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30% cut in Hungary's drug spending next month?

World News | January 19, 2011


Lynne Taylor

30% cut in Hungary's drug spending next month?

Hungary’s  programme of economic reform, to be announced next month, could include cuts totalling around 30% to the national drug reimbursement bill, the government has said.

Gyorgy Matolcsy, the minister for national economy in the government established by the centre-right Fidesz party last April, has said that savings of as much as $490 million (around 30%) are possible to spending on drugs by the national health insurance fund (OEP), whose drugs bill was over $1.7 billion in 2010, 5% more than planned for the year.

Drug reimbursement is estimated to account for only 20% of total health care spending in Hungary but use of pharmaceuticals is boosted by the population’s tendency to over-medicate, say local reports.

While the details of the cost-saving measures will not be revealed until February, experts suggest that they could take the form of lower reimbursement for certain drugs – although this could create access problems and create additional financial pressures for the primary care and hospital sectors – or further moves to encourage the use of generics, whose market share is low, accounting for only 46% of off-patent drug sales in Hungary in 2009. The government announced last month that it would be introducing new incentives for physicians and pharmacists to increase generic prescribing and dispensing.

Another possibility, observers believe, would be a further increase in the financial burdens imposed on drugmakers, which already contribute to the OEP to cover overspending, for example through taxes on the sales of reimbursed medicines and charges for registering their representatives.

Hungary’s public health research institute, the GKI-EKI, warns that any further burdens on the industry would simply lead to unprecedented numbers of drugmakers exiting the country.

Hungary’s domestic pharmaceutical industry concentrates on generics, but the country’s Association of Innovative Pharmaceutical Manufacturers (AIPM) also includes 25 research-based firms, including AstraZeneca, Bayer and Merck, while members of the Confederation of Hungarian Employers and Industrialists (MGYOSZ) include GlaxoSmithKline, Pfizer and sanofi-aventis, notes a recent report from Espicom.

The country also has the strongest biotechnology sector in central and eastern Europe, which has developed rapidly in recent years due to support from the government, academic excellence and a traditionally strong R&D base, adds Espicom.

Analysts at IHS Global Insight point out that “a fairly significant number” of innovative drugs are reimbursed in Hungary, and the possibility that reimbursement of these could be either reduced or cut completely would represent “a very negative prospect” for pharmaceutical companies operating in the country.

“Already facing numerous restrictions on their activities in this market, any extra new levy or other additional fiscal burden would most certainly be greeted with consternation by pharma companies. Additionally, there is already a perception in Hungary that too much of the cost of reimbursed medicines is covered from out-of- pocket payments, and so a potential increase in these would certainly raise a scandal among many in Hungary,” says IHS Global Insight.

• A recent report from Business Monitor International (BMI) forecast that, during 2009-2014, Hungary’s pharmaceutical market will show a compound annual growth rate (CAGR) of 3.27% in local currency terms and 3.83% in US dollars, while CAGRs for total drug expenditures will be 4.59% and 4.86% in forint and US $ terms, respectively.

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