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Hungary's top pharmaceutical companies feel austerity pinch

Two major Hungarian pharmaceutical manufacturers on Tuesday reported a significant loss in profits as a strong forint, the effects of a government austerity package and a drop in sales in Russia all hit home.

The top firm, Richter Gedeon Nyrt, reported Ft 7.19 billion ($39.73 million) net profit for the Q1, 48.8% down on the previous year. Egis Nyrt posted a six-month net profit of ft 2.82 billion ($15.6 million), 70% less than in the same period last year. Both companies were hit by austerity measures brought in by the government aimed at targeting the nation's huge budget deficit, which at 9.2% in 2006 was the largest in the EU. Pharmaceutical companies now have to pay 12% of the subsidies that the healthcare fund provides for their drugs, pay a hefty fee to register every medical representative and proportionally compensate any annual deficit in the healthcare fund. Domestic sales also dropped due to the austerity measures. The strong forint to the dollar also hit sales, Richter said in its report, as did a decline in sales in Russia. (