Hungary's drug subsidy budget could be HUF 320 billion in 2007, while the actual balance of the budget is estimated at HUF 440 billion, local information portal weborvos.hu has reported. This translates into a HUF 120 bn budget gap and means that local producers will face massive payments into the budget, which will considerably dent their profits.
Uncertainty is high about the recently proposed healthcare measures, according to which drug makers should contribute to the gap of the Hungarian drug subsidy budget.
According to a bill submitted to Parliament last Friday, Hungarian drug makers will be levied a tax of 14% (of the full-year amount of the subsidy on producer prices on drugs which carry a fixed subsidy) and 16% on drugs, which carry a non-fixed subsidy.
On top of this, Egis may lose another 6-14% and Richter another 2-5% of their profits next year, depending on other related measures, according to portfolio.hu's calculations. It is likely that the profit losses will actually be closer to the bottom of the ranges given.
The calculations below are solely based on the newly available information.
We must also note that the portal's information about the HUF 320 bn (gross HUF 440 bn) drug subsidy budget has not been confirmed by either the Finance Ministry or the Health Ministry and the former promised to give us an exact data for next week.
The National Health Insurance Fund (OEP) and the producers will jointly pay for an overshoot of the drug fund budget up to 9%, while any excess budget overspending above 9% will be solely covered by drug makers.
Based on available information by the Health Ministry and weborvos.hu, the 2007 profit of Egis will be reduced by 6-14% yr/yr and the profit of Richter will go down 2-5%, compared to analysts' current consensus forecast.
See table below for profit losses at different gross payments into the drug subsidy budget.
If we add further impacts to these, we will find that Egis will pay 22-31% and Richter 9-12% of their 2007 profits into the drug subsidy budget (according to our current - mid-September - consensus).
Financing of OEP deficit
According to the bill that was brought to light last Friday, the financing of the drug budget's deficit in 2007, based on gross spending, i.e. without producers' payments, will be as follows:
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