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Hungary is fast staking a reputation for itself as one of Central and Eastern Europe (CEE)’s most dynamic economies. Thanks to increased European Union (EU) funding, higher EU demand for its exports, and a rebound in domestic household consumption, the country achieved year-on-year GDP growth of 4.8 percent in 2019. GDP per capita stands at USD 16,500 today, significantly above the pre-global financial crisis high of USD 14,000.
A major factor behind this economic growth is pharmaceuticals, which account for 7.5 percent of Hungary’s GDP and have long been a national flagship industry. As Dr György Bagdy, professor and former vice rector at Semmelweis University, notes, “after the Second World War the eastern bloc countries were given special commitments by the Soviet Union, and Hungary was bestowed drug research and discovery responsibility.” This history of pharmacological research and production is reflected today in an attractive pharma investment landscape and the presence of home-grown success stories such as Gedeon Richter and Egis on the international scene.
Around 60 companies are licensed to manufacture human medicinal products in Hungary, making it one of Eastern Europe’s leading pharmaceutical manufacturers, and medical and pharmaceutical goods account for a full 4.9 percent of the nation’s total exports, the highest percentage in the CEE region.
Industry insiders are keen to play up Hungary’s investment potential. “There are several incentives such as tax benefits and grants from the Hungarian government to stimulate industry R&D and manufacturing investments,” exclaims Dr Istvan Hodász, CEO of Egis, Hungary’s largest generic manufacturer. “Moreover, due to Hungary’s strong tradition in pharma, the skill and availability of the workforce has been a significant factor in attracting several pharmaceutical companies to establish their R&D and manufacturing capabilities in the country,” he continues.
However, despite the overall attractiveness of the Hungarian pharma investment landscape, several challenges exist, most notably in terms of market access for innovative treatments. Medical device and pharmaceutical importers often face a number of hurdles when attempting to obtain approval to be placed on the national health insurance reimbursement lists.
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Director, AIPM, Hungary
In 2016, Hungary transitioned from a second-tier member to a full member of the EU. As Judit Bidló, deputy director general of pricing and reimbursement for Hungary’s National Institute of Health Insurance Fund Management (NEAK), explains, this has already had a significant impact on patient access to innovative new products. “As soon as there is a new product registered in the EU, within days, patients who are eligible for this treatment are made aware of it,” she outlines. “This has improved transparency within the healthcare ecosystem, and inadvertently, increased the velocity and scale of reimbursement appeals as well.”
Access to innovation remains the most pressing matter for Hungary’s pharmaceutical ecosystem, and Bidló acknowledges that the “NEAK needs to find solutions to reconcile the number of new products registered with a reimbursement system that can adapt to this new influx of registration.” The current regulatory framework for reimbursement is a bone of contention for innovative industry players who operate in the country.
“Hungary has one of the most bureaucratically clad and complicated systems in Europe which takes up to two years before a new drug is approved for reimbursement. The process requires political decision, as the healthcare budget is not under the State Secretary of Health, but under the Minister of Finance; some decisions even require approval from Prime Minister’s office,” proclaims Peter Holchacker, director general of the AIPM, Hungary’s association of innovative pharmaceutical manufacturers.
Despite being a highly strategic market within CEE, Hungary lags behind its neighbors in terms of market access. “As I manage Bulgaria, Romania, and even Slovenia, I have a benchmark reference for what access conditions are like in these other markets. In these countries, the reimbursement process is faster and more transparent,” laments Dr Attila Lukács, general manager and head of commercial operations EEU for CSL Behring in Hungary, Romania, and Bulgaria.
IBSA’s Anna Wienner concurs, pointing out that “only one-third of products which are submitted into the reimbursement scheme are accepted by NEAK which is unacceptable.” For example, since 2016, 71 and 69 medicinal products have become available for patients in Bulgaria and Slovakia respectively, yet this number is only 48 in Hungary.
Furthermore, the country’s pricing system adds additional complexity to solving the market access equation. CSL Behring’s Lukács points out that that “Hungary has one of the strictest price-referencing systems in the EU, which then plays into how products are analyzed for cost-effectiveness in the country.”
“The EU employs five to six pricing policies, whereas Hungary uses all 11 available. For any new drug, the above and below 20 per cent of price tenders are disregarded and the rest is used to find the right price,” adds Bidló.
General Manager, Roche Hungary
Lukács insists that this evaluation system is not effective because “some innovative products cannot be benchmarked to the existing standards of care which have extremely low costs, such as steroids or antibiotics. This limits growth opportunities not only for CSL Behring, but for the entire pharma industry. Because of this, certain brands and products will never be launched in Hungary.”
The AIPM’s Holchacker goes on to clarify that from a legislative perspective, the Hungarian decision-making procedure is quite in line with the European requirements and transparency directives, but adds, “however, the political influence in the decision-making process makes it hard to support improvement efforts.” The question remains of how a fast, effective, and sustainable reimbursement system can be created?
While bureaucracy has hindered the upper levels of Hungary’s regulatory infrastructure, the 2018 appointment of a new director general for the National Institute of Pharmacy and Nutrition (OGYÉI) – the administrative authority for medical product evaluation – offers the possibility of new dynamism in the country’s market access scheme.
Having had a longstanding career in the pharmaceutical industry, Dr Mátyás Szentiványi, OGYEI’s newest leader, aims to bring a fresh and collaborative mindset to the organization. “It has been my goal to streamline regulatory processes in areas where we have sufficient expertise and establish more successful deadlines. Furthermore, I aspire to create a clear regulatory framework for activities such as drug promotion, which are often interpreted differently by government, industry, doctors, etc,” promises Dr Szentiványi.
The industry has made its need for transparency known, and having a regulator with a pharma background who can see both sides of the coin and hopefully deliver win-win solutions is a promising step in the right direction. Looking towards the future, Irma Veberič, general manager of the Hungarian affiliate of Roche, expresses that the pharma companies “hope to see reimbursement publications without limitations and with a higher frequency.”
Among the efforts of Hungarian stakeholders to determine more efficient pricing and reimbursement structures, there is a common ambition to explore what is considered by many to be the next epoch of healthcare; a value-based system.
Understanding the universal issue being faced by healthcare systems around the world, Roche’s Veberič insists that “…the cost of healthcare in Hungary is increasing at least twice as fast as GDP growth. The clear solution is moving from paying for each individual box of pharmaceuticals to a value-based healthcare system.”
Bidló of NEAK agrees that creating such a system is “not a possibility, but a necessity.” However, the lingering doubts of how such a transformation can be accomplished are not to be overlooked. “The EU published recommendations on how to implement this, which is a great step forward, but no one knows how to manage it perfectly. The biggest challenge with such a healthcare system is defining and quantifying value. It is important to determine whether incremental innovation can be considered as value or whether only a significant improvement in survival chances can be considered as such. This requires investing more in improving the analysis of real-world evidence for medication but also hospital treatments: define the areas of improvement and understand what is effective with more accuracy,” she adds.
Success in Serialization
Having become a bona fide member state of the EU, Hungary must ensure compliance with all EU regulatory initiatives, including the Falsified Medicines Directive 2011/62/EU that came into effect February 2019.
“When the regulation was first introduced, there was heavy resistance from the industry in Hungary and across Europe,” admits Dr Mátyás Szentiványi of the National Institute of Pharmacy and Nutrition (OGYÉI). Understanding that resisting such changes almost always leads to delays in adoption, Szentiványi adds that “we made sure that we were prepared in Hungary before February and established our own Hungarian Pharmaceutical Identification Non-profit Limited Liability Company (HUMVO) to facilitate the process.”
Dr Antal Feller, CEO of Hungaropharma and Anna Wienner, general manager of IBSA, both board members of HUMVO agree. “The fact that wholesalers, manufacturers, and pharmacists represented themselves within HUMVO has helped to speed up the process; allowing concerns to be addressed instantaneously,” states Feller. Although counterfeit drugs were not historically an issue in the Hungarian market, the regulation had a significant impact on Hungary’s entire pharmaceutical supply chain. “The biggest challenge was to connect this system with the end-users – the pharmacists. For context, Hungary has more than 2300 pharmacies,” explains Wienner.
Despite this initial hurdle, the market has recovered, and pharmaceutical players have implemented the unique identifiers. “Hungary is now the fourth most compliant European country regarding the serialization guidelines,” assures Feller.
Hungary also has the most successful pharmaceutical transactions per capita in the EU. “Hungary is ranked the sixth lowest for alert-rate in the EU,” adds Wienner. “We are now in the stabilization phase of embracing this regulation and we are hoping to conclude this transition quite soon without jeopardizing the supply chain of medicines for patients,” she concludes.
Despite details which remain unresolved, there are high hopes that the healthcare system will move in this direction. The question is, how quickly can such a transformation be achieved? Ildikó Horváth, state secretary for health explains that “in Hungary only incremental changes happen as it requires the involvement of several authorities and ministries when making decisions.”
Nevertheless, among the regulatory authorities, there is an acknowledgement that a unified effort across stakeholders is the key to successfully creating a tangible framework and achieving such a system. “It is important to identify the areas of unmet needs, which are the basis of defining value,” says Bidló. “In collaboration with the industry and companies, defining value will not only help to create a value-based healthcare system, but the insurance and reimbursement systems will be better understood and implemented.”
According to Horváth, “fair and affordable” is the guiding mantra that the government is striving towards as they look to establish a closer network of cooperation with the industry to resolve the challenges in reaching this next era of healthcare. “I believe the more discussion there is between the industry and the health authorities, the higher the possibility of success for this transition,” agrees Veberič.
The prospect of a truly innovative Hungarian healthcare system is still some way in the future and there are several pressing concerns in terms of the country’s health today. Hungarians live five years less than the EU average with female life expectancy standing at just over 80 years and men at 70.
However, life expectancy figures in Hungary are increasing faster than the EU average and improved by nearly four years between 2000 and 2015 to 75.7. Nevertheless, there is a long way to go and Horváth insists that “the top priority of the administration is to close the gap with other European countries.”
The vast majority of stakeholders agree that Hungary’s healthcare system remains severely underfinanced, even when stacked up against some of its more underdeveloped neighbors. Healthcare expenditure as a percentage of GDP has been relatively stagnant over the last ten years. In 2017, healthcare spending was 7.1 percent of the GDP compared to the EU average of 9.9 percent. Roche’s Veberič affirms that “the system as it is currently is unsustainable. It would be good to have a stronger government policy to address this.”
Veronika Ferencz, general manager of Exeltis, adds that “health is a very pressing issue in Hungary and the current conditions are difficult. Generally speaking, the vast majority of the population is not satisfied with the quality of care, and some may say healthcare in the country is worse than ever.”
Dr Szentiványi admits that the Hungarian health authorities, “must find more strategic ways to combine and manage the public health expenditure of the government with the out-of-pocket expenditure of citizens. Hungary has a good health infrastructure and skilled professionals, so our goal is to continue improving to create an even stronger healthcare environment.”
Egis, The Most Successful Biosimilar Distributor In The Region
Egis Group (headquartered in Hungary) is one of the leading generic pharmaceutical companies in the CEE region. The vertically integrated company’s activities incorporate all areas of the pharmaceutical value chain.
Egis’ active ingredients and branded generics are available in 71 countries in total through a network of subsidiaries and partners. Focusing on high-quality, value-added branded generic products, Egis devotes approximately EUR 50 million yearly to R&D.
Based on new strategic decisions, Egis has acquired new IP, registration, business development expertise to obtain the licenses of several biosimilar products and developed new special capabilities. A new biological quality control laboratory was created to perform analytical testing for the pre-marketing quality control of biological products. A new, cold chain logistics system was also established for in-house packaging, labeling, transportation and storage of biosimilar products.
Strengthening its presence on the biosimilar market is one of the key strategic initiatives for Egis: in 2013, the company launched its first biosimilar monoclonal antibody (mAb) medicine, infliximab, which was also the first mAb in the EU. Since then, Egis launched three additional biosimilar drugs.
Egis biologicals distribution performance on the field of biosimilar mAbs became exceptional in the region, overperforming competitors. Achieved market shares are not only the highest among other biosimilars but reached best position in related INN, beating the originator – infliximab – in a short period of time. This outstanding result is owed to the highly educated and engaged colleagues who managed to tailor market access and commercial activities to the biosimilar’s specific challenges, via strong key account management and promotion. In collaboration with Medicines for Europe and local pharma associations Egis takes an active role in the fight for better patient access to biologics.
Out-of-pocket payments account for 29 percent of all health spending in Hungary – nearly twice as high as the EU average of 15 percent – about half of which are used to pay for pharmaceuticals. Additionally, growing public hospital debt remains one of the biggest problems in the country’s healthcare system, resulting in the postponement of surgeries and other treatments. This trend has caused an increasing number of patients to turn to the private hospital sector, further driving out-of-pocket expenditures.
Dr András Szabó, CEO of Szinapszis, a Hungarian market research and consulting agency specialized in the health industry, confirms the advancement of the private healthcare sector. “All countries have limited resources to pay for healthcare solutions, and in Hungary, high levels of innovative and quick treatments have always been available through the private sector… So far, the out-of-pocket private market size stands at HUF 300 billion (USD 1 billion).”
“This has a negative impact on the industry because patients are spending more money to visit private institutions and will find it more difficult to access quality products, ultimately resulting in long-term health issues and therefore even more trips to the doctor. In Hungary, we have now reached the level where it will be very difficult to make changes to the healthcare ecosystem, let alone the rapid reforms which are desperately necessary,” says Ferencz.
While many industry players are calling for a shift in priorities, general manager of Novo Nordisk Hungary, Calin Galaseanu, offers a reminder that the big picture should be considered in these discussions. “It is important to look at healthcare as an ecosystem because expenditure cannot be judged singularly. While the economy has strong prospects, the government has to distribute its budget where the need is greatest,” he prompts.
“There is no such thing as a perfect healthcare environment. Looking at investment in health as a percentage of GDP in Hungary compared to the EU gives us hope that there is room for improvement here. However, must be careful not to treat healthcare expenditure as a percentage of GDP as the only KPI of a healthcare system,” Galaseanu continues.
Healthcare needs are changing, and the government must be adaptive to these trends. “As a collective administration, a balance needs to be struck between flexibility and sustainability, while being accountable for the long-term quality of the results. More attention needs to be given to patients’ response as their feedback is invaluable. Through transparency and receptiveness of their input, it will allow us to identify and target areas that need improvement,” insists Horvath.
One of the key contributors to the country’s poor life expectancy statistic is preventable deaths, which are twice as high as the European average. This is related to lifestyle; an amalgamation of bad habits such as excessive smoking, drinking, and unhealthy eating. These factors play a major role in the incidence of cardiovascular and oncological diseases: the two leading causes of deaths in Hungary.
More than 80,000 new cancer patients are registered in Hungary each year and, once a patient is diagnosed, the prospects are grim. As highlighted by Veberič, “the cancer-related mortality rate in Hungary is the highest in Europe according to OECD statistics. We have 38 percent more deaths due to these diseases than the country with the lowest death rate – Switzerland.”
The biggest challenge being faced in oncology is that patients enter the physician room to receive treatment at a very late stage. In lung cancer, 49 percent of patients in Hungary are in stage four, and combined with stage three, this figure increases to more than 70 percent of patients.
Dr György Bodoky, founder & honorary president of the Hungarian Society of Clinical Oncology (MKOT), emphasizes that “there needs to be more push for screening programs and diagnosis in oncology. Hungary was one of the first countries to introduce mammography and gynecology screenings, but there is still room for improvement in attendance.” In 2018, a national colorectal screening program was introduced by the Hungarian government in hopes of better reaching the at-risk population.
In a similar vein of motivating patients to be proactively involved in their own health, improving health literacy is another priority for healthcare stakeholders. “Patient adherence is very low in Hungary which is a major issue if medicines and treatment regimens are not followed as they should be. These factors together [with poor health habits] create an added burden for the healthcare system by increasing medical needs and reducing efficiencies,” says Szabó.
“While good access to treatment is essential, adherence is also important in the management of the disease. When patients do not follow their treatment regimens properly for whatever reason this leads to major complications down the line,” states Galaseanu, who understands the magnitude of this issue firsthand as the leader of the country’s top diabetes player.
Mid-Cap Strategy: Gedeon Richter
Gedeon Richter stands alone as the only one of Hungary’s four historical pharmaceutical manufacturers to have resisted international acquisition. However, the company does not exist in a vacuum and, like many globally active mid-cap pharma players, establishing partnerships across the entire value chain has been made a fundamental pillar of its operational strategy.
Ranging from manufacturing to R&D and licensing agreements, the firm has built a wide network of collaborators across the globe. These partners include not only small and medium sized peers, but also Big Pharma players with strong marketing capabilities. One of its most significant collaborations has been with Allergan to market the potential blockbuster biosimilar cariprazine (VRAYLAR in the US). While Allergan covers the marketing of the drug in the Americas, Gedeon Richter has also inked agreements with leading Italian mid-cap Recordati to market the drug in Western Europe and Algeria, Tunisia, and Turkey.
As CEO Gábor Orbán notes, “we have secured several licensing agreements with trusted partners around the world to ensure access to [cariprazine] to patients globally. In particular, VRAYLAR has seen tremendous success and it continues to be the fastest-growing antipsychotic drug in the market. We are also continuing to add new indications to the label to broaden its commercial potential very significantly.”
Orbán outlines, “Our approach to partnership is a necessary part of our operations because we cannot cover the entire value chain for every product category. CNS is an example where we start with the initial research and develop up until proof of concept, where we then need a partner to help bring the product to certain key markets like the US.” He adds, “We also work with other midcaps around the world to sell specialty pharma products in markets where Richter does not have a strong presence such as MENA.”
As well as Big Pharma partnerships, Richter also offers CDMO and in-licensing opportunities to companies looking to access the Central and CEE region, especially in women’s health. In October 2019, Gedeon Richter signed a series of agreements with US-based biotech Mycovia for the co-development, manufacture, and commercialization of a novel oral antifungal product.
Through these partnerships, Richter and its partners can utilize their individual strengths to reduce risk and increase the chance of mutual success. “Partnerships are absolutely an essential strategy for midsize players like Richter,” concludes Orbán.
With ambitions to resolve the country’s healthcare issues and improve patients’ access to innovation, the pharma industry in Hungary must consider how it will continue its growth trajectory into the coming years. Meanwhile, Hungarian authorities must determine how the country can elevate its healthcare infrastructure to meet European benchmarks while maintaining competitiveness as a pharma investment center within the region. “Like most markets in CEE, we also see the same risks in sustainability to the system as expenses increase at a much faster pace than GDP growth,” explains Jānis Meikšāns, general manager of TEVA.
While new approaches are necessary to resolve these challenges, there is a mutual understanding that drastic changes are unrealistic in Hungary. Therefore, joining forces is the best opportunity for advancing on the issues at hand. Dr Szabó emphasizes that being a partner not only to patients and doctors, but health authorities as well, is an necessary shift within today’s healthcare environment. “Pharmaceutical companies should not only be drug sellers but service providers…Establishing initiatives such as risk-sharing agreements with the government or programs to improve patient education and adherence are all tangible ways for the industry to embrace this trend and secure their margins,” he asserts.
Better communication will be of key importance moving forward. As Francesco Banchi, managing director for the local affiliate of Boehringer Ingelheim, concludes, “Having an open conversation with the authorities is the most important trick; putting ourselves in their shoes and trying to understand how they manage their role.” Hungary has a unique and delicate balance between the political sphere, national manufacturers, and multinational companies who are all interdependent of each other. Though the direction of progress has been set by Hungary’s stakeholders, a long journey lays ahead which will reveal just how the country’s longstanding pharma tradition will be translated in the future within the context of an evolving European healthcare landscape.
Filling the Gap in Natural Health
After a career in Big Pharma, Norbert Langen, founder and CEO of Phytotec, a Hungarian distributor of evidence-based natural Rx and OTC drugs, took an entrepreneurial leap to bringing these unique products to Hungary’s healthcare market.
Unusually for a trained pharmacist, Langen decided to pursue a career path working in the pharmaceutical industry rather than in a pharmacy. “From a product manager for Bayer, I was promoted to headquarters, working as a project manager for the Asian region for three years,” he exclaims.
After coming to Hungary in 1997 as general manager for Bayer, Langen eventually recognized some market segments which were well established in Western Europe but were still not filled with products in Hungary. One of these gaps was evidence-based herbal drugs – a gap Langen decided to fill. “I convinced two well-known producers of high-quality herbal drugs from Germany and Switzerland to trust their products to my start-up company.”
For Phytotec, the right marketing strategy has been key to successfully introducing these products to the Hungarian market. “At first, doctors did not understand this concept. We had to explain that all our OTC herbal products were registered drugs with clinically proven effectivity, safety and standardized pharmaceutical quality. This was different from the traditional herbal products they used to know,” Langen explains. “Phytotec builds trust, not only by proving the efficacy of products but by guaranteeing quality as well,” he continues.
As an SME, marketing strategy flexibility differentiates Phytotec from big pharma, where there is a clear distinction between Rx and OTC business units and their communication channels. “We have both medical marketing and medical sales teams in place, as well as a marketing specialist for direct-to-consumer (DTC) communication.”
According to Langen, patients in Hungary like natural products and are continuously searching for alternatives to chemical drugs. “Our priority is to be an innovator in marketing, but also to further develop the range of reimbursed innovative products and their effective medical promotion to specialists. By determining new target groups and innovative marketing channels we can become household names and find success for years to come,” he concludes.
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