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Hungary Pharmaceuticals and Healthcare Report Q4 2010
Business Monitor International, Aug 2010, Pages: 86
Business Monitor International's Hungary Pharmaceuticals and Healthcare Report provides industry professionals and strategists, corporate analysts, pharmaceutical associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Hungary's pharmaceuticals and healthcare industry.
In BMI’s Emerging Europe Business Environment Ratings (BER) for Q410, Hungary continued to improve and is now ranked fourth (out of the 20 markets surveyed), up from sixth and eighth in the previous two quarters, respectively. Our projections used to calculate scores in this quarter’s matrix are slightly more positive thanks to improved economic and market outlooks. However, a negative regulatory environment and consequent below-par market performance result in a relatively weak outlook for multinationals. Globally, Hungary is ranked 23rd of the 83 markets now included in our pharmaceutical universe.
According to Róbert Kassai, vice-president of UEAPME (the European Association of Craft, Small and Medium-sized Enterprises), Hungary is experiencing difficulties with meeting its research and development (R&D) target set by the European Union (EU). Currently, the country is investing 1% of its gross domestic product (GDP) in R&D activities – the EU's target for the country stands at 3%. The main problems include the presence of narrow markets, the need for financial support from public money and own resources in R&D investments and the fact that financial resources of small and medium enterprises (SMEs) only come with quantitative results. Moreover, the budget-cutting claw-back system creates an environment that discourages competition from new market entrants, who are disadvantaged relative to incumbents. The system also fosters conditions that discourage the entry of products with a high cost-toprice ratio, such as low-priced generic products or higher-priced innovative products.
Nevertheless, the long tradition of pharmaceutical manufacturing and an improving tax conditions for research and development (R&D) will continue to attract interest from foreign players. To this end, in June 2010, Israel-based generic drugmaker Teva was granted a non-repayable amount of HUF1.5bn (US$6.7mn) by the Hungarian government, which will be invested in the expansion of its sterile pharmaceuticals-producing Godollo plant. Initial production is scheduled for launch in Q311, with the plant becoming fully operational by end-2014. Upon completion, Teva’s sterile manufacturing output will be doubled, with products destined for the domestic, European and US markets. Teva also recently launched a new manufacturing plant in Debrecen, Hungary, for the production of tablets, with the site also capable of undertaking R&D activities.
In terms of the wider operating environment, consumer confidence in Hungary continues to gradually improve, according to the latest economic data published by GKI Economic Research. Given our outlook for private consumption to remain weak over the medium term, we caution that the improved figures do not imply a fundamental demand-driven recovery in the short term, but rather that conditions are merely slowly improving. In fact, the economy will almost certainly underperform Emerging Europe over the medium term, which will also have a bearing on the availability of healthcare finances.
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