Hungary's OEP Drug Spending in 2007 Under Control at Pharmaceutical Sector's Expense

P&R Reforms Keep Drug Spending Under Control

Hungary's National Health Insurance Fund (OEP) has reported that its drug expenditure totalled 323 billion forint (US$1.7 billion) in 2007 and was in line with the budget set for the year, reports Pharma Marketletter. Pharmaceutical companies contributed 9.6% or 31 billion forint to the OEP in 2007. Drug makers are also yet to pay a 12% tax on sales of reimbursed products from 2007 and a 5 million forint registration fee for every medical representative in 2008. On 15 January 2007, several reforms designed to rein in pharmaceutical spending growth came into effect. They included: a new 12% tax on sales of reimbursable drugs (shared between the pharma companies and distributors); a requirement for pharma companies to cover the entire reimbursable drugs budget overspend if the budget is exceeded by 10% or more; a hefty 5 million forint (US$25,000) registration fee for each pharmaceutical salesperson; changes to drug subsidy levels for the different reimbursement groups; and a new tiered pricing structure for generics(see Hungary: 31 January 2007: For Whom the Bell Tolls: Hungary Embarks on Drastic Health System Reforms).

OEP's pharmaceutical spending adhered to its target budget in 2007 at the expense of the pharmaceutical sector. Reduced levels of reimbursement by OEP also meant higher patient contributions, as patients paid 13.85% more year-on-year (y/y) for drugs in 2007.

In the first three quarters of 2007 the fund reduced drug subsidy spending by 11% to 243 billion forint, down from 286.8 billion forint in the same period of 2006 (see Hungary: 11 October 2007: Hungary's National Healthcare Fund Cuts Drug Subsidies by US$246.6 mil. During January-September).

Continuing drug price cuts have made operating conditions for pharmaceutical companies very difficult (see Hungary: 4 October 2007: Operational Conditions Worsen as Hungarian Drug-Price Cuts Continue in October). In 2007, the average price reduction was 23% for 960 drugs affected by reference pricing, with some of the bestselling drugs on the market hit hardest. Since it lost patent protection in Hungary in June 2007, the share of Merck & Co's (U.S.) hypertension drug Cozaar/Hyzaar (losartan) has dropped to a mere 3% of the market.

According to Mark Molnar, head of the Pharmaceutical Department at the OEP, savings made by the insurance fund have allowed the listing of 30 new active ingredients and combination products, including vaccines and cardiovascular, osteoporosis, asthma and cancer drugs, notes the source. The majority of new listings are cheaper generic medicines with an estimated value of 8 billion forint. The draft budget for 2008 has been set at 300.3 billion forint.

Outlook and Implications

The P&R reforms that have taken place in Hungary since the beginning of 2007 have hit the pharmaceutical sector hard, forcing domestic drug-makers to halve their investments in the country and focus on exports (see Hungary: 18 September 2007: Richter Gedeon to Make Further Cuts in Domestic Investments). The reforms are here to stay and toughening competition in the market in 2008 is to be expected. Innovative drugs that lose patent protection will be the hardest hit.