The newest special tax on medicinal product distributors jeopardises safe supply to Hungarian patients

The continuous depreciation of the forint, the pandemic, and then the war in Ukraine has seriously endangered safe access to modern medicinal treatments, which is now exacerbated by the disproportionate and high special tax increase that may lead to unforeseen consequences. As they have done so every time in the past when the need arose, innovative pharmaceutical companies will responsibly bear the obligations imposed upon them, though they must also emphasise that they consider the decision both erroneous and dangerous: instead of further burdens, immediate, substantive supporting actions are necessary to bolster the reliability of access to medicinal products in order to stabilise the situation.

In the interest of the above, AIPM requests the new government to immediately initiate professional dialogue and to implement a common action plan as part of a new agreement to be concluded with the pharmaceutical industry to expedite access and promote reliability.

The post-pandemic negative effects worsened by the conflict in Ukraine have shaken the foundations of safe and reliable access to medicines: in the past four years alone, the nosedive of the forint exchange rate led companies selling prescription medicinal products to see losses of HUF 260 bn, resulting in market conditions seemingly no longer tenable in the case of numerous treatments.

In light of the above, extending the extra profit special tax levied by the cabinet to these medicines is incomprehensible. Thanks to unchanged regulated prices, enormous exchange rate losses, growing manufacturing costs and ever-increasing inflationary pressure, which in themselves already threaten the sector, pharmaceutical distribution companies have already paid special taxes. The amount was HUF 96 bn last year alone and has given the budget extra revenue of approximately HUF 900 bn (!) in total since 2010. In fact, according to the recently submitted budget proposal for 2023, every 5th forint of state expenditure devoted to medicine reimbursement will come from the special tax paid by pharmaceutical companies.

Increasing the tax rate on medicinal products to 28% increases the difficulty of selling products with producer prices higher than HUF 10,000, meaning it explicitly affects treatments with higher value-added therapeutic effects used to treat, for instance, diabetes, tumorous diseases, cardiovascular diseases, and psychiatric diseases, and the irreplaceable modern products used to treat rare diseases. The introduction of the new tax is in itself a 40% tax hike even though there will still be products not subject to any tax at all, while the special tax will pose an unbearably high tax burden of 38% on certain innovative treatments. However, it can be determined that more than 80% of the HUF 20 bn extra profit tax will be borne exclusively by AIPM companies. Thus, the vast majority of the newly introduced tax shall be paid upon the modern medicines that represents only the quarter of the thousand-billion Hungarian pharma market – while they create the most health benefits to Hungarian patients.

AIPM Director Dr. Péter Holchacker explained, “The already high special tax in the pharmaceutical industry and the substantial weakening of the forint in recent years has had a profoundly negative effect on the pharmaceutical companies that sell treatments available with support from social insurance.” He believes the government’s conclusion on the extra profit generated in the prescription medicinal product sector is inappropriate and, instead of attaining the desired target, the tax increase threatens safe medicine supply to patients. Additionally, existing burdens and current macroeconomic conditions would require substantive and supportive governmental measures to maintain the current level of access. The new taxes not only narrow the possibility for Hungarian patients to access new treatments but may also threaten uninterrupted access to certain currently available treatments. While the burden of Pharma companies is continuously increasing, the access to modern therapies is significantly slowed down: above 120 therapies are waiting for reimbursement decision, of which 85 – more than ever –  is at the very final decision after the required professional procedure.

Dr. Péter Holchacker also reminded us that due to the generally poor health conditions of Hungarians, reliable and safe access is especially important in Hungary. “We trust that the government places the interests, safe recovery, and reliable access to medicines first and foremost.” He also said that AIPM remains open to a professional dialogue in the interest of finding a solution that is reassuring for all parties involved. To facilitate such a solution, AIPM recommends the conclusion of a new agreement between the government and the pharmaceutical industry, which could prevent not only treatments from becoming unavailable en masse but would also ensure reliable financing and market environment for both the government and the sector.