Report to the Trade Barriers Regulation Committee

EUROPEAN COMMISSION Directorate-General for TradeDirectorate F - Co-ordination of WTO and OECD matters. Dispute settlement and Trade Barriers Regulation Dispute settlement and Trade Barriers RegulationNon-Confidential VersionMonday, September 13, 2004REPORT TO THE TRADE BARRIERS REGULATION COMMITTEETBR proceedings concerning Turkish practices affecting trade in pharmaceutical products- 1 - 1. INTRODUCTION...... 4 1.1. The Complaint...... 4 1.2. The investigation...... 5 2. THE PRODUCTS AND THE COMPLAINANT...... 6 2.1. The products...... 6 2.2. The complainant...... 6 3. ECONOMIC, COMMERCIAL AND REGULATORY BACKGROUND IN THE EUROPEAN UNION...... 7 3.1. Economic and commercial background...... 7 3.1.1. General...... 7 3.1.2. Production and External trade...... 7 3.2. The EU legal and regulatory regime for pharmaceutical products...... 8 3.2.1. Marketing authorisations, pricing and transparency issues...... 8 3.2.2. Data exclusivity...... 10 4. ECONOMIC AND COMMERCIAL BACKGROUND IN TURKEY...... 13 4.1. Production...... 13 4.2. Market share of generics and original pharmaceutical products...... 14 4.3. External Trade...... 15 4.4. Employment...... 16 5. TURKISH REGULATORY REGIME FOR PHARMACEUTICALS...... 16 5.1. Description of the authorities involved and their responsibilities...... 16 5.2. Description of the process for authorisation/approval for pharmaceutical products17 5.3. Reimbursement system...... 19 6. PRELIMINARY POINTS UNDER THE TBR ANALYSIS...... 217. TURKISH PRACTICES (TRADE OBSTACLES) : FACTUAL AND LEGAL ANALYSIS...... 23 7.1. Discriminatory and arbitrary benchmarking...... 23 7.1.1. Complainant’s allegations...... 23 7.1.2. Recent developments on pricing...... 26- 2 - 7.1.3. Conclusion...... 28 7.2. Discriminatory margins...... 28 7.2.1. Factual analysis...... 28 7.2.2. Legal analysis under WTO rules...... 30 7.2.3. Legal analysis under the EC-Turkey Customs Agreement...... 31 7.2.4. Conclusion...... 31 7.3. Local production requirements...... 32 7.3.1. Factual analysis...... 32 7.3.2. Conclusion...... 33 7.4. Discriminatory “Buy Turkish” policies...... 33 7.4.1. Factual Analysis...... 33 7.4.2. Conclusion...... 34 7.5. Data protection and data exclusivity...... 34 7.5.1. The Complainant’s allegations...... 34 7.5.2. The Turkish authorities’ position...... 37 7.5.3. Generics producers’ position...... 38 7.5.4. Legal analysis...... 39 7.5.5. Conclusion...... 46 8. ADVERSE TRADE EFFECTS...... 46 8.1. Local content requirements...... 47 8.2. Lack of data protection...... 47 8.3. Conclusion...... 49 9. COMMUNITY INTEREST...... 5010. CONCLUSION...... 5111. ENVISAGED COURSE OF ACTION. .ERROR! BOOKMARK NOT DEFINED.- 3 - 1. INTRODUCTION1.1. The ComplaintOn 9 October 2003, the European Federation of Pharmaceutical Industries and Associations (EFPIA) lodged a complaint (exhibit n°1) under Article 4 of Council Regulation (EC) n° 3286/94 (the Trade Barriers Regulation – TBR), to seek the removal of a number of alleged obstacles to trade in pharmaceutical products on the market of the Republic of Turkey.EFPIA is a non-profit organisation representing the interests of the pharmaceutical industry in the European Union. For the purpose of the complaint, EFPIA is acting on behalf of those of its members which have an interest to export and market their products in Turkey.The complainant alleged that Community sales of pharmaceutical products in Turkey are hindered by a number of obstacles to trade within the meaning of Article 2(1) of the Trade Barriers Regulation, i.e. “a practice adopted or maintained by a third country and in respect of which international trade rules establish a right of action”. The trade barriers allegedly encountered by the complainant (EFPIA) include discriminatory pricing and discriminatory margins, local production requirements, discriminatory distribution policies, lack of data protection/data exclusivity as well as overall lack of transparency in the pricing system.The Commission decided that this complaint contained sufficient evidence to justify the initiation of an examination procedure and a corresponding notice was published in the Official Journal of the European Union on 20/12/2003 (OJ C n°311/31) (exhibit n°2).- 4 - 1.2. The investigationDuring the first stage of the investigation, the Commission services gathered information on the products subject to investigation, on the Turkish legislation and practice, on the Turkish and Community pharmaceutical markets and industries and on the adverse effects claimed by the complainant. This information has been mainly collected by means of different questionnaires addressed to:– The complainant EFPIA;– Turkish generics producers (in associations and individually);– Turkish authorities;– Research-based companies in Turkey.After collecting the information referred to above, the Commission services carried out verification visits. A fact finding mission took place in Turkey and the Commission officials met with representatives of the two Turkish generics producers associations (IEIS/Pharmaceutical Manufacturers Association, TISD/Turkish Pharmaceutical Manufacturers Association), the association of the research-based companies in Turkey (importers and locally established) under the acronym of AIFD, representatives of individual companies, officials from the Ministry of Health, the Ministry of Labour and Social Security, the Secretariat General for EU Affairs (under the authority of the Prime Ministry and the Turkish Foreign Affairs Ministry), the Ministry of Finance, the Ministry of the Treasury, representatives of the Turkish Pharmacists Association, representatives of the Istanbul Chamber of Pharmacists, representatives of the McKinsey consulting company and the EU Delegation in Ankara.The Commission services wish to stress that the Turkish authorities were fully co- operative throughout the investigation and were willing to reply to all questions. That was also the case for all other interested parties, including the generics producers and the Pharmacists associations.- 5 - 2. THE PRODUCTS AND THE COMPLAINANT2.1. The productsThe products under investigation are pharmaceutical products falling under the following Combined Nomenclature Headings codes 2936, 2937, 2938, 2939, 2941 and 3001 to 3006. The products which are principally subject to the alleged obstacles to trade are innovative or original products:Innovative pharmaceutical products are those introduced in the market for the first time. They are developed by research-based pharmaceutical companies which then take the appropriate steps to protect their intellectual property rights in the product. This is essential as it allows the innovator of the product a period of exclusive sales and thus profitability, thereby ensuring the continuity of research into further products. The cost of researching and developing a new chemical or biological entity was estimated at € 895 million in 20011.Generic products contain the same active ingredient as the innovative products and are essentially similar to and overall interchangeable with the innovative products. A key element for generic pharmaceuticals is bioequivalence. Bioequivalence means that the products to be compared (i.e. the generic medicines and the original) produce the same biological availability of the active substance in the body when given in the same quantity.2.2. The complainantEPFIA represents the pharmaceutical industry operating in Europe. Founded in 1978, its members are 18 national pharmaceutical industry associations and 43 companies undertaking research, development and manufacturing of medicinal products for human use in Europe. EPFIA has a liaison status with national pharmaceutical industry associations from 1 candidate country and 4 new EU countries (Bulgaria, Czech Republic, Hungary, Poland and Slovenia).1 Source: Di Masi J., Tufts University, centre for the Study of Drug Development, November 2001- 6 - 3. ECONOMIC, COMMERCIAL AND REGULATORY BACKGROUND IN THE EUROPEAN UNION3.1. Economic and commercial background3.1.1. General2With an estimated share of 37, 5% of the world pharmaceutical output in 20023, more than 588.000 employees, a global output of nearly € 159 billion and sales of € 104 billion4, the pharmaceutical industry is the 5th largest sector in the European Union, amounting to 35% of the total EU manufacturing value added. The sector is high technology-based and research and development oriented. R&D expenditure reached nearly € 20 billion in 2002 and amounts to 15% of the whole EU business R&D expenditure. It is also one of the high technology sectors to consistently show a positive trade balance. 3.1.2. Production and External tradeIn 2002 production of pharmaceutical products in the EU was in the order of € 145 billion5. Exports of those products amounted to € 49.2 billion (approximately one third of the production) while imports reached € 23.9 billion. The EU pharmaceutical industry is a key contributor to the EU trade balance. In 2002 the trade surplus reached € 25.3 billion (up from 16.3 billion in 2000). in 1000 € (source Eurostat) 2000 2001 2002 IMPORT 16.343.910 20.630.267 23.941.759 EXPORT 32.640.956 40.360.496 49.256.448 Trade surplus 16.297.046 19.730.229 25.314.6892 Source EFPIA member associations including all Member States in 2002, Switzerland and Norway3 in value, at ex-factory prices4 Pharmaceutical market value at ex-factory prices. Pharmaceutical market value at retails prices amounts to € 156 billion in 20025 Source: EFPIA member associations (official figures) excluding Switzerland and Norway- 7 - EU external trade (in 1000 €)60.000.00040.000.000 IMPORT 20.000.000 EXPORT0 2000 2001 20023.2. The EU legal and regulatory regime for pharmaceutical productsThe European Union has established certain principles for the management and operation of national health care systems, which are reflected in EU law. All EU Member States offer state medical assistance and different degrees of reimbursement of medicaments to patients, and regulate – to a lesser or larger extent depending on the particular Member State - the market for pharmaceutical products both from the point of view of pricing and of protection of public health.In order to better understand EFPIA’s complaint, it is useful to provide a brief and focused overview of the EU legal and regulatory regime governing pharmaceutical products. The following analysis simply aims at highlighting those issues which are relevant for EFPIA’s complaint.3.2.1. Marketing authorisations, pricing and transparency issuesFrom the first European Community pharmaceutical Directive concerning the granting of marketing authorisations for medicinal products, issued in 1965, to our days, Community lawmakers have striven to maintain a high level of protection to public health while achieving a single, EU-wide market for pharmaceutical products under conditions of transparency, streamlined procedures for pricing/reimbursement as well as support for research and innovation.- 8 - The principles to which pricing and reimbursement of pharmaceutical products must adhere to are stated in Council Directive 89/105/EEC of 21 December 1988 (exhibit n°3). Its main principles are: - the right of the company, holder of a marketing authorisation and applying for pricing approval, to a prompt and duly motivated response; - use of objective and verifiable criteria to accept or refuse to admit products to reimbursement lists; - publication of the criteria and of the lists themselves.In another respect, under Directive 2001/83/EC of the European Parliament and of the Council of 6 November 2001 (exhibit n°4) on the Community Code Relating to Medicinal Products for Human Use, it is made clear that marketing authorisations for medicinal products may be refused only for reasons relating to the quality, safety or efficacy of the medicinal product concerned. This confirms the fact that under international practice in the regulation of pharmaceutical products, it is unusual to include price as an integral part of the registration approval process. Further and regarding pricing – in those cases where the marketing of a medicinal product is permitted only after the competent authorities of the Member State concerned have approved the price of the product – EU Member States have committed under the same Council Directive 89/105/EEC, as above, that a decision on the price which may be charged for the medicinal product concerned is adopted and communicated to the applicant within 90 days of the receipt of an application submitted by the holder of a marketing authorisation. Also, Council Directive 89/105/EEC (the so-called Transparency Directive) imposes the obligation to provide a statement of reasons based on objective and verifiable criteria whenever it is decided not to permit marketing of a product at the price proposed by the applicant. Through these specific provisions, the Transparency Directive aims at enhancing transparency and eventually avoiding- 9 - creeping and/or overt restrictions that undermine the functioning of the EC common market.3.2.2. Data exclusivityAlthough, intellectual property legislation on data protection is ultimately Member State legislation, the basic norms are reflected in EC legislation. Reference is made in particular to Directive 2001/83/EC of the European Parliament and of the Council of 6 November 2001 (exhibit n°4) on the Community Code Relating to Medicinal Products for Human Use. Having as objectives the safeguarding of public health through appropriate rules on production, distribution and use of medicinal products while promoting the development of the pharmaceutical industry within the Community, this Directive sanctions the rule of data exclusivity, namely that confidential data is exclusive to the originator and may not be relied on by others for marketing approvals during a period of 6 – 10 years following grant of marketing approval.More particularly, under the mentioned directive data exclusivity implies: (i) that the undisclosed/confidential data generated by the originator may not be used by another company (generics manufacturer) to produce its own relevant data (principle of non-disclosure), and, (ii) that the marketing/regulatory authority may not rely or refer (directly or indirectly) to the originator’s data, to process and approve third parties’ subsequent applications for a certain period of time (6 – 10 years following the grant of marketing authorisation) (principle of non-reliance). As indicated above, the EC legislation is based on protection of data exclusivity for a term of 6 – 10 years, with a mandatory 10 year period for products authorised at the Community level through the so-called “centralised procedure”. After completion of the exclusivity period/term, test data (toxicological and pharmacological tests plus clinical trials) may be relied on by new applicants- 10 - (“abbreviated/abridged applications”), which only have to demonstrate that their product is essentially similar to an already approved one. It should be stressed that under the relevant Directives as listed above, no medicinal product may be placed on the market of a Member State unless a marketing authorisation has been issued by the competent authorities of that Member State.Further, Directive 2001/83/EC, imposes a 210 day time limit for adoption of the decision granting authorisation to place a medicinal product on the Member State market following the submission of a valid marketing authorisation application.It should be stressed that recently adopted EU legislation confirms and strengthens the points made above regarding transparency, pricing and data exclusivity. In this context, particular reference should be made to Directive 2004/27/EC of the European Parliament and of the Council of 31 March 2004 (exhibit n°5) amending Directive 2001/83/EC on the Community Code relating to Medicinal Products for Human Use and which entered into force on 30 April 2004. This new Directive aims, among others, at promoting the operation of the internal market through harmonisation of the period for data protection/exclusivity relating to pre- clinical tests and clinical trials. In particular, it provides for an effective period of protection of ten years (which under certain circumstances can be extended to eleven) following the initial authorisation of the original product in a Member State or the Community. In turn, the ten-year period is broken down into two sub-periods: generic manufacturers are entitled to apply for, and obtain, a marketing authorisation after eight years from the first marketing authorisation; however, the generic product cannot be placed on the market before ten years. The new directive thus strengthens considerably data protection in line with international practice and the stated objective to foster the promotion and marketing of research-based innovative pharmaceutical products. It should be noted that EU Member States are bound to transpose this Directive within their domestic legal order by 30 October 2005.- 11 - In addition, the EU Member States have basically unified the procedures for authorisation of marketing of new pharmaceuticals. There are two different authorisation procedures, one centralised by which the application is examined by the European Agency for the Evaluation of Medicinal Products and the marketing authorisation is granted by the European Commission, and the other based on mutual recognition by which the marketing authorisation is first granted by one Member State and then recognised by the others. The laws and procedures for the conduct of clinical trials have also been harmonised in Directive 2001/20/EC of the European Parliament and of the Council of 4 April 2001 on the approximation of the laws, regulations and administrative provisions of the Member States relating to the implementation of good clinical practice in the conduct of clinical trials on medicinal products for human use.The EU recognises the necessity to avoid duplication of authorisation procedures to ensure fast access to innovative products without reducing the level of protection of patients. To this purpose it is a member of the International Conference on Harmonisation of Technical Requirements for Registration of Pharmaceuticals for Human Use (ICH), and embodies its recommendations in its regular system. ICH is a joint initiative of pharmaceutical regulators and research-based industry in Europe, the US and Japan, whose purpose is the harmonisation of technical requirements and procedures concerning the evaluation of safety, quality and efficacy of medicinal products. EU’s representatives in ICH are the European Commission, the European Agency for the Evaluation of Medicinal Products and EFPIA.4. ECONOMIC AND COMMERCIAL BACKGROUND IN TURKEY 4.1. Production The main organisations that represent the pharmaceutical industry in Turkey are as follows:- Pharmaceutical Industry Employers’ Syndicate (IEIS) or Pharmaceutical Manufacturers Association (IEIS), which is the full and correct name. The- 12 - association was established in Istanbul in 1964 as required in the Law of Unions for the purpose of enabling member firms to meet their needs and to possess more effective and harmonious operating environment. As of March 2004, The Manufacturers Association has 23 members, 5 of which being also members of the Turkish Pharmaceutical Manufacturers Association (TISD) The main functions of the association are representing members, consulting and informing, providing educational activities, preserving ethical standards, enabling the industry to preserve and improve its position at international standards and completing the harmonisation of the industry to the EU. Its task is to perform the necessary activities to protect and develop the joint economic and social interests of the members which are essentially domestic manufacturers. They hold a 31.7% market share in value, of which 11.9% concern dual members with TISD.- The Turkish Pharmaceutical Manufacturers Association (TISD), founded in 1952 represents the interests of the local pharmaceutical producers in Turkey and especially the generics industry of small and medium size. As of March 2004 they have 14 members, out of which 5 are also members of IEIS. They hold a 19% of market share of which 11.9% concern dual members with TISD.- Innovator Pharmaceutical Firms’ Association (AIFD). They have 29 Members representing a market share in value of 57.3% and represent the innovative producers in Turkey. AIFD is a member of the complainant, EFPIA.All of them are organisations representing the pharmaceutical sector. During the legislative process on registration, marketing approval, price setting, reimbursement and other legislative issues, the Ministry of Health asks for the opinion of all interested parties. These associations do not participate formally in the decision making process on import, registration/marketing approval, price setting and reimbursement issues.- 13 - According to AIFD there are 82 local producers in Turkey in 2002, out of which 7 are original product producers and 75 are generics producers. In addition to that, there are also 17 original product toll-manufacturing companies6. All original product producers and original toll-manufacturing companies are non Turkish companies. The Turkish pharmaceutical industry is not a research-based industry and does not produce innovative products. They either produce generics or produce under the licences agreements (both generic and originals) 4.2. Market share of generics and original pharmaceutical productsThe evolution of market shares in value and percentage of both generics and original products (locally produced and imported) in the Turkish market since 2000 is as follows: market share in mio € 2000 2001 2002 2003 original 2.099 1.951 2.283 2.518 generics 1.311 1.123 1.244 1.370 Total market 3.410 3.074 3.527 3.888 Source: IMS database, Company provided data, BCG analysisMarket share generics/original products in Turkey in mio €3.000 2.000 original 1.000 generics 0 2000 2001 2002 20036 Toll processing relationships, with respect to chemicals, active pharmaceutical ingredients and finished drug products, are ubiquitous in the pharmaceutical manufacturing industry. Historically, large pharma companies turned to toll processing after commercial drug product introduction, typically when manufacturing tasks had become routine- 14 - market share in value (%) 2000 2001 2002 2003 generics locally produced 36,50 34,60 33,20 33,00 generics imported 1,90 1,90 2,00 2,20 Total generics 38,40 36,50 35,20 35,20 originals locally produced 40,10 38,80 35,00 31,40 originals imported 21,50 24,70 29,80 33,40 Total originals 61,60 63,50 64,80 64,80 Source: IMS database, Company provided data, BCG analysisHistorically the original producers were and still are a very important part of the total pharmaceutical industry. In 2003 the share of original products in the total industry was approximately 65% whereas the generic products were approximately 35%. With 2003 figures out of total € 3.9 Billion market, € 2.5 Billion was original products (locally manufactured and imported) and approximately 50% of it are produced in Turkey either by original manufacturers themselves, or by the Turkish toll-manufacturers and under license by Turkish or EU-manufacturers. The Turkish pharmaceutical original industry production is mostly realised under the license agreements and toll manufacturing in 2003. For example, in 2003, 68% of the Turkish production of original products is produced under license agreements and toll manufacturing.4.3. External TradeThe Republic of Turkey’s pharmaceutical industry has little research-based activities and produces mainly generics, available either on prescription or as over-the-counter products (OTCs). Consequently, imports to Turkey are mostly innovative products rather than generics. in mio € 2000 2001 2002 Imports of Turkey 1.344.840 1.345.328 1.721.182 Imports from EU 867.184 883.564 1.159.751 EU share in Total Imp 64% 66% 67% Total exports of Turkey 160.219 171.186 173.707 exports to the EU 57.205 68.493 72.815 EU share in total Exp 36% 40% 42% Source: SIS, UFT,IEIS In 2002 Turkey has exported € 173,707,000 worth of pharmaceutical products world-wide, of which € 72,815,000 to European Union countries (42 % of all- 15 - exports) while it has imported € 1,721,182,000 worth of pharmaceutical products world-wide, of which € 1,159,751,000(7) from European Union countries (67 % of total imports). 4.4. EmploymentThere are 21,000 people employed in the pharmaceutical industry (Source: IEIS). Original medicines producers employ directly 9,400 people and indirectly 800 (through toll-manufacturing), totalling 10,200 people. The remaining 10,800 are employed for generics producers. 5. TURKISH REGULATORY REGIME FOR PHARMACEUTICALS 5.1. Description of the authorities involved and their responsibilitiesIn Turkey, the Ministry of Health, General Directorate of Pharmaceuticals and Pharmacies is the sole authority in charge of registration, marketing approval/authorisation, pricing of pharmaceuticals, legal classification and inspection. In particular, the role of this authority is to provide for registration, marketing approval/authorisation and pricing of pharmaceutical products, to define rules to be followed as well as to control the advertisement of pharmaceutical products, to undertake inspection of pharmaceutical products and pharmaceutical production plants in Turkey. The Directorate General’s duties and responsibilities are laid down in Decree Law No. 181 (n° 6) on the Organisation and Duties of the Ministry of Health (Official Gazette No. 18251, 14.12.1983) and the Basic Law on Health care Services (Law No: 3359 Official Gazette 14.05.1987 (7n°9). In its tasks, the Ministry of Health is assisted by a number of ”internal” commissions/committees (Advisory Commission for the Registration of Medicinal Products for Human Use, Advisory Commission for Technology – Pharmacology, Bioavailability – Bioequivalence Evaluation Commission and Radiopharmaceutical Advisory Commission) composed of university professors, pharmacologists,7 Source : EUROSTAT EEC Special Trade statistics extraction 2003- 16 - pharmaceutical technologists, clinicians, representatives of the Ministry and other related experts. The duties and functions of these commissions/committees are regulated in the Regulation on setting the duties of Scientific Advisory Board and Commissions for Medicinal Products for Human Use (Official Gazette no: 25254, 9.10.2003) (exhibit n°8). These commissions/committees actually operate as consulting bodies of the Turkish Ministry of Health in the handling of marketing approval applications submitted by pharmaceutical products manufacturers. According to the information gathered, these commissions/ committees need to be consulted before a marketing authorisation/approval is given. An application needs subsequent “green light” of each one of these committees before it can be dealt with by the next one.5.2. Description of the process for authorisation/approval for pharmaceutical productsIn terms of procedures, the regime/process as described above applies to all pharmaceutical products to be put on the market in Turkey, whether imported or locally produced originals or generics. The marketing authorisation/approval details are laid down in the Licensing Regulation for Pharmaceuticals (Official Gazette No: 22218, 2.03.1995) (exhibit n°9).Apart from certain procedural differences (between research-based and generic products to be explained below in connection to the issue of data protection), the requirements for a registration dossier for pharmaceutical products are standard and applicants must comply with them. Article 8 of the Licensing Regulation for Pharmaceutical Products specifies a list of documents that should accompany the application. Accordingly, a summary of the dossier, chemical, pharmaceutical and biological information, pharmacological – toxicological documents and clinical documents (tests) should be provided. The Appendix of the Licensing Regulation for Pharmaceutical Products provides a full list of information and documents that need to be included in the dossier for the registration of medicinal products. Furthermore and in order to assist applicants, the Turkish Ministry of Health, in addition to WHO and FDA guidelines and recommendations, has produced a special- 17 - check list (Guideline of Evaluation of Authorisation Applications) where the items to be included in the registration dossier are listed.Following the opinion of the advisory commissions/committees as above, a report is being prepared and submitted to the General Directorate of Pharmaceuticals and Pharmacies of the Health Ministry. The General Directorate notifies the applicant accordingly. If the notification requires the applicant to submit additional information, the applicant has to provide it within a period defined in the given notification. Article 17 of the Licensing Regulation (Notifications and Objections) lays down the right of objection for the applicant in case of refusal of its application. If the license application is rejected, the applicant shall be notified of the decision with reasons. The applicant is entitled, in case of refusal, to have recourse to judicial remedies before the competent administrative courts.In terms of deadlines, there are no specific and binding deadlines for the conclusion of the processing of marketing approval applications. On 3 December 2003, though, the Ministry of Health issued a Notice (No: 49221) (exhibit n°10) to the Pharmaceutical Industry Manufacturers Association where they declared that their intention was to complete the registration/marketing approval within 210 days for all products. Finally, the criteria considered by the Ministry of Health when evaluating applications for registration of pharmaceutical products are efficacy and safety under proposed administration conditions, whether introduction of the product into the market will be beneficial, whether the product has suitable technical and pharmacological specifications and whether its price is reasonable. This is clearly stated in the Law on Medicinal Products for Human Use (Law No: 1262, Official Gazette No: 898, 26.05.1928) (exhibit N°11) and the Licensing Regulation for Pharmaceutical Products of 1995. Furthermore, all the information gathered during the investigation, including the replies given by IEIS and TISD confirm that the approval of the price of drugs is a- 18 - strict prerequisite before registration approval and marketing approval is granted for both imported and domestic products. In other words, pricing determination is an integral part of the marketing/registration approval process in Turkey and according to further information, there have been no instances where a marketing approval was granted without a previous pricing determination.In procedural terms, prices are decided by the so-called Pharmaco Economy (Pricing) Committee (according to the complainant) and the Pricing Commission as of January 2004 working in parallel with the Bioavailability – Bioequivalence Evaluation and Radio pharmacological Advisory Commissions (according to the replies given by IEIS and TISD).5.3. Reimbursement systemThere are three main government reimbursement entities in Turkey SSK, Emekli Sandigi and Bag Kur. A significant portion of the market, estimated at twenty-five percent, is self-financed by patients. SSK, Emekli Sandigi and Bag Kur operate a co- finance arrangement whereby patients in employment contribute 20% of the price of the product, while retired patients contribute 10% with the fund picking up the remaining 90% of the established price.- SSK operates under the Ministry of Social Services and Labour and serves principally employees of the private sector. SSK represents around 30% of the market.SSK has its own hospitals and pharmacies and directly purchases from the companies wholesalers via tenders. The tenders of SSK are subject to public procurement law and the tenders are published on SSK website daily. SSK purchases the cheapest alternative from available products with the same active ingredient or the same therapeutic class. In consequence, the cheapest generic of each molecule is purchased by SSK to be serviced to its patients at SSK pharmacies. If an SSK pharmacy is not available then the patient could purchase the prescribed drug at private pharmacies where the SSK reimburses them on the basis of the cheapest generic plus up to 30%- 19 - more. The system of reimbursement has been in place at SSK since 1993 and still continues at present. - Bag Kur serves principally the self-employed. Bag Kur represents around 20% of the market.Until the end of 2001 Bag Kur patients could obtain their prescribed drugs from private pharmacies with no limitations on brand names. Bag Kur would reimburse whatever brand of the same molecule the doctor prescribed. At the beginning of 2002 Bag Kur system switched to a generic referencing policy when it started to reimburse only the cheapest price plus up to 30% more. If the original product is 100 and the cheapest generic is 30 then the amount reimbursed would be equal to 39 (=1.30*30).- Emekli Sandigi serves people retired from or working at public serviceEmekli Sandigi reimbursement system was exactly the same as the Bag Kur System before the reimbursement system changed in 2002, in which the generic and innovative products were all reimbursed as long as the doctors prescribed them by the brand. In March 2003, however, Emekli Sandigi also switched to a generic reimbursement policy based on the arithmetic average of all registered generics prices and the original product price. This system is called the “average reference price”. The example below shows how the system works:Original product price 100 Generic A product price 50 Generic B product price 30 Emekli Sandigi maximum reimbursement price: 60 = (100+50+30)/36. PRELIMINARY POINTS UNDER THE TBR ANALYSISFollowing the description and short analysis of the Turkish and EC regulatory systems on pharmaceuticals and before embarking on the examination of the particular claims raised by EFPIA (the complainant), it is essential to set out certain remarks.- 20 - As experience shows, the majority of states around the world have adopted various cost- containment and price control measures affecting marketed pharmaceutical products. Similarly, the EC Member States – as recognised by Council Directive 89/105/EEC of 21st December 1988 relating to the transparency of measures regulating the prices of medicinal products for human use and their inclusion in the scope of national health insurance system – have adopted a variety of measures of an economic nature on the marketing of medicinal products in order to control public health expenditure on such products. These measures include also direct and indirect price controls on the prices of medicinal products as a consequence of the inadequacy or absence of competition in the medicinal products market and limitations on the range of products covered by national health insurance systems.These measures reflect the Member States’ wish to promote public health by ensuring the availability of adequate supplies of medicinal products at a reasonable cost. At the same time, they are intended to promote efficiency in the production of medicinal products and to encourage research and development with new medicinal products on which the maintenance of a high level of public health within the Community depends. Ultimately, these measures reflect the Member States’ varied priorities and objectives regarding the formulation of adequate responses to complicated questions involving medical/health, financial, budgetary and social concerns and traditions related to provision of healthcare services. Although the European Union has envisaged further harmonisation of such measures in the future, the most pressing concern as exemplified by Council Directive 89/105/EEC (Transparency Directive) is to establish a basic framework ensuring that these measures function under conditions of transparency, non-discrimination and streamlined procedures and objective and verifiable criteria.In line with the basic philosophy underpinning Council Directive 89/105/EEC, the examination of the particular claims submitted by the complainant will be limited to those aspects that raise fundamental concerns of non-discrimination, transparency and fairness. The processing of these claims and the ensuing conclusions and findings under no circumstances should be interpreted as putting in question the sovereign and legitimate right of Turkey - as well as of any other country - to pursue policies of price and health expenditure control, provided that these policies respect the basic principles of transparency, non-discrimination- 21 - and fundamental fairness. In this spirit, the analysis of the Commission below has focused on these particular aspects which raise serious concerns regarding discriminatory treatment of imported products in terms of pricing margins and local production requirements and distribution policies.At the same time, the issue of data protection/data exclusivity touches upon basic notions of fairness and improper commercial use. As it will be explained below in the corresponding legal analysis, Article 39.3 of the TRIPS Agreement, as well as the relevant EC legislation covering the same subject matter, are intended to protect, against disclosure and unfair commercial use, confidential data submitted as a requirement for obtaining licensing approval for original pharmaceutical products. Allowing regulatory authorities to rely (directly or indirectly) on the originator’s sensitive data as a 'shortcut' to marketing approval of generic products without a set period of data exclusivity constitutes an unfair commercial use as it prevents improperly originators’ exclusive use of their data for a period of time sufficient for them to recoup the costs incurred in running trial tests and producing and compiling data for submission to regulatory authorities.7. TURKISH PRACTICES (TRADE OBSTACLES) : FACTUAL AND LEGAL ANALYSISThe complaint concerns obstacles to trade allegedly caused by Turkish practices and measures involving lack of transparency, discriminatory application of the pharmaceutical import, sales and marketing system, including discrimination in pricing and pharmaceutical marketing approvals procedures and distribution channels. The complainant also identifies a lack of protection of commercially sensitive data submitted as part of the marketing approval procedure.7.1. Discriminatory and arbitrary benchmarking7.1.1. Complainant’s allegations7.1.1.1. Factual analysisAs a first remark, the complainant alleges that contrary to international practice, the criteria considered by the Turkish Ministry of Health when evaluating applications for registration of pharmaceutical products include among others (efficacy and- 22 - safety under proposed administration conditions, beneficial impact of the introduction of the product, suitable technical and pharmacological specifications) the issue of whether the price is reasonable.According to the complainant, the inclusion of the price as an integral part of the regulatory approvals regime has the consequence, inter alia, that regulatory approvals for a product cannot be granted until the pricing is determined by the Turkish authorities, thus giving them an exceptional negotiating power over pricing and leading to excessive delays in cases of disagreements.It should be mentioned that the pricing process is administered by the Directorate of Pharmaceuticals and Pharmacies of the Turkish Ministry of Health, in the context of the overall marketing authorisation process of medicinal products, on the basis and under the authority of Price Decree 84/8845 (exhibit n°12) (Decision Regarding the Prices of Pharmaceutical and Medicinal Products, Galenic Preparations and Vials Produced in Turkey, Council of Ministers Decision No. 84/8845), the Licensing Regulation for Pharmaceutical Products as published in the Official Gazette of 2 March 1995, No 22218 and related decisions, communications and notifications.More specifically, the complainant argues that imported products are benchmarked to the pre-tax retail prices of reference countries (primarily prices of country of origin, country of production and eventually an arbitrary basket of reference countries). The complainant further argues that the process of making these benchmarking decisions as regards to the choice of reference countries, is to a large extent arbitrary as no price regulations or administrative decisions have been published setting out in detail the process or the specific criteria for choosing the applicable country comparisons. To substantiate these allegations, the complainant refers essentially to a number of decisions and communications and more particularly to the Turkish Ministry of Health Decision 3070 of 25/6/2001 (exhibit n°13) about determination of Pharmaceuticals Prices, the Ministry of Health Communication letter to the Pharmaceuticals Industry Manufacturers Association,- 23 - dated 2 August 2002 (exhibit n°14), the Ministry of Health Communication letter to the Pharmaceutical Manufacturers Association dated 11 July 2002 (exhibit n°15) and the Ministry of Health letter to the Association of Research-based Pharmaceutical Companies, dated 3 December 2003.Furthermore, the complainant, in corroboration of its claims, submits a number of documents (essentially correspondence between the Turkish Ministry of Health and individual research-based companies) focusing on requests for prices applicable in the country of origin, country of manufacture or third countries.According to the complainant, the country of origin element as used in the pricing process leads to different results depending on the location of the headquarters of the producer of the product and that two competing/like products, being considered in the system, are being treated differently depending on the nationality of the producers concerned. According to the complainant, this leads to effective discrimination against competing products from companies headquartered in jurisdictions with low pharmaceutical prices.In addition, the complainant argues that the country of origin standard has been applied arbitrarily and without any consistency. Finally, the complainant claims that in addition to benchmarking by country of company’s origin (meaning the country in which the administrative headquarters of the company manufacturing the product is located), Turkish authorities very often, as mentioned above, arbitrarily use benchmark prices from alternative third countries.In terms of legal arguments, the complainant argues that the “country of origin” element, as described above, results in discrimination and differential treatment contrary to the obligations of Article I of GATT 1994. According to the complainant, one of the products is disadvantaged as compared to the treatment of the other competing or like products to the extent that the country of origin determination favours one product over the other in terms of price. Furthermore, EFPIA argues that the practice of arbitrary benchmarking (arbitrary selection of comparison with third countries) is contrary to Article III:4 of GATT 1994 as it is- 24 - only applicable to imported products generally and is not applied to like and competing domestic production and, by its arbitrary nature, it affords less favourable treatment to imported products than to like domestic products the pricing of which is not benchmarked in this way. Also, the complainant argues that the Turkish pricing regime lacks transparency and is applied in a non-uniform, impartial and reasonable manner in violation of Article X of GATT 1994. Finally, EFPIA argues that the Turkish pricing regime, being an integral part of the marketing approval system, is covered by the TBT Agreement (Agreement on Technical Barriers to Trade) and due to its discriminatory, arbitrary and non-transparent functioning, runs contrary to Articles 2.1 and 2.2 thereof.7.1.2. Recent developments on pricingFollowing the submission of EFPIA’s complaint and the initiation of the TBR investigation, the Turkish authorities adopted the new Decree No. 2004/6781 on the Pricing of Medicinal Products for Human Use on 6 February 2004 (exhibit n°16) which entered into force on 14 February 2004 and published in the Official Gazette 14 February 2004 under N° 25373. This Decree was later modified by the Decision Amending the Decree Relating to the Pricing of Human Medical Products n° 2004/7124 (exhibit n°17) dated 5th April 2004 and published in the Official Gazette of 14th April 2004. Parallel to these two legal acts, the Turkish authorities also adopted and published two explanatory Notifications Regarding the Pricing of Medicinal Products for Human Use of 3rd March 2004 N° 25391 (exhibit n°18) and of 22nd April 2004 N° 25441 (exhibit n°19) both published in the Official Gazette of 3rd March 2004 and 22nd April 2004 respectively.In terms of pricing, Article 3 of the Decree, as amended by the related subsequent Decision provides for a basket of five EU countries to be determined each year to be used as the basis for establishing the price of the original products. In fact, the amended Decree stipulates that the reference price of the original products shall be fixed at 100 % of the ex-factory price in the cheapest among the five reference countries or if the ex-factory price is not available, at 100% of the sale price to the wholesaler obtained upon deducting the VAT rate and pharmacy and wholesaler- 25 - profits from the public sale price in that country. If the ex-factory price in the country from where it is imported is lower than the designated reference price, the ex-factory price in the country of importation shall be taken as the reference price. The public sale price shall be determined upon adding the envisaged wholesalers and pharmacy profit rates and VAT to the sale price to the wholesaler.The 5 reference basket countries determined by the Ministry of Health shall be Italy, France, Spain, Portugal, and Greece until the end of 2005. With regards to original products manufactured by using locally produced raw materials, companies may request a sale price to the wholesaler which is 10% above the reference price determined as above.For generic products, the reference price is determined at 80% of the reference price determined for the originals (100% of the cheapest ex-factory sales price among the reference 5 countries). Similarly to the original products, if the ex-factory sales price of the product under pricing in the country of importation is lower than the generic product reference price, the ex-factory price in the country of importation shall be taken as the reference price of that generic product. The final public price shall be determined upon adding the applicable wholesaler and pharmacy margins to the sale price to the wholesaler.If domestic raw materials are being used, sales prices to the wholesaler which are 10% above the designated reference prices of the generic products may be requested.The Pricing Decree as amended by the relevant Decision and clarified by the above mentioned Notifications envisages the conclusion of the whole pricing process (pricing transaction) within 90 days upon the submission of all the necessary documentation by the company concerned. In case of heavy workload, this period may be extended by 60 days.Finally, the Pricing Decree also envisages more structured, streamlined and time limited procedures not only for pricing but also for pricing adjustments of prices- 26 - following price variations of the products in the reference (basket) countries or for re-determination of prices of products already in the market.It should be stressed that the new Pricing Decree abolishes the previously applied explicit differentiation of price calculation between locally produced and imported products, the only distinction remaining being that between original and generic products.7.1.3. ConclusionDue to the changes brought by the new Pricing Decree as subsequently amended EFPIA’s particular claims have become largely moot. Consequently, there is no need to enter into more details. In particular, this is due to the fact that the new Pricing Decree – according to the Turkish authorities – has effectively repealed the Ministry of Health Decision No. 3070 of 25 June 2001 and all related previous price calculation practices through the establishment of a new pricing regime.It should be pointed out though that despite the significant improvements brought about in terms of pricing by the new Pricing Decree, the Commission nevertheless entertains certain reservations. In particular, the new Decree as amended by the relevant Decision seems to be inconsistent with Turkey’s national treatment obligations under GATT 1994, Article III:4 as it accords treatment less favourable to imported raw materials for pricing of original and generic products (for a detailed legal analysis see below section 7.2.2). Moreover, despite the improvements contained in the new Pricing Decree, the Commission reserves the right to monitor its practical application and reach the necessary conclusions, in particular to ensure that the Decree is applied in a manner that is fully in line with EC Directive 89/105 (which should have been incorporated into the internal legal order of Turkey by virtue of Article 8 of Decision 1/95 (exhibit n°20) and Article 1(2) of Decision 2/97 (exhibit n°21) of the EC – Turkey Association Council).- 27 - 7.2. Discriminatory margins7.2.1. Factual analysisThe complainant alleges that the margins applicable to imported and locally produced pharmaceutical product are discriminatory. This margin system offers margins of 20% to pharmacists in respect of sales of imported products but 25% in respect of locally produced product. In addition, wholesalers’ margins are set at 9% for local products against 7% for imported products.These lower margins as applicable to imported products are set out in Decision 1932 (exhibit n°22) incorporated in a letter of 26 April 2001 issued by the Directorate General of Pharmaceuticals and Pharmacies of the Ministry of Health. This provides an incentive for pharmacists to dispense locally produced products when available. This discriminatory system of margins was challenged in the Turkish courts on procedural grounds (ultra vires) and as a result, a Decision of the Council of Ministers dated 6 February 2002 (exhibit n°23) provides in item 3 that margins for wholesalers and retailers/pharmacists operate under the same maximum margins as for domestically produced products, but gave discretion to the Ministry to set lower percentages to imports. Using that discretion, the Ministry of Health in a letter of 10 July 2002, decided that the margins applicable to imported products would be 7% for the wholesaler and 20% for the pharmacists, which set back the margins for imported products to the lower levels communicated on 26 April 2001 (exhibit n°24).The new pricing Decree 2004/6781 regarding the pricing of Medicinal Products for Human Use of 6 February 2004 published in the Official Gazette and put into force on 14 February 2004 (Article 10) eliminates the difference in margins between the locally produced and imported products and sets out a regressive system of margins- 28 - determination with margins declining according to the ex-factory price of the products.However, Articles 1 and 2 of Decision No 2004/7124 which amended Decree No 2004/6781 of 6 February 2004 provide that the price to the wholesaler for generics and original products shall be determined by adding an extra 10% above the respective reference prices for originals and generics if manufactured by using locally produced raw materials. In consequence, this act has eliminated the previously applied explicit discriminatory margins between locally produced and imported products and the Commission considers that the issue has been settled but introduces a new discrimination between imported and domestically produced raw materials and ultimately between imported and locally produced pharmaceutical products.7.2.2. Legal analysis under WTO rulesSince the discriminatory margins at the wholesaler and retailer level as described above are not longer applied, a detailed legal analysis under the rules of the WTO and the Customs Union is no longer required.However, as indicated above, Decision No. 2004/7124 of 14 April 2004 provides that for both original and generic products produced by using domestically produced raw materials, the ex-factory prices (prices to the wholesaler) may be increased by 10% above the determined reference price.The relevant Articles (1 and 2) of the Decision, on their face, accord to imported pharmaceutical products (and incidentally also to imported raw materials) less favourable treatment as they are not eligible for the increased price.GATT Article III:4 provides that imported products “shall be accorded treatment no less favourable than that accorded to like products of national origin in respect of all laws, regulations and requirements affecting their internal sale…” The terms of Articles 1 and 2 of the Pricing Decision are clearly inconsistent with Article III:4, as- 29 - they expressly extend preferential pricing – and thus by definition more favourable treatment – only to products (originals + generics) incorporating raw materials of national origin. This implies de facto discrimination as regards domestic pharmaceutical products, which are more likely to use domestic raw materials.Furthermore, this preferential treatment to pharmaceutical products using local raw materials appears to constitute a violation of Article 2.1 of the TRIMS Agreement in conjunction with Point 1 (a) of the Annex thereof.It should be recalled that the TRIMS agreement prohibits WTO members from applying trade related investment measures in a manner which is inconsistent with GATT Article III. In particular the Annex of the TRIMS Agreement under point 1 (a) considers as WTO incompatible those measures which require the use by an enterprise of products of domestic origin either mandatorily or as a condition to obtain an advantage.7.2.3. Legal analysis under the EC-Turkey Customs AgreementUnder Decision N°1/95 of the EC-Turkey Association Council on implementing the final face of the Customs Union, Article 5 provides that:Quantitative restrictions on imports and all measures having equivalent effect shall be prohibited between the PartiesThis provision prohibits not only outright quantitative restrictions, but also measures having an equivalent effect namely measures with among others promote or favour domestic products to the detriment of competing imports. On the basis of the factual information as above, it is beyond doubt that the Turkish recent Pricing Decree on its terms favours domestic pharmaceutical products, which are more likely to use domestic raw materials. It may therefore be concluded that this particular provision of the recent Pricing Decree constitutes a violation of Article 5 of the EC-Turkey Customs Union Agreement as per Decision N°1/95 of the EC-Turkey Association Council on implementing the final face of the Customs Union.- 30 - 7.2.4. ConclusionIn the light of the above, no conclusion needs to be reached regarding the previously applied discriminatory margins at wholesaler and retailer level.However, the preferential treatment afforded to locally produced pharmaceutical products under Articles 1 and 2 of the recent Decision No. 2004/7124 of 14 April 2004 regarding pricing of pharmaceutical products is in breach of Article III:4 of GATT 1994 and Article 2.1 TRIMS in conjunction with Point 1 (a) of the Annex to the TRIMS.Finally, this preferential treatment as above is in breach of Article 5 of the EC- Turkey Customs Union Agreement as per Decision N°1/95 of the EC-Turkey Association Council on implementing the final phase of the Customs Union7.3. Local production requirements7.3.1. Factual analysisEPFIA alleges that on certain occasions regulatory/registration approvals for imported pharmaceuticals were not granted unless local production requirements were previously met. Although, there was no formal legal basis/es upon which local production requirements are a prior prerequisite for registration/marketing approval decisions for imported pharmaceuticals, local production requirements were only applied during the second half of the 90’s : the complainant submitted several exchanges of correspondence between the General Directorate of Pharmacies and Pharmaceuticals of the Ministry of Health and the concerned companies where it is clearly stated that the application process of the imported product would only continue if the product were produced in Turkey. The evidence provided concerns 4 companies and in total 12 examples. However, no example or evidence has been reported of marketing approval denials as a result of a refusal from the industry to engage in local production. - 31 - On the other hand, the local production requirements resulted in delays in the overall approval/registration process of 6 months and above. One of the company which submitted evidence had to face additional delays between 7 and 22 months compared to the average duration of all its submissions since 1985; in fact the average duration between the submission date for registration approval and the approval date is 32 months whereas the duration for products concerned by the local production requirements ranged from 39 months to 55 monthsIn addition, the complainant also alleges that due to pressure to engage in local production, 2 companies (4 examples) had to engage in local production as a result of these requirements. On the basis of the evidence gathered during the investigation, the Commission can only confirm that in one case the company was actually forced to shift to local production and in another case the company was refused the authorisation to shift from local production to importation.However, on the basis of all the material gathered and the written replies during the investigation visit in Turkey, all the research based companies concerned confirmed that local production requirements do not apply anymore.Consequently, the Commission considers that the issue has practically become moot. Therefore, a legal analysis is not merited.7.3.2. ConclusionIn the light of the above, it is concluded that the previously applied local production requirements do not apply anymore and therefore no further investigation has been considered necessary. 7.4. Discriminatory “Buy Turkish” policies7.4.1. Factual AnalysisThe complainant alleges that the Turkish Ministry of Labour and Social Security issued in 2001 written directions favouring/instructing the purchase/dispensing of local generic products to the detriment of imported original products. - 32 - In a letter dated 6 September 2001 and numbered 53485 (exhibit n°25), the Ministry of Labour and Social Security instructed health facilities to “purchase imported products only if there is no local product that has the same treatment or in case of absolute necessity of the use of this medicine”. This letter was sent to SSK hospitals under the Ministry jurisdiction. The complainant also provided material evidence of a company having its imported product returned based on instructions mentioned here above.However, according to the evidence gathered during the investigation and the written replies of the Turkish authorities, the specific written instructions were revoked by a general letter dated 12.03.2002 and numbered 28840 (exhibit n°26).In consequence, the Commission considers that the alleged discrimination described above does not apply anymore and that, therefore, a legal analysis is not merited.7.4.2. ConclusionIn view of the above, it is concluded that the previously applied discriminatory “Buy Turkish” policies through the 2001 written instructions/directives of the Turkish Ministry of Labour and Social Security have now been eliminated.7.5. Data protection and data exclusivity7.5.1. The Complainant’s allegationsThe complainant alleges that commercially sensitive data resulting from expensive pharmacological and toxicological tests, including clinical trial data, is not sufficiently protected against theft or other forms of appropriation. EFPIA alleges that files containing material of a highly sensitive nature developed by originators of pharmaceutical products are often left in locations in the Ministry of Health which are not secured at all or up to the level reasonably necessary for protection of such sensitive information.- 33 - Furthermore, the complainant alleges that due to the absence of data exclusivity in Turkey, the Turkish regulatory authorities rely on or refer to the originators data as the basis for their granting of approval to generic products.According to EFPIA, the Licensing Regulation for Pharmaceutical Products, as published in the Official Gazette on 2 March 1995, No. 22218, provides for pharmaceuticals licensing applications to be based on data developed by others without any indication of minimum time since submission of the original data. Article 9 of the Regulation, entitled Abridged Applications, provides that if the (generic) product is completely identical to a product previously licensed by the Ministry of Health (with proof that it has the same qualitative and quantitative composition, has the same pharmaceutical form, is administered via the same route and if applicable, has the same bioavailability/bioequivalence), it may not be necessary to submit test results (pharmacological and toxicological test results or clinical studies) on the product.The Abridged Applications system under Article 9 of the Licensing Regulation is applicable only to generics and these types of applications do not need to submit toxicological, pharmacological data or clinical trial studies, hence, their application periods last on the average one year whereas the same figure is 2 – 2,5 years for imported and locally produced original products.According to EFPIA, the lack of data protection/data exclusivity has a serious impact on imports of pharmaceutical products from the EU to Turkey. First, the conditions of competition are shifted against imports from the EU and even EU producers of original products in Turkey because those products must be priced at a level allowing the cost of data development to be recovered, while competitors within Turkey relying on data developed by EU producers for their marketing approvals have no such costs to recover. Secondly, the lack of data exclusivity potentially facilitates marketing of pharmaceutical products of a very low standard claiming to be equivalent to the originator product and as the insurance/ reimbursement regime is often based on benchmarking with reference to these products, in the absence of effective data protection the entire system of quality control and price benchmarking- 34 - breaks down. At the end, the complainant argues that companies are forced to withhold their products from the market due to fear of leaks of data and of the lack of prospect for achieving adequate prices due to the operation of benchmarking- based insurance/reimbursement regimes.Based on the information gathered, EFPIA estimates that 222 generic copy products have been submitted to the Turkish Ministry of Health for approval after 1 January 2000. As of January 2004, 66 of the 222 applications were approved.In terms of legal arguments, the complainant argues that the lack of data protection/exclusivity violates Article 39.3 of the Agreement on Trade Related Intellectual Property Rights (TRIPS) as well as the commitments assumed by Turkey in the context of the EC – Turkey Customs Union Agreement.More particularly, the complainant argues that the Turkish practices regarding confidential data violate both the principle of confidentiality of data (protection against disclosure) and the principle of protection against unfair commercial use. Regarding the first, the complainant argues that it means that there must be efforts taken to safeguard the data against disclosure beyond the officials who need to review the data as part of the marketing approval process. Regarding the principle of unfair commercial use of data, the complainant claims that the term must be interpreted as a reference to a proprietary right amounting to the exclusive right to rely on the data. In other words, the authorities requiring submission of the data for marketing approvals should not allow others to rely on or refer to the same data for marketing approvals. The complainant further argues that the interpretation of the terms of Article 39.3 should be “assisted” by reference to the terms of the EU – Turkey Customs Union Agreement as it concerns intellectual property.According to the complainant and on the basis of the Vienna Convention on the Law of the Treaties Articles 30, 31 and 32 as subsequent agreements and practice and as relevant rules of international law in the relations between Turkey and the EU, the obligations of the Customs Union Agreement must be taken into account in interpreting Turkey’s obligations to the EU under the WTO. In other words, the- 35 - terms of the WTO Agreement as between Turkey and the EU should be read in light of the terms of the Customs Union Agreement as defining the “extent” of the obligations of Turkey and the EC to each other where they are dealing with the same subject matter.In this context, the complainant points out to the specific commitments assumed by Turkey by virtue of Decision No. 1/95 of the EC – Turkey Association Council of 22 December 1995 on implementing the final phase of the Customs Union and the Decision No. 2/97 of the EC – Turkey Association Council of 4 June 1997 establishing the list of Community instruments relating to the removal of technical barriers to trade and the conditions and arrangements governing their implementation by Turkey (97/438/EC). These provisions, according to the complainant, commit Turkey to introduce into its internal legal order a system of data protection/data exclusivity in line with the one envisaged in Council Directive 2001/83 on the Community Code Relating to Medicinal Products for Human Use and related Member State legislation.7.5.2. The Turkish authorities’ positionThe Turkish authorities in their replies on whether sensitive data submitted to the Ministry of Health for marketing approval are secured against disclosure, cite a number of provisions that allegedly safeguard confidentiality. According to the Turkish authorities, protection/ confidentiality/non-disclosure of confidential data is provided under the Turkish Commercial Code through the unfair competition provisions, the Civil Servants Act on the responsibility of civil servants not to divulge business secret information, the Patent Decree Law no: 551 (exhibit n°27) relating to protection of confidential information in the context of patent applications and, finally, the Licensing Regulation against disclosure of confidential submitted information.Also and regarding claims of unsatisfactory “physical” security of confidential data, the Turkish authorities reject these allegations arguing – without evidence being- 36 - submitted however - that cases related to such allegations brought before Turkish courts have been concluded in favour of the Ministry of Health, thus confirming the effective protection of commercially sensitive data.As far as data exclusivity is concerned, the Turkish authorities claim essentially two things. First, that TRIPS Article 39.3 does not sanction the right of data exclusivity, namely a proprietary right amounting to the exclusive right of the originator of pharmaceutical products to rely on the confidential data submitted as understood in the EC law, and second that Turkey has realised its commitments under Decision 1/95 as above regarding intellectual property rights and data protection. At the same time though, both in their written replies as well as orally during the investigation visit, the Turkish authorities have explicitly confirmed that Article 9 of the Licensing Regulation (Abridged Applications) does not provide for data exclusivity contrary to the EC and Member States legislation, while openly admitting that Turkey has not yet adopted Directive 2001/83/EC despite its commitments.At this point, it should be stressed that Turkey has already acknowledged in a TRIPS Council debate on compliance with TRIPS in 2001 that “Data exclusivity and marketing exclusivity are not covered by Turkish legislation, as it is the case in the EU and the US. Only patented product is protected by the Patent Law until the due date of the patent expires.”7.5.3. Generics producers’ positionIn the same spirit, IEIS and TISD in their written replies as well as during the investigation visit, confirmed a number of points, namely- that as a rule the registration of a new medicinal product in Turkey requires the submission of data including pharmacological, toxicological and clinical trade data; - that the Abridged Applications procedure under Article 9 of the Licensing Regulation applies exclusively to the generic products; that Article 9 of the Licensing Regulation (Abridged Applications) does not require the submission of- 37 - pharmacological, toxicological and clinical trial tests contrary to the case of original products; - that generics producers do not have to repeat all the tests previously conducted whose results have been submitted to the authorities; - that the so-called Abridged Applications procedure is only available after the reference original product is approved according to the Licensing Regulation for Pharmaceutical Products and before an original product obtains its marketing approval, the generic products cannot obtain a marketing approval; - that generics producers need only to submit general pharmaceutical, biological information plus relevant bioequivalence test results; - that Article 9 (Abridged Applications) of the Licensing Regulation has no difference to Article 10 of Directive 2001/83/EC except for paragraph 1(a)(iii) regarding data exclusivity; - that Article 39.3 of TRIPS does not create “exclusive rights” of any kind, as is the case with the EU and US data exclusivity laws; - that consequently Article 39.3 cannot prevent a regulatory authority from using/relying on or referring to the data of a registered product in order to assess and register other “similar” products so long as this information is not disclosed to the third party e.g. a generic manufacturer; - that today in Turkey the generics producers can apply for marketing authorisation, as long as there is no patent protection for that product; - and, that the confidentiality/non-disclosure principle of confidential data is safeguarded by relevant provisions in the Turkish Commercial Code (exhibit n°28), the Patent Decree Law, the Civil Servants Act (exhibit n°29) and the Licensing Regulation, as described above.- 38 - 7.5.4. Legal analysisThe Commission will first analyse the issue under the WTO rules and further under the EC-Turkey Customs Union Agreement:7.5.4.1. Obligations under WTO rulesBy virtue of Article 65, paragraphs 1 and 2 of the TRIPS Agreement, Turkey has committed to apply fully the provisions of Article 39 of the TRIPS Agreement as of 1st January 2000.Article 39.3 of the TRIPS Agreement provides that:“ Members, when requiring, as a condition of approving the marketing of pharmaceutical or of agricultural chemical products which utilise new chemical entities, the submission of undisclosed test or other data, the organisation of which involves a considerable effort, shall protect such data against unfair commercial use. In addition, Members shall protect such data against disclosure, except where necessary to protect the public, or unless steps are taken to ensure that the data are protected against unfair commercial use.”On the basis of the wording of this Article, it is clear that the TRIPS obligation in respect of data protection has two aspects. These are confidentiality of data and unfair commercial use of data. In other words, Article 39.3 requires WTO members to protect data against unfair commercial use and to protect data against disclosure, unless it is necessary to protect the public or unless steps are taken to protect against unfair commercial use.With respect to protection against non-disclosure (the confidentiality obligation), the interpretation to be given clearly implies that the undisclosed data generated by the originator may not be disclosed to anyone other than those few officials who need to use it for marketing authorisation purposes of the particular innovative/original products concerned. Under the confidentiality principle, it is self-evident that the undisclosed data cannot be disclosed to and eventually used by generics manufacturers in order to enable them to produce by reference their own data.- 39 - Further, the principle of confidentiality implies that there must be efforts taken to safeguard the data against impermissible disclosure, thus leading to a satisfactory, effective and reliable overall protection system.Regarding the confidentiality principle as interpreted above, the evidence provided by the complainant is still insufficient at this stage to reach a firm conclusion.As regards the second principle, namely that of protection against unfair commercial use, the main question of interpretation is what is meant by ‘unfair commercial use’. Also relevant is the question whether Article 39.3 obliges WTO Members to prevent their regulatory authorities from using and relying on the data of a registered original/reference product in examining similar products from generic manufacturers during a certain period of time. Clearly, the concept of ‘unfair commercial use’ is different from the concept of “unfair competition”, as used in Article 39.1 with a reference to Article 10bis of the Paris Convention on the Protection of Industrial Property, and which relates to behaviour among competitors. Protecting data against “unfair commercial use” is also different from protecting them from disclosure, since the latter is a separate and distinct obligation under Article 39.3.Based on the logic and the negotiating history of this provision, ‘unfair commercial use’ should cover all practices and uses that give a competitor a ‘springboard’ to shortcut test and /or other development and research efforts undertaken by others.It should be stressed that protection of data against ‘unfair commercial use’ is a governmental function. It falls, therefore, upon WTO Members’ regulatory authorities to act in a manner that effectively protects submitted undisclosed data from the risk of ‘unfair commercial use’. In the light of these considerations and despite certain divergence of opinion, the text, context and purpose of Article 39.3 of TRIPS suggest that in order to guarantee that no “unfair commercial use” within the meaning of Article 39.3 shall be made, regulatory authorities should not rely on these data for a reasonable period of time. In other words, providing data exclusivity- 40 - for a certain period of time is the envisaged way to protect data against unfair use as prescribed by Article 39.3.The rationale behind this interpretation is illustrated in the following scenario, which would occur – and usually does – in the absence of data protection.. This also explains the risk of ‘unfair commercial use’ through reliance on data submitted by originators. As a result of original research, an innovative producer develops a new drug, including undertaking the testing and clinical trials necessary to establish its safety and efficiency. At the end of this process, which can take years and involve very substantial expense, the innovator applies for marketing approval. As soon as approval is granted (without data protection), a generic producer could apply for approval of a generic copy of the innovator’s drug, doing nothing more than showing that the generic copy is bioequivalent to that drug. This could not be possible but through reliance on the originators’ data by the regulatory authority in charge of granting marketing approval in the country concerned. A generic producer could thus avoid the effort and expense of testing and running the clinical trials on a drug and still enter the market almost immediately after the innovator.Moreover, the generic producer could enter the market at a lower price, having borne only a fraction of the innovator’s costs. That this would represent an unfair commercial advantage is difficult to debate. In other words, generic drug manufacturers wishing to market copies of a product developed by an innovative company, should not be allowed to gain as a ‘shortcut’ marketing approval on the basis of confidential test data generated at great effort and expense by the innovator.According to all the considerations above, it appears that in order to guarantee that no ‘unfair commercial use’ within the meaning of Article 39.3 shall be made, regulatory authorities when granting marketing approvals, should not rely on originator’s test data for a reasonable period of time. It should be recalled that Article 39.3 of the TRIPS Agreement applies, inter alia, to pharmaceutical products which utilise new chemical entities. According to academic- 41 - literature8 when a chemical entity is new in the WTO Member concerned, in the sense that it has not been previously submitted for regulatory approval of the type considered under this article, then, prima facie, it should be considered new, and, consequently, the data related thereto would be eligible to be protected.Based on the information provided by the complainant, it should be mentioned that the EC pharmaceutical products claiming data protection contain new chemical entities since they have been registered for the first time in Turkey. Therefore they are entitled to data protection according to Article 39.3 of the TRIPS Agreement.7.5.4.2. Obligations under the EC-Turkey Customs Union AgreementIn addition to WTO rules on data protection, Turkey is also bound by the corresponding provisions under the EC-Turkey Customs Union Agreement. It should be recalled that Decision 1/95 of the EC-Turkey Association Council provides in Article 31, paragraph 2, that “the parties recognise that the Customs Union can function properly only if equivalent levels of effective protection of intellectual property rights are provided in both constituent parts of the Customs Union. Accordingly, they undertake to meet the obligations set out in Annex 8”.Annex 8 in its turn specifically refers to the TRIPS Agreement by providing in Article 1 that “as regards to the scope, level of protection and the enforcement of intellectual, industrial and commercial property rights between the two parties, the provisions of the TRIPS Agreement will apply after its entry into force for both Parties to the extent to which there are no rules laid down in this decision”.Further, Article 2 of Annex 8 of Decision 1/95 provides that Turkey shall “improve the effective protection of intellectual, industrial and commercial property rights in order to secure a level of protection equivalent to that existing in the European Communities and shall take appropriate measures to ensure that these rights are respected”. In line with this objective, Article 7 of Annex 8 expressly defines that obligation on Turkey to “adopt domestic legislation in the following areas, in order to reach alignment with legislation in the EC:8 See Daniel Gervais, The TRIPS Agreement, Drafting History and Analysis, 1997, p 187- 42 - - In the industrial property area- Protection of know-how information and trade secrets legislation in line with Member States’ legislation…”Turkey’s commitments on data protection are finally confirmed by the fact that the EC-Turkey Association Council Decision 2/1997 of 4th June 1997 establishing the list of Community instruments relating to the removal of technical barriers to trade and the conditions and arrangements governing their implementation by Turkey (97/438/EC), explicitly refers in Annex 2, Section XIII on medicinal products, to Council Directive 1965/65/EEC of 26th January 1965 (exhibit n°30) as amended inter alia by Council Directive 87/21/EEC of 22nd December 1986 (exhibit n°31) – later replaced by a codified text, the 2001/83 EC directive – which effectively introduced the rule of data exclusivity for a set period of time from 6 to 10 years from the first marketing of the original/reference product (Article 4 (2) of Council Directive 1965/65/EEC).It should also be noted at this point that by virtue of Articles 8 and 31 of Decision 1/95 in conjunction with Annex 8 thereof and Annex 2, Section XIII of Decision 2/97 of the EC-Turkey Association Council, Turkey should have introduced legislation on data exclusivity in conformity with the EC acquis at least by 1st January 2001. This is a strict requirement necessary for the effective functioning of the EC-Turkey Customs Union.7.5.4.3. FindingsDespite its clear, unequivocal obligations under the TRIPS Agreement and the EC – Turkey Customs Union Agreement, Turkey has not adopted any legal provision in its national legislation to implement the relevant commitments with respect to data protection/data exclusivity undertaken with these agreements.As indicated above, both the Turkish authorities as well as the associations of generic producers (IEIS and TISD) have explicitly confirmed that Article 9 of the Licensing Regulations does not provide for data exclusivity as envisaged under the- 43 - TRIPS Agreement and the EC and Member States relevant legislation on data protection. In fact, Article 9 of the Licensing Regulation (Abridged Applications) is completely non-compliant and contradictory to TRIPS Article 39.3 requirements and the EC – Turkey Customs Union Agreement commitments undertaken by Turkey. This Article/ allows the Ministry of Health to rely on or refer to the data of the prior registered product in order to demonstrate that the generic product is equivalent to the originator’s product in terms of safety and efficacy and grant the requested regulatory approval. This objective is served by the possibility for generic products manufacturers of submitting simply bio-equivalence data, thus skipping the most sensitive, costly and highly sophisticated pharmacological, toxicological data and clinical trial data, otherwise required for all original products. Furthermore, the Article does not provide any period of exclusivity. On the basis of this procedure, the Turkish Ministry of Health has approved a considerable number of products in much shorter application processing periods (average 1-year) compared to the corresponding periods for imported or locally produced original products (average period between 2 and 2,5 years). It is, thus, clear that the absence of data protection/data exclusivity as exemplified through Article 9 of the Licensing Regulation, is in violation of both Article 39.3 of the TRIPS Agreement and the Turkish commitments under the Customs Union Agreement.7.5.5. ConclusionIn the light of the above, it is concluded that the lack of protection/data exclusivity as exemplified through Article 9 of the Licensing Regulation, is in clear violation of both Article 39.3 of the TRIPS Agreement and the Turkish commitments under the Customs Union Agreement (Decisions 1/95 and 2/97 of the EC – Turkey Association Council) and related EC legislation. In the light of the above, it also appears that in order for Turkey to fulfil its obligations under both the TRIPS Agreement and the EC-Turkey Customs Union Agreement, is to provide for data exclusivity for reasonable period of time. Regardless of how long a reasonable period of time can be under the terms of Article 39.3 of the TRIPS Agreement, it is clear that Turkey does- 44 - not fulfil its relevant obligations since it does not provide for any data protection at all by allowing generic products to be approved on the basis of the originators’ data without any time limit.8. ADVERSE TRADE EFFECTSEFPIA states that the challenged Turkish practices cause adverse trade effects within the meaning of Article 2(4) of the Trade Barriers Regulation. The alleged adverse trade effects consist mainly of sales and revenue losses due to the discriminatory and opaque operation of pricing and reimbursement systems and of additional costs and losses of competitiveness due to the local production requirements In addition, the lack of data protection causes significant revenues losses for the EU original producers to the benefit of Turkish generics producers.Since the investigation confirmed that pricing issues (pricing calculation basis plus discriminatory margins) have been addressed to a large extent and in a relatively satisfactory manner and that the alleged local production requirements and “Buy Turkish” policies do not apply anymore, the Commission will mainly examine the impact of lack of data protection, and of local content requirements.8.1. Local content requirementsConcerning the examination of the impact of discriminatory practices with regard to the use of locally produced raw materials, it is too early to make an evaluation as a result of the very recent introduction of the measures concerned. In principle, however, such measure is susceptible to have a negative impact on exports to Turkey of raw materials used for the manufacture of pharmaceutical products and, could also distort conditions of competition between domestic and imported pharmaceutical products.8.2. Lack of data protection The complainant alleges that the lack of data protection has caused and causes adverse trade effects to the EU pharmaceutical industry.- 45 - Indeed, in order to establish the safety and efficacy of medicinal products as a condition of their approval and registration, the innovative pharmaceutical industry must generate extensive data through the conduct of pre-clinical and clinical trials. It should be reminded that the cost of researching and developing a new chemical or biological entity was estimated at € 895 million in 2001. The whole process lasts between 9 and 10 years: three years for pre-clinical testing and around 6 to 7 years to conduct the clinical trial phases. All data generated during this process will then be submitted to the regulatory authorities in order to apply for marketing authorisation.Safety and efficacy data submitted as part of a registration file must be temporarily protected against disclosure and unfair commercial use in order for the originator’s industry to recover research and development costs and a reasonable profit.Failure by Turkey to implement data protection means that originator companies suffer from unfair commercial use from generic products that are approved based on the originator data. Since generic products do not have to bear the above mentioned costs and lengthy process, they may be priced at a lower level and gain market share to the detriment of original products.There are three independent studies conducted to assess the likely costs of the introduction of data exclusivity in Turkey. - Mac Kinsey & Company “Effects of data Exclusivity in the Turkish pharmaceutical market” April 2003 (exhibit n°32) (based on 2001 IMS data);- Independent scientific Board in Ankara (Professor Dr; T. H Cayli, H. Celik, Prof. Dr. M.Tokat, Assoc.Prof Dr. T. Unalan) “Data protection in pharmaceuticals in Turkey and its cost implications” July 2003 (exhibit n°33) (based on 2001 IMS data);- 46 - The Monitor group, developing a common understanding of the “impact of data exclusivity on pharmaceutical industry and Health Care economics in Turkey” June 2003 (exhibit n°34) (based on 2002 IMSD data).The main findings of these studies are summarised in the following table (based on a 6 year data exclusivity implementation:In Million USD per year Mac Kinsey & Scientific Board Monitor Group CompanyAdditional cost to the 14 20 27 sate social security institutionsSales losses by copy 115 117 104 producersSales gains by innovative 135 135 128 producersThe estimated losses of originator companies are comprised between 128 and 135 million USD a year according to the different studies. As regards sales losses and gains for generic and innovative producers, it is worth noting that the accuracy of the above mentioned figures is supported by the fact that findings in value are very similar in all studies.The above mentioned figures reflect the actual business losses for innovative producers in 2001 as regards the first two studies and 2002 for the third one. In consequence, the losses or gains stems are calculated based on the existing copies available in 2001 and 2002 and the number of molecules that would have actually benefited from data protection if available.The actual business losses for EU companies could be calculated by applying the relative value of imports compared to revenues and by taking into account the proportion of imports from the EU. Assuming that imports as % of revenues are- 47 - comprised between 36 and 56% and that imports from the EU account for 64 to 100%, the negative impact for EU companies is estimated between 44 and 50 million USD9 (exhibit n°34).However, the complainant has also calculated that potential annual losses for European business could reach € 100 to 110 million Euros if we take into account the present generic products registered before the 6 years period plus all pending registrations8.3. ConclusionThe Community industry is suffering adverse trade effects caused by the lack of data protection. The economic impact is substantial and amounts to USD 44 to 50 million per year although the potential impact based on all pending registrations of generics products may be much more significant and reach up to USD 110 million per year according to the complainant. The fact that EU exports of pharmaceutical products to Turkey have been increasing does not detract from this conclusion. Indeed, adverse trade effects due to lack of data exclusivity are basically reflected in revenue losses (as well as potentially a reluctance to market innovative products in Turkey).As regards local content requirements, no actual data is available due to their recent introduction. However, it appears that such measures are susceptible to provoke adverse trade effects on imported pharmaceutical products.This has an impact on the Community in terms of production, utilisation of capacity, investments as well as on profit and employment. Turkey represents a significant amount of trade with EU10, the EU being the main importer of pharmaceutical products in Turkey with a market share of 67% in 2002. 9 Base year for calculations 2001 and sales loss by multinational innovative producers estimated at 135 million USD. 10 Turkey has imported € 1,160 million worth of pharmaceutical products in 2002- 48 - Therefore, the Commission services consider that the challenged Turkish practices cause adverse trade effects within the meaning of Article 2(4) of the Trade Barriers Regulation9. COMMUNITY INTERESTThere is an undeniable Community interest in further dealing with the alleged Turkish trade barriers for a number of reasons. First, the Community has an interest in ensuring a proper implementation of the EC - Turkey Customs Union Agreement, which establishes a particularly close relationship between the EU and Turkey. Many of the issues raised in this TBR complaint have already been the subject of numerous discussions within the framework of the EC - Turkey Customs Union Joint Committee, the EC - Turkey Association Committee and the EC - Turkey Association Council, although no solution could be found. Indeed, there can be no doubt that Turkey is in breach of its obligations under the Customs Union Agreement. It should be noted that, in these circumstances, in accordance with Article 58 of the Council Decision n°1/95 of the EC-Turkey Association Council, protection measures may be adopted if necessary. Second, the EU also has a clear systemic interest in maintaining the observance and implementation of international trade laws among its trading partners, especially among those WTO Members, such as Turkey, which represent significant amounts of trade with EU producers.Finally, these interests are fully justified as the adverse trade effects seem to have a considerable impact in terms of revenue losses for the European pharmaceuticals companies. The economic consequences of this impact for the EU include the loss of employment as a direct result of the loss of export sales of pharmaceutical products and the more general loss of competitiveness of the EU industry as a producer of pharmaceutical products for export. 10. CONCLUSIONIn the light of the above analysis, the following conclusions may be drawn:- 49 -  As a result of the introduction of a new pricing regime by the Turkish authorities on pharmaceutical products, the pricing-related claims raised by the complainant have become moot and should be analysed no further; Since they no longer apply, the discriminatory margins at wholesaler and retailer level have become moot and should be analysed no further; However, the preferential pricing treatment afforded to pharmaceutical products incorporating raw materials of national origin under the terms of Articles 1 and 2 of the Decision No. 2004/7124 of 14 April 2004 about amending the Decision Relating to the Pricing of Human Medical Products is in violation of Article III:4 of GATT 1994 and Article 2.1 of TRIMS. Finally, this preferential treatment as above is in breach of Article 5 of the EC-Turkey Customs Union Agreement as per Decision N°1/95 of the EC-Turkey Association Council on implementing the final phase of the Customs Union; In the light of all the information gathered, it may be concluded that the evidence concerning the conditions of physical security/storage of confidential data as required by Article 39.3 of the TRIPS Agreement (protection against disclosure) is not sufficient to reach a firm conclusion at this stage. However, the Commission will continue monitoring this issue and reserves its right to reassess its position in the light of further evidence and request the Turkish authorities to take all necessary measures to ensure full respect of its obligations under Article 39.3 of the TRIPS Agreement; Finally, it may be concluded that the lack of data exclusivity as exemplified in Article 9 of the Turkish Licensing Regulation for pharmaceutical products (Abridged Applications) and followed practices, is in breach of both Articles 39.3 of the TRIPS Agreement and the explicit Turkish commitments under the EC – Turkey Customs Union Agreement (Decisions 1/95 and 2/97 of the EC – Turkey Association Council) and related EC legislation. In light of the findings as above, it is finally concluded that there is no need to deal with the complainant’s claim under Article XXIII.01(b) of the GATT 1994 (non-violation complaint). - 50 - LIST OF EXHIBITSExhibit 1 EFPIA non-confidential complaintExhibit 2 Notice of Initiation of an examination procedure (OJ C n°311/31) dated 20/12/2003Exhibit 3 Council Directive 89/105/EEC of 21 December 1988Exhibit 4 Directive 2001/83/EC of the European Parliament and of the Council of 6 November 2001Exhibit 5 Directive 2004/27/ECExhibit 6 Decree Law No. 181 on the Organisation and Duties of the Ministry of Health (Official Gazette No. 18251, 14.12.1983) Exhibit 7 Basic Law on Health care Services (Law No: 3359 Official Gazette 14.05.1987)Exhibit 8 Regulation on setting the duties of Scientific Advisory Board and Commissions for Medicinal Products for Human Use (Official Gazette no: 25254, 9.10.2003)Exhibit 9 Licensing Regulation for Pharmaceuticals (Official Gazette No: 22218, 2.03.1995)Exhibit 10 Ministry of Health Notice (No: 49221) to the Pharmaceutical Industry Manufacturers Association, 3 December 2003Exhibit 11 Law on Medicinal Products for Human Use (Law No: 1262, Official Gazette No: 898, 26.05.1928) Exhibit 12 Price Decree 84/8845 (Decision Regarding the Prices of Pharmaceutical and Medicinal Products, Galenic Preparations and Vials Produced in Turkey, Council of Ministers Decision No. 84/8845)Exhibit 13 Turkish Ministry of Health Decision 3070 of 25/6/2001 Exhibit 14 Ministry of Health Communication letter to the Pharmaceuticals Industry Manufacturers Association, dated 2 August 2002 Exhibit 15 Ministry of Health Communication letter to the Pharmaceutical Manufacturers Association, dated 11 July 2002 Exhibit 16 Decree No. 2004/6781 on the Pricing of Medicinal Products for Human Use on 6 February dated 5th April 2004 and published in the Official Gazette of 14th April Exhibit 17 Decision Amending the Decree Relating to the Pricing of Human Medical Products n° 2004/7124 - 51 - Exhibit 18 Explanatory Notifications Regarding the Pricing of Medicinal Products for Human Use of 3rd March 2004 N° 25391Exhibit 19 Explanatory Notifications Regarding the Pricing of Medicinal Products for Human Use of 22nd April 2004 N° 25441Exhibit 20 Decision 1/95 of the EC – Turkey Association CouncilExhibit 21 Decision 2/97 of the EC – Turkey Association CouncilExhibit 22 Decision 1932 incorporated in a letter of 26 April 2001 issued by the Directorate General of Pharmaceuticals and Pharmacies of the Ministry of HealthExhibit 23 Decision 2002/4331of the Council of Ministers dated 6 February 2002 Exhibit 24 Letters/Decisions to the industry dated July and August 2002, effectively confirming the earlier (26 April 2001) margins (also found in Exhibits 16 and 17)Exhibit 25 Ministry of Labour and Social Security letter dated 6 September 2001 and numbered 53485 Exhibit 26 Ministry of Labour and Social Security letter dated 12.03.2002 and numbered 28840Exhibit 27 Patent Decree Law no: 551Exhibit 28 Turkish Commercial CodeExhibit 29 Civil Servants ActExhibit 30 Directive 1965/65Exhibit 31 Directive 1987/21Exhibit 32 Mac Kinsey & Company “Effects of data Exclusivity in the Turkish pharmaceutical market” April 2003 (BCI)Exhibit 33 Independent scientific Board in Ankara (Professor Dr; T. H Cayli, H. Celik, Prof. Dr. M.Tokat, Assoc.Prof Dr. T. Unalan) “Data protection in pharmaceuticals in Turkey and its cost implications”, July 2003 (BCI)Exhibit 34 Monitor group:” Impact of data exclusivity on pharmaceutical industry and Health Care economics in Turkey”, June 2003 (BCI)BCI (Business Confidential Information) exhibits are in bold- 52 -

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