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Richter, Egis say new Hungarian drug funding law to cut profits

Richter Gedeon Nyrt and Egis Nyrt executives said today they'll make cuts to their Hungarian operations after the government introduced laws that reduced their profitability

Richter will cut capital spending by Ft 10 billion ($50 million) and eliminate some of its less profitable medicines, CEO Erik Bogsch said today at a press conference. Egis CEO Ágnes Gál said her company will sell about 70 fewer products, including different doses of the same drug, which generate sales of about Ft 1.5 billion a year. „We have to decide what kind of portfolio we're going to have on the market,” Gál said at the press conference. „The government's goal is for the patient to buy the cheapest drug, nothing else. They don't pay any regard to quality or innovation.” The drugmakers are protesting a change that forces them to pay a 12% rebate to the government for buying their medicines and Ft 5 million for each new addition to their sales staff.

The companies will also have to plug the deficit if the state health insurer exceeds its budget. Hungary passed the legislation, known as the „drug thrift” law, last year as part of a larger effort to tame the widest budget deficit in the European Union. The EU won't allow Hungary to adopt the euro until it lowers the deficit, which ballooned to an estimated 10% of GDP. The new rules may take a Ft 20 billion bite out of drugmakers' annual profit in Hungary, causing them to cut research spending, Richter's Bogsch said. Members of Hungary's biggest pharmaceutical industry group, MaGyOSz, invested an estimated Ft 73 billion in Hungary last year, almost half of which went toward research and development, he said. (Bloomberg)