At the heart of the problem are the new EU rules on data exclusivity, which refers to the intellectual property on the clinical and preclinical data aimed at proving that a new compound is safe and effective.
At present, there is a block on the approval of generic versions of drugs that have been registered for less than six years in the EU. However, under the new framework for pharmaceuticals, adopted by the European Parliament last month, this period will be extended to 10 years.
Imre Czinege, a member of the Hungarian parliament's health care committee, told the Budapest Business Journal that the change would raise healthcare costs in Hungary - which makes extensive use of generic drugs - by an annual HUF 15 billion (€60m). And HUF 12 billion of this would be laid at the door of the country's National Health Care Fund (OEP), which is already under considerable budgetary constraints.
Hungary is currently striving to contain a swelling drugs budget, which has been capped at HUF 239 billion this year but looks set to overshoot this figure by at least HUF 40 billion. It has already implemented a plan to cut drug price subsidies by 15 per cent - prompting threats from at least one drugmaker (GlaxoSmithKline) to pull out of the country.
The change would hurt local producers by limiting the number of products they can copy, said Czinege, forcing doctors either to prescribe more expensive products from multinationals or substitute for another medication which may not offer the same safety and efficacy. Moreover, the long period of protection would also take away incentives for innovative producers to create new molecules, it is alleged.
However, the Association of Innovative Pharmaceutical Manufacturers in Hungary (AIPM) argued that the impact of the extension of data protection periods for manufacturers of original products would be considerably less, at around HUF 3 billion a year, as only a handful of low-turnover products would be affected.
Extending the data exclusivity period could create better conditions for innovation, the AIPM added.
The local company that will be affected the most by the developments is Richter Gedeon, a partially state-owned firm that makes branded and generic drugs, as well as active pharmaceutical ingredients (APIs) and intermediates, and accounted for approximately one third of Hungary's entire pharmaceutical production in 2003.
Richter has refused to accept the Hungarian's government's plan, under which it would pay back 15 per cent of the sales of all products on the reimbursement list to the OPE, equating to around HUF 3.0-3.5 billion in 2004.