Hungary's pharmaceuticals sector has negative environment for multinationals, says BMI

In Business Monitor International’s Emerging Europe Business Environment Ratings (BER) for the fourth quarter of 2010, 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. BMI’s projections used to calculate scores in this quarters 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 Robert Kassai, vice-president of UEAPME (the European Association of Craft, Small and Medium-sized Enterprises), Hungary is experiencing difficulties with meeting its R&D target set by the European Union. Currently, the country is investing 1% of its Gross Domestic Product (GDP) in R&D activities, whereas 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, as well as 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-to-price ratio, such as low-priced generic products or higher-priced innovative products.