Economy 17 September 2013, 11:12am

Hungary not to curb drug subsidy spending next year - paper

Portfolio

The main figures of Hungary’s 2014 draft budget show that health care spending could be HUF 40-50 billion higher next year than in 2013, which is behind requests for an increase of HUF 120-150 bn, local daily Népszabadság reported on Tuesday. It seems, however, that gross drug subsidy expenditures will not be changed next year.

The paper said drug spending will be upped by HUF 40-50 bn next year, whereas legislators responsible for the sector had talked about the necessity to increase spending by HUF 120-150 bn.

That is how much more the government would have needed for the consolidation and operation of hospitals. With a single month’s worth of funding it could be avoided that hospitals accumulated large debts year after year, the paper added.

It also reminded that health care expenditures were cut by HUF 80 bn in 2012 compared to 2011, and that wage hike for health care workers was carried out at the expense of funds for patient care. The 2014 budget figures also reveal that GPs will not receive higher remuneration even next year.

Healing and prevention expenditures are planned at over HUF 900 bn. Drug subsidies are to remain largely flat compared to 2013 at around HUF 290 bn, which is good news for the pharma sector, the paper noted.

At first glimpse it is indeed good news that the cabinet does not plan to curtail drug subsidy spending in gross terms, but at this juncture we do not know the composition of gross spending items. This means we have no information on how large ratio of drug subsidy expenditures the producers will have to cover. Until told otherwise we have to assume that the cabinet does not plan to implement changes in this area, either, i.e. the burdens of the manufacturers will not increase.

This was not unexpected, given that in the Széll Kálmán Plan - a package of structural reform measures - the government originally planned a major cut for 2013, but then in Nov12 the target was raised substantially, by even more than intended (by HUF 60 bn). Recent developments too, such as a strategic co-operation agreement with Richter, indicated that positive changes had occurred in the regulatory environment for the pharma sector.

The expectation of no cut to drug subsidy expenditures if favourable for both Richter and Egis since a reduction would have most likely affected them negatively (at least this is a fair assumption in retrospect). The blind bidding system, however, remains in effect and that will continue to exert pressure on the producers. Richter and Egis will need to cut their prices further come October.