Hungarian drugmakers ask court to strike down new subsidy law

The so-called „drug thrift” law violates Hungary's constitution because it forces drugmakers to pay for overspending by the state-monopoly health insurer, the group, Magyosz, said in a statement released yesterday. The law also forces pharmaceutical companies to pay the insurer a 12% rebate on state subsides. Hungary's government passed the law to rein in spending on medicines, which ballooned to Ft 348.9 billion (€1.3 billion) last year, more than double the amount in 2000.

Gedeon Richter Nyrt, Hungary's biggest drugmaker, estimated the law, along with other new taxes and subsidy cuts, may lower 2007 profit by at least Ft 7 billion. „The system doesn't make any sense,” said Robert Wessman, CEO of Icelandic drugmaker Actavis Group hf, whose Hungarian unit, Keri Pharma Kft, is a member of Magyosz. „I'm not sure this is something they can legally support.” Hungarian President László Sólyom last month declined Magyosz's request to refer the drug thrift law to the Constitutional Court for review. The drugmakers might refer the law to European Union competition authorities, Wessman said. Actavis, which expects as much as €23 million ($30.3 million) in revenue from Hungary this year, could see its Hungarian profit drop by as much as 50% because of the new regulations, he said.

According to Wessman's reading of the law, the state will assess the amount each drugmaker has to pay based upon the company's sales growth, not its absolute revenue. Generic-drug companies such as Actavis tend to have higher growth rates than those that sell expensive brand-name drugs, he said. „It discriminates between branded and generic companies,” Wessman said in a December 7 interview. Hungarian Health Ministry Press Officer Dóra Kádár said the government has not yet decided how it will assess each company's contribution toward paying down the state's drug deficit. (Bloomberg)