests

World Trade OrganizationWorld Trade Organization European UnionEuropean Union Turkey GovernmentTurkey Government

MultinationalsMultinationals Local Pharma IndustryLocal Pharma Industry

Intellectual property is expensive Intellectual property is expensive and a critical differentiator in and a critical differentiator in knowledge based competition, knowledge based competition, WTO members must respect the WTO members must respect the basic requirementsbasic requirements

Turkey must respect its Turkey must respect its obligation of the TRIPS obligation of the TRIPS agreement that it signed in 1995agreement that it signed in 1995

Data Data protectionprotection should have should have been applied from 1 January been applied from 1 January 20002000

Ensure member countries adopt Ensure member countries adopt WTO (TRIPs) rulesWTO (TRIPs) rules

Protect interests of all companies Protect interests of all companies located in member countrieslocated in member countries

Views Turkey’s progress with Views Turkey’s progress with concern:concern:– Behind schedule in adopting Behind schedule in adopting

the TRIPS agreementthe TRIPS agreement– Incomplete in meeting the Incomplete in meeting the

customs union agreementcustoms union agreement– Behind schedule in meeting Behind schedule in meeting

EU membership provisionsEU membership provisions

Become a qualified candidate for EU Become a qualified candidate for EU membership as soon as possiblemembership as soon as possible

Adopt international intellectual Adopt international intellectual property rules as soon as possible, property rules as soon as possible, while ensuring:while ensuring:– Disruption of local industry is Disruption of local industry is

minimalminimal– Social and government costs do Social and government costs do

not increasenot increase– Consumers / patients have access Consumers / patients have access

to medical innovationto medical innovation– FDI continues to increaseFDI continues to increase

Enhance global reach of their intellectual capital Enhance global reach of their intellectual capital and spread costs of innovation across marketsand spread costs of innovation across markets

Participate in markets that respect international Participate in markets that respect international IP rightsIP rights

Turkey must adopt data exclusivity as per TRIPS Turkey must adopt data exclusivity as per TRIPS agreement of 1995agreement of 1995

Enable build up of robust health care sector that Enable build up of robust health care sector that adheres to high quality / technology standardsadheres to high quality / technology standards

““Phase In” into the new environment so as Phase In” into the new environment so as to co-exist as a low cost / generics providerto co-exist as a low cost / generics provider

Adoption of data exclusivity and EU rules Adoption of data exclusivity and EU rules must be linked to the date of accessionmust be linked to the date of accession

Ensure they continue to play crucial roles in Ensure they continue to play crucial roles in the Turkish health care industrythe Turkish health care industry

However, multiple views and interest make the “Data Exclusivity” issue complexHowever, multiple views and interest make the “Data Exclusivity” issue complex


Data Exclusivity Requirements in the Context of Data Exclusivity Requirements in the Context of Various AgreementsVarious Agreements

Three different interpretations of likely application of Data ExclusivityThree different interpretations of likely application of Data ExclusivitySource: EU Website, WTO Website, southcentre.org, www.kobinet.org.tr/kosgebabm/english/lib/tr/001e.html

19951995 19971997 19991999 20002000 20012001… …

EC-Turkey Customs Union EC-Turkey Customs Union Agreement 2/97Agreement 2/97

Specifies EU community laws Specifies EU community laws that need to be implemented into that need to be implemented into Turkish law, in order to remove Turkish law, in order to remove all technical barriers to trade by 1 all technical barriers to trade by 1 Jan 2001Jan 2001– Includes detailed specs by Includes detailed specs by

type of goods — motor type of goods — motor vehicles, food, medicinal vehicles, food, medicinal products, agricultural and products, agricultural and construction equipment, construction equipment, household appliances, etc.household appliances, etc.

– Annex II, chapter XIII, relates Annex II, chapter XIII, relates to medicines and specifies to medicines and specifies that 6 or 10 years of data that 6 or 10 years of data exclusivity needs to be exclusivity needs to be implemented by 1 Jan 2001, implemented by 1 Jan 2001, as per EU law 65/65/EECas per EU law 65/65/EEC

TRIPS Agreement with WTO 1995TRIPS Agreement with WTO 1995 Covers all aspects of IP protection Covers all aspects of IP protection

including copyrights, trademarks, including copyrights, trademarks, patents and undisclosed information patents and undisclosed information (data protection)(data protection)

Turkey agreed to protect all Turkey agreed to protect all undisclosed data (Article 39.3)undisclosed data (Article 39.3)

No requirement on data exclusivityNo requirement on data exclusivity

EC-Turkey Customs Union EC-Turkey Customs Union Agreement 1/95Agreement 1/95

Harmonize Turkey’s legislation for full Harmonize Turkey’s legislation for full free movement of goods with EU by free movement of goods with EU by 1 Jan 20011 Jan 2001

Two requirements relating to data Two requirements relating to data protectionprotection– Implement TRIPS by 1 Jan 1999Implement TRIPS by 1 Jan 1999– Remove technical barriers to Remove technical barriers to

trade by 1 Jan 2001trade by 1 Jan 2001

Implement TRIPs by 2000 (because of 5 year Implement TRIPs by 2000 (because of 5 year transition period for developing country)transition period for developing country)

Implement TRIPs by 1999Implement TRIPs by 1999

Implement Data Exclusivity by 2001Implement Data Exclusivity by 2001

Ag

ree

me

nts

Ag

ree

me

nts

Imp

lic

ati

on

s

Imp

lic

ati

on

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of

Da

ta

of

Da

ta

Ex

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siv

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Ex

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Aligning Multiple Perspectives and InterestsAligning Multiple Perspectives and InterestsUnified View Is Critical to Resolution of Outstanding IssuesUnified View Is Critical to Resolution of Outstanding Issues

Multiple InterestsMultiple Interests

GenericsGenerics– ““Phase in” into new Phase in” into new

environmentenvironment InnovatorsInnovators

– Enhance global reachEnhance global reach Turkish GovernmentTurkish Government

– Qualify for EU Qualify for EU accession and manage accession and manage the industry transition the industry transition while implementing DEwhile implementing DE

EUEU– Ensure member Ensure member

countries adopt WTO countries adopt WTO rulesrules

WTOWTO– Ensure global Ensure global

standards in standards in protection protection of undisclosed of undisclosed informationinformation

Unified ViewUnified View

Develop a sound logic Develop a sound logic structure to classify and structure to classify and identify the molecules identify the molecules potentially affected by DEpotentially affected by DE

Develop different Develop different scenarios for DE scenarios for DE application based on the application based on the most likely combination of most likely combination of the critical variables such the critical variables such as length of DE (6 vs. 10), as length of DE (6 vs. 10), price impact, etc.price impact, etc.

Understand the impact of Understand the impact of the different scenarios on the different scenarios on the industry as well as on the industry as well as on health care costshealth care costs

Understand the current Understand the current impact as well as potential impact as well as potential future impactfuture impact

International International Connectivity Connectivity RequirementsRequirements TRIPsTRIPs EU / Multinationals EU / Multinationals

enhanced involvementenhanced involvement

Economic Vibrancy Economic Vibrancy of Local Industryof Local Industry Wealth CreationWealth Creation EmploymentEmployment Balanced Balanced

DevelopmentDevelopment

Social Costs & Social Costs & BenefitsBenefits HealthcareHealthcare Dislocation of Dislocation of

industryindustry Consumer access Consumer access

to innovationto innovation

In light of the multiple perspectives on Data Exclusivity, an objective and In light of the multiple perspectives on Data Exclusivity, an objective and unified view is critical to resolving the outstanding issuesunified view is critical to resolving the outstanding issues


AffectedAffected Active Active

SubstancesSubstances

ScenarioScenario Specification Specification

Range of Range of AssumptionsAssumptions

Critical Critical VariablesVariables

Logic Logic StructureStructure

Structure of the ApproachStructure of the Approach

1

2

3

4

Classifies the various pharmaceutical products into various categories which might differently impact healthcare cost and pharmaceutical industry structure for different interpretations, policies, and implementation of Data Exclusivity requirements

Identifies specific variables, e.g., period of Data Exclusivity, defining uncertainties surrounding interpretations and implementation of Data Exclusivity requirements

Defines range of possibilities for each of the variables of Data Exclusivity for a 6-year vs. 10-year period

Specifies various likely combinations of assumptions of the critical variables which will reflect likely Data Exclusivity application scenarios

Impact of Data Exclusivity?

– Immediate

– Future

Zeros in on those active pharmaceutical ingredients which will be affected by the different scenarios of DE application

5

We have developed a rigorous approach to analyzing the potential impact We have developed a rigorous approach to analyzing the potential impact of implementing data exclusivity of implementing data exclusivity


* Potentially affected only if data exclusivity is allowed to run beyond patent** In case of multiple registrations (i.e., additional strength / form, new uses), first registration is considered as data exclusivity does not apply to subsequent registrations in EU with the exception of France. Issue is still being debated in EU (including harmonized 10+1 year) and is likely to be resolved in the near future. New uses currently get 3 years of additional data exclusivity in the U.S.*** As there is a significant overlap between the products in pipeline and sold in EU- and U.S.-only products in EU will be considered

Registered Pre-Year X

Not Sold in Turkey

Sold in EU / U.S.***

In EU / U.S.*** Pipeline

Originals

Patented*

Not Patented

Registered Post-Year X**

Generics

Sold in Turkey

Originals and generics both

currently in the market

Only originals in Only originals in market today — market today —

may face generics may face generics in future in future

Originals not yet in Originals not yet in Turkey — may Turkey — may

enter market and enter market and may face generics may face generics

in future in future

Future Impact

(Qualitative / Quantitative Assessment via Case Studies and Model)

Immediate Impact

(Quantitative Assessment via Model)

LogicStructure1

Our assessment will reflect an assessment of immediate, potential future Our assessment will reflect an assessment of immediate, potential future and indirect impactsand indirect impacts

Modeling Impact of Data Exclusivity Immediate Modeling Impact of Data Exclusivity Immediate vs. Future Impactvs. Future Impact


Logic Structure: Classification of Logic Structure: Classification of Pharmaceutical Products in TurkeyPharmaceutical Products in TurkeyThe following decision tree describes the logic of the classification process andThe following decision tree describes the logic of the classification process andhighlights the areas affected by Data Exclusivityhighlights the areas affected by Data Exclusivity

* Potentially affected only if data exclusivity is allowed to run beyond patent** In case of multiple registrations (i.e., additional strength / form, repeat use), first registration is considered as data exclusivity does

not apply to subsequent registrations in EU with the exception of France. Issue is still being debated in EU (including harmonized 10+1 year) and is likely to be resolved in the near future. New uses and new forms of the active substance currently gets 3 years of

additional data exclusivity in the U.S. *** As there is a significant overlap between the products in pipeline and sold in EU- and U.S.-only products in EU will be considered

3a

3b

4b

4a

1

2

Sold in Turkey

Not Soldin Turkey

Sold in EU / U.S.***

In EU / U.S.*** Pipeline

Manufactured in Turkey

Importedto Turkey

Registered Pre-Year X**

Originals

Patented*

Not Patented

Registered Post-Year X**

Description

No impact area

Sold in Turkey, registered post-Year X

Marketed by generic manufacturers– e.g., Ator,

Vigrande, Osteomax

Generics


Marketed by innovator firms– e.g., Lipitor,

Pantpas, Telfast


Marketed by innovator firms– e.g., Relpax

Not sold in Turkeyor EU / US

Developed by innovator firms

Not sold in Turkey, sold in EU / U.S.

Marketed by innovator firms– e.g., Edronax

Universe of Pharma Products

LogicStructure1


A range of variables and potential assumptionsA range of variables and potential assumptions

Key Driver Critical Variable

Location of first registration considered for Data Exclusivity

Turkey or EU, whichever is earlier

Turkey Interpretation

Data Exclusivity Start Year

2003 or later 1995–1999

– Least likely

1999, 2000, 2001 – Most likely

Data Exclusivity Beyond Patent Protection

No Data Exclusivity beyond patent expiry

Data Exclusivity beyond patent expiry

Policy Choice(s)

Length of Data Exclusivity

6 years 10 years

Price Impact No change in prices Prices go up to original’s level

Market Dynamics

Generic-Original Market Dynamics

Historic Prices

Critical Variables of Immediate Impact ModelCritical Variables of Immediate Impact Model

Range of Assumptions2 3


Classification of Pharmaceutical Products for Classification of Pharmaceutical Products for Different Registration DatesDifferent Registration Dates

Sold inTurkey

Not Sold in Turkey

Sold in EU / U.S.

In EU / U.S. Pipeline

Manufactured in Turkey

Imported to Turkey

Registered Pre-Year X

Registered Post-Year X

Year X = 1995–1998Year X = 1995–1998– No legal commitment by TurkeyNo legal commitment by Turkey– Applicable only if Turkey applies data exclusivity Applicable only if Turkey applies data exclusivity

retrospectively from start yearretrospectively from start year– Early entry by Turkey into EU might create some Early entry by Turkey into EU might create some

legal issues vs. specific molecules launched in this legal issues vs. specific molecules launched in this date range (e.g., generics in Turkey but not in EU)date range (e.g., generics in Turkey but not in EU)

– General consensus in the industry that data General consensus in the industry that data exclusivity start year will not be before 1999exclusivity start year will not be before 1999

Year X = 1999Year X = 1999– Turkey–EU Association Council Decision No 1 / 95 Turkey–EU Association Council Decision No 1 / 95

(intellectual property rights)(intellectual property rights)– TRIPS will be implemented by 1999TRIPS will be implemented by 1999

Year X = 2000Year X = 2000– TRIPS AgreementTRIPS Agreement

– Developing countries have 5 years to implement Developing countries have 5 years to implement (by 2000)(by 2000)

Year X = 2001Year X = 2001– Turkey–EU Association Council Decision No 2 / 97 Turkey–EU Association Council Decision No 2 / 97

(removal of technical barriers)(removal of technical barriers) Turkey committed to remove technical barriers to trade by Turkey committed to remove technical barriers to trade by

2001 with Turkey-EU Association Decision No 1/952001 with Turkey-EU Association Decision No 1/95 EEC Directive 65 / 65 (data exclusivity) is among the rules EEC Directive 65 / 65 (data exclusivity) is among the rules

and regulations to be implementedand regulations to be implemented – Decision No 2 / 97 is a commitment by Turkey to Decision No 2 / 97 is a commitment by Turkey to

implement data exclusivity by January 2001implement data exclusivity by January 2001

Universeof Pharma Products


Scenarios for Immediate ImpactScenarios for Immediate Impact

Location of Registration

Length of Data

Exclusivity

Date of Registration Post-YEAR X,

within Each Scenario

Turkey Turkey or EU*

* Whichever is earlierSource: Monitor Analysis

6 Years

10 Years

SCENARIO 1

SCENARIO 2

SCENARIO 3

SCENARIO 4

1995–1998

1999

2000

2001

2003 or later

Most Likely Cases

Scenario Specifications4


Potentially Affected Products Due to Data Potentially Affected Products Due to Data Exclusivity Exclusivity

* Withdrawn from the market in 2002, excluded from the impact analysis** Bulk of the sales go through the tendering process, which is not reflected in the IMS data, but taken into account in the impact analysis*** Bristol Myers SquibbNote: Excludes SSK expenditureSource: IMS Health, Ministry of Health,Monitor Analysis

At most up to 10, and at least 3 active substances could potentially be affected with implementation of Data Exclusivity

Active Substance Original Product

Marketing Authorization

Holder

Number of

Generics

Registration Date in Turkey

Registration Date in EU

2002 Original

Sales (000 $)

2002 Generic

Sales (000 $)

2002 Total Sales

(000 $)

Atorvastatin Lipitor Pfizer 2 1998 1997 23,465 14,210 37,675

Sildenafil Viagra Pfizer 2 1999 1998 11,500 6,582 18,082

Pantoprazole Pantpas Bayer 2 2001 1998 6,075 8,289 14,364

Glimepiride Amaryl Aventis 1 1997 1996 5,370 535 5,906

Meloxicam Mobic Boehringer 3 1998 1995 4,398 15,074 19,472

Fexofenadine Telfast Aventis 1 1999 1996 4,135 1,354 5,489

Alendronic Acid Fosamax Merck 2 1997 Pre-1995 18,014 101 18,115

Lansoprazole Ogastro Abbott 8 1997 Pre-1995 1,140 33,537 34,677

Nimesulide* Mesulid Pfizer 4 1996 Pre-1995 6,569 4,095 10,664

Paclitaxel** Taxol BMS*** 1 1997 Pre-1995 6,034 1,116 7,150

1B

1A

2B

2A

T E

6

10

10 9 6 3Active Substances Affected

Length of Data Exclusivity


4


Immediate Impact — Value Shift in RevenuesImmediate Impact — Value Shift in Revenues

Turkey Turkey with EU

Dat

a E

xclu

sivi

ty P

erio

d


6 Y

ears

10 Y

ears

11

22 44

33

128 128 12878

32 17 17

-104 -104 -104-59

-21 -11 -11 0

-250

-125

0

125

250

Year-7 Year-6 Year-5 Year-4 Year-3Decision

1/95(1999*)

Year-2TRIPS

(2000*)

Year-1Decision

2/97(2001*)

2002

Data Exclusively Start Year

(+7%) (+7%) (+7%)

(+5%)(+2%) (+1%) (+1%)

(0%)

(+7%) (+7%) (+7%)(+4%)

(+1%) (+1%) (+1%)(0%)

Most Likely Cases

$(MM)

Original Gains Generic Losses* ???

51 51 51

170 0 0 0

-38 -38 -38

-7000 0

-100

-50

0

50

100


1/95(1999*)

Year-2TRIPS

(2000*)

Year-1Decision

2/97(2001*)

2002


(+3%) (+3%) (+3%)

(+1%)(0%) (0%) (0%) (0%)

(+2%) (+2%) (+2%)

(+1%) (0%) (0%) (0%) (0%)

Most Likely Cases

$(MM)

128 128 12878

32 17 17

-104 -104 -104-59

-21 -11 -11 0

-250

-125

0

125

250


1/95(1999*)

Year-2TRIPS

(2000*)

Year-1Decision

2/97(2001*)

2002


(+7%) (+7%) (+7%)(+5%)

(+2%) (+1%) (+1%)

(0%)

(+7%) (+7%) (+7%)(+4%)

(+1%) (+1%) (+1%)(0%)

Most Likely Cases

$(MM)

7954 51

170 0 0 0

-60-40 -38

-7 000 0

-150

-75

0

75

150


1/95(1999*)

Year-2TRIPS

(2000*)

Year-1Decision

2/97(2001*)

2002


(+5%)(+3%) (+3%)

(+1%)(0%) (0%) (0%) (0%)

(+4%)(+3%) (+2%)

(+1%) (0%) (0%) (0%) (0%)

Most Likely Cases

$(MM)


Immediate Impact — Increase in Healthcare CostsImmediate Impact — Increase in Healthcare Costs

Turkey Turkey with EU*

Len

gth

of

Dat

a E

xclu

sivi

ty


6 Y

ears

10 Y

ears

11

22 44

33Most Likely Cases

27 27 2721

128 8

10 10 10

8

43 3

37 37 37

29

16

10 10

00

45


1/95(1999**)

Year-2TRIPS

(2000**)

Year-1Decision

2/97(2001**)

2002


$(MM)

Public Private* Whichever is earlier; ** ???Source Monitor Analysis

Most Likely Cases

15 15 1511

6 6 6

4

21 21 21

15

0 0 0 00

25


1/95(1999**)

Year-2TRIPS

(2000**)

Year-1Decision

2/97(2001**)

2002


$(MM)

Most Likely Cases

27 27 2721

128 8

10 10 10

8

43 3

37 37 37

29

16

10 10

00

45


1/95(1999**)

Year-2TRIPS

(2000**)

Year-1Decision

2/97(2001**)

2002


$(MM)

Most Likely Cases

2116 15

11

8

6 5

4

29

2220

15

0 0 0 00

35


1/95(1999**)

Year-2TRIPS

(2000**)

Year-1Decision

2/97(2001**)

2002


$(MM)


Future Impact: Multiple Uncertainties Will Drive Future Impact: Multiple Uncertainties Will Drive Competitive Responses(?)Competitive Responses(?)

Data Exclusivity Data Exclusivity Requirements?Requirements?

New Governance New Governance Guidelines on Guidelines on

HealthcareHealthcare

Past / Current Market

Behavior

Future Market

Behavior?

Product / Market Strategy? Pipeline Management? Alliances? Pricing? Registration Speed?

Understanding and Extending the Past

Capturing the Range of Likely Responses in

the New Environmentvs.


Likely Changes in Competitive Behaviour in the Likely Changes in Competitive Behaviour in the Pharmaceutical IndustryPharmaceutical Industry

Time

Degree of Intensity of Competitor Behaviour

Transition Phase (5–6 Years)

Uncertainties associated with

market and competitive responses

Range of Possibilities

Post Data Exclusivity “Market Order”

Extremely intense competitive behaviour

Rapid introduction of new molecules

Intense price competition from generics in response to recent changes in government’s reimbursement policy

Improved registration speed to EU standards (Recommended time in Turkey-EU Association Decision 2/97 is 210 Days)

Marginal change in competitive behaviour

Marginal increase in introduction of new molecules from historical numbers

Price competition modest

* In view of the discontinuous nature of change Data Exclusivity may spur in the marketplace, the assumptions for the assessment of future impact must take into account extreme outcome, while not ignoring, but not influenced by past market behaviour


104

70 70 62

8

0

50

100

150

200

OrignialsRegistered* inEU Post-1995

Originals Soldin TurkeyPost-95

Originals Only Originals withGenerics

Potential Future ImpactPotential Future Impact

* Initial application of the molecule only, MRP** Azelaic Acid is registered in EU after 1995, but before 1995Source: IMS Health, MRPFG Product Index, Monitor Analysis

Original Product Registrations in EU and Original Product Registrations in EU and Turkey Post-1995, End of 2002Turkey Post-1995, End of 2002 Likely Dynamics in the FutureLikely Dynamics in the Future

Generics might enter to compete Generics might enter to compete against originalsagainst originals

Originals in EU (not yet in Turkey) Originals in EU (not yet in Turkey) which might enter Turkeywhich might enter Turkey

There are a large number of current molecules that may potentially be There are a large number of current molecules that may potentially be affectedaffected


Critical Variables of Future Impact ModelCritical Variables of Future Impact Model

Key Driver Critical Variable Based on 1997–2002* Modest Competitive

Intensity High Competitive

Intensity**

Market Forces

Number of affected substances1

2–3 5 7 first two years 6 next two years 4 in the last year

Price differential between originals and generics2

30% 60% 80%

Annual sale of the affected active substance at year 63

$24 M

– Based on 3 molecules

$20 M


$16 M


Government Registration Capacity

Time lag between the launch of the original and generic product

2 years

– Current average

1–2 years 1 year

– EU Recommendation

* Assumptions based on variables estimated by analyzing what would have happened if 6 year data exclusivity was implemented between these years** Reflects views of some industry insiders regarding future environment in view of more vibrant environment resulting from recent policy shifts1, 2, 3 Check appendix for rationale of assumptionsNote: 10 year case will not be analyzed due to difficulties in forecasting the time-horizon. Furthermore, patent protection in later stages will minimize the impact of

additional 4 year protection provided by 10 year Data Exclusivity

Range of Assumptions


Sale s(Th $)

Original vs . Ge ne ric Pr ice Diffe re ntial***

2002 Sale s We ighte d

Price Diffe re ntial

2002 Apr-03

ATORVASTATIN 37,675 32% 9.5%

FEXOFENADINE 5,489 44% 1.9%

GLIM EPIRIDE 5,906 16% 0.8%

M ELOXICAM 19,472 17% 2.6%

PANTOPRAZOLE 14,364 55% 6.3%

SILDENAFIL 18,082 32% 4.6%

ALENDRONIC ACID 18,115 27% 3.9%

LANSOPRAZOLE* 30,051

NIM ESULIDE** 30,618 26%

PACLITAXEL 7,150 6% 0.3%

Total Sale s 126,252.1

Ave rage Price Diffe re ntial 29% 30%

M e dian Price Price Diffe re ntial 30%

Range of PossibilitiesRange of Possibilities

4

2

1

2

0

1

2

3

4

5

1997 1998 1999 2000 2001 2002

2.3

Historical Analysis of Number of Active Substances That Would Have Been Affected, Depending

on Registration Location*

Assumption 1 Velocity of

Introduction similar to historical average

3

X 2

Assumption 2 Velocity of Introduction

higher than historical average reflecting some industry insiders’ views about future environment

2.3 5

Average Price DifferentialAverage Price Differential 29%29%

Median Price DifferentialMedian Price Differential 30%30%

Average Price DifferentialAverage Price Differential 68%68%

Median Price DifferentialMedian Price Differential 54%54%

Price DifferentialPrice DifferentialNumber of Affected Molecules


$0

$5

$10

$15

$20

$25

2004 2005 2006 2007 2008 2009$0

$5

$10

$15

$20

$25

2004 2005 2006 2007 2008 2009

Range of Possibilities — Active Substance Sales Range of Possibilities — Active Substance Sales EvolutionEvolution

Sales Evolution of Active Substance Sales Evolution of Active Substance

$MM $MM

Y3–Y6CAGR

Y3–Y6CAGR

18%

12%

30%

28%

16%

59%

Critical Assumptions 3 molecule 1 year time gap Start 2004

Critical Assumptions 5 molecule 2 year time gap Start 2004

Generic

Original

Active Substance

Active Substance

Original

Generic


Future Impact of Data Exclusivity — IndustryFuture Impact of Data Exclusivity — Industry

Case 2

Case 3

Case 1

Conservative

Moderate

Aggressive

2004 2005 2006 2007 2008 2009 Cumulative

Effect 2004–2009

As a Percentage of Sales

2004–2009

Total Generic Loss at Ex-Factory Prices 0 7 25 52 85 126 295 2–3%

Total Original Gain at Ex-Factory Prices 5 26 68 122 188 268 677 4–5%

2004 2005 2006 2007 2008 2009 Cumulative

Effect 2004–2009


2004–2009


Total Original Gain at Ex-Factory Prices 5 31 86 161 256 376 915 5–7%

2004 2005 2006 2007 2008 2009 Cumulative

Effect 2004–2009


2004–2009


Total Original Gain at Ex-Factory Prices 5 46 141 267 419 595 1,473 9–11%

* Number of affected molecules are 7 for the first 2 years, 6 next 2 years, 4 in the last year. Average molecule sale comparable to 3 molecule caseNote: Market size is forecasted based on 4-year CAGR. Two alternative cases are considered for ranges given under percentage of sales. First case assumes

market share of generics vis a vis originals will remain the same. Second case assumes all the growth during the 6 year period will come from originalsSource: IMS, Monitor Analysis

Critical Assumptions

Data Exclusivity Start Year 2004

Number of Affected Molecules 3

Price Differential 30%

Registration Lag Between Originals and Generic

1 Year






1 Year



Number of Affected Molecules Dynamic*



1 Year


Future Impact of Data Exclusivity — Health CareFuture Impact of Data Exclusivity — Health Care

Case 2

Case 3

Case 1

Conservative

* Number of affected molecules are 7 for the first 2 years, 6 next 2 years, 4 in the last year. Average molecule sale comparable to 3 molecule caseNote: Market size is forecasted based on 4-year CAGR. Forecast used to calculate percentage of sales is the total market size for pharmaceutical products in

the case of increase in health care cost and total state spending on pharmaceutical products for cost to the stateSource: IMS, Monitor Analysis

Moderate

Aggressive

2004 2005 2006 2007 2008 2009 Cumulative

Effect 2004–2009


2004–2009

Increase in health care costs at retail prices 7 30 64 106 154 214 576 2%

Cost to the state at retail prices 5 22 47 78 113 157 423 2%

2004 2005 2006 2007 2008 2009 Cumulative

Effect 2004–2009


2004–2009

Increase in health care costs at retail prices 7 34 82 143 218 311 795 3% Cost to the state at retail prices 5 25 60 105 160 228 583 3%

2004 2005 2006 2007 2008 2009 Cumulative

Effect 2004–2009


2004–2009

Increase in health care costs at retail prices 7 46 124 225 346 486 1,234 5%

Cost to the state at retail prices 5 34 91 165 254 357 906 5%






1 Year






1 Year



Number of Affected Molecules Dynamic*



1 Year


Indirect Effects Need Equal Amount of AttentionIndirect Effects Need Equal Amount of Attention

Positive Concerns

Pharmaceutical Industry

General Economy

More forward looking manufacturers might be able to participate in a more dynamic marketplace

Foreign direct investment might increase

Generic manufacturers might lose export opportunities of active ingredients

Short-term disruption in employment (may not be significant because of migration to generic manufacturers)

Sound DE / IP policy will contribute to its international stature

Trading relationships in sectors which are export intensive (auto, textiles, glass)

Development of local entrepreneurship which is in tune with global partnerships

None, except how disruption of pharma industry might impact the overall economy

Impact of Application of Data Exclusivity


Next StepsNext Steps

Specific Steps

Specific Guidelines Specific Guidelines for Industry on for Industry on

Intellectual Property Intellectual Property Management in Management in

Turkish IndustryTurkish Industry

Outcome

Policy and Industry Policy and Industry Action Programs for Action Programs for DE ImplementationDE Implementation

Essential Next Essential Next StepsSteps

Tailored Tailored Presentations in D.C., Presentations in D.C.,

Brussels, and Brussels, and International International

AgenciesAgencies

Define Data Define Data Exclusivity Policy Exclusivity Policy vis-à-vis Overall IP vis-à-vis Overall IP

PolicyPolicy

Evolve a Evolve a Communication Communication Strategy to All Strategy to All

Concerned for a Concerned for a Clear Path ForwardClear Path Forward

Develop a working Develop a working group for “DE” group for “DE” implementationimplementation


ConcessionConcession

Industry Industry Reconstruction Reconstruction RequirementsRequirementsFact Based Fact Based

Guidelines on PPGuidelines on PP

Three Proposed Exercises Must Integrate Different Points of Three Proposed Exercises Must Integrate Different Points of View and Interest Toward a Comprehensive Policy EngineView and Interest Toward a Comprehensive Policy Engine

“A Comprehensive Policy Engine on

Intellectual Property

Management”

World Trade OrganizationWorld Trade Organization

Intellectual property is expensive and a critical differentiator in knowledge based competition, WTO members must respect the basic requirements

Nations must respect its obligation of the TRIPS agreement

Protect interests of all companies located in member countries

TurkeyTurkey

Become respected for WTO membership as soon as possible

Adopt international intellectual property rules as soon as possible, while ensuring:– Disruption of local industry is minimal– Social and government costs do not

increase– Consumers / patients have access to

medical innovation– FDI continues to increase

InnovatorsInnovators

Enhance global reach of their intellectual capital and spread costs of innovation across markets

Participate in markets that respect international IP rights

Turkey must adopt data exclusivity as per TRIPS agreement of 1995

Enable build up of robust health care sector that adheres to high quality / technology standards

Generic ManufacturersGeneric Manufacturers

“Phase In” into the new environment so as to co-exist as a low cost / generics provider

Adoption of data exclusivity and IP rules must be linked to the some benefits / conditions(?)

Ensure they continue to play crucial roles in the local health care industry

Industry StrategyIndustry Strategy


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Developing a Common Understanding of the “Multiple Dimensions” of How Data Exclusivity will Impact the Turkish Pharmaceutical Industry and Health Care.

Documents

data exclusivity impact

location of registration

future impact

new environment

new molecules

data exclusivity adoption

new industry structure

turkish marketplace