Hungarian Health Minister Mr Lajos Molnár has announced some new elements of the planned changes in the financing of the drug subsidy budget. Press reports that Health Ministry also plans to extend tax the existing subsidy payback system to drug wholesalers. Moreover, the Ministry also plans to introduce a registration fee for sales representatives (doctor visitors) to reduce the number of doctor visits, which they see could reduce the use of expensive original drugs.
Our view: It seems that the government plans preserve the principles of the financing, namely setting subsidy targets and claiming back money from pharmas, if they exceed them.
The plan that generics will be differentiated from original drugmakers, with a potentially lower payment obligation is, however, a new item, and is slightly positive implication on listed pharmas. Involving the wholesalers to the payback system, however, is a completely new element and negative for both Richter and Egis, having significant stakes in the drug wholesale business in Hungary. Since profit contribution of drug wholesale business is some double at Egis when compared to Richter, the smaller Hungarian pharma could be affected more. The planned registration fee of HUF 5m per representative could mean a one-off cost of HUF 700-800m for both pharmas. Given Egis lower profits, this measure would hurt it's profitability more than that of Richter.