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Hungary's Austerity Measures Impact Pharma – Drug Budget Planned to be Cut Almost by Half

16 May 2012 Brendan Melck

Hungary's latest austerity plan, dubbed the Széll Kálmán Plan 2.0 - following on from last year's first Széll Kálmán Plan, named after the nineteenth-century finance minister - was revealed towards the end of April. The plan aims to further reduce the country's sizeable budget deficit, and includes a number of measures aimed at reducing pharmaceutical reimbursement spending further - prompting a stark warning from the Hungarian Innovative Pharma Association (IGY) of the likely withdrawal of an increasing number of medicines from the market, in response to the ever tightening regulatory situation.

Hungary's Pharmaceutical reimbursement budget feels the pinch
With savings being sought everywhere and anywhere, the Hungarian government has come up with an extra 10 billion forint (USD45.3 million) cut in the pharma reimbursement budget of the National Health Insurance Fund (OEP) in 2012, to add to the 83 billion forint cut already envisaged in the first Széll Kálmán Plan, and another cut of 40-billion forint to the OEP's budget in 2013…which in turn adds to the cut of around 120 billion forint planned last year.

Thus, when compared with the 2011 pharmaceutical reimbursement budget of the OEP - which reportedly reached 376 billion forint - the government is planning for a halving of the total sum available in 2013 - only 216 billion forint. Initial figures show that the budget cuts are some way behind their targets - but this is to be expected.

The second Széll Kálmán Plan still has to be approved by the European Commission, which is expected to give its decision by the end of May - and if the Commission should decide that the cuts are not sufficient, one-third of Hungary's EU subsidies could be withheld - thus, it is an important test to pass.

A Series of Measures Rather than One Big Cut
No pharmaceutical market could withstand such a massive cut in the reimbursement budget without some severe, negative consequences. Under the first Széll Kálmán Plan, and in the new one, the Hungarian authorities have attempted to achieve the cuts through a series of measures rather than high-profile, across-the-board price cuts.

In 2011, these measures included:

  • An increase in the mandatory levy pharmaceutical companies pay on the sales of reimbursed drugs, from 12 to 20%
  • A doubling of the registration fee for pharmaceutical representatives
  • The introduction of a system of "blind" tenders for drugs reimbursed by the OEP, in October 2011

This year, among other measures, we have seen the introduction of a therapeutic / disease register system, under which drugs' effectiveness is monitored and assessed, as well as the introduction of prescription by international non-proprietary name for cholesterol-lowering drugs (although use of brand names is permitted in certain cases). More measures, including the introduction of electronic prescriptions, are planned for next year.

Pharmacies Under Threat in Hungary
As well as the threats from the IGY of product withdrawals, many pharmacies are facing liquidity problems, as the blind tendering system brings prices down to a level at which profitability is minimal. Already, the drug cost-containment measures associated with the first and second Széll Kálmán plans are making Hungary's Pharma Economic Act of 2007's look mild by comparison.



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