Research Institute
GOVERNMENT REDUCES PUBLIC PHARMACEUTICAL EXPENDITURE IN HUNGARY:
RATIONAL DECISION IN CHALLENGING ECONOMIC PERIOD?
Background:
Methods:
Scarcity of public resources, especially in challenging economic times, draws attention to the
expenditure on pharmaceuticals. Utilisation of innovative drugs is considered to be one of the main
contributors for the growth of pharmaceutical expenditures. Price of innovative drugs converges to a
narrow price corridor, due to international price referencing and parallel trade in the EU.
The proportion of pharmaceuticals spending can be very different for each country. Huber and
Orosz maintained that OECD (Organisation for Economic Co-operation and Development) countries
with lower income tend to spend a greater proportion on pharmaceuticals (1), partly because labour
costs are usually adjusted to local price levels, which reduce the relative weight of health services in
cost calculation. Middle income countries have to purchase innovative drugs on the same
international reference price as developed countries, whilst their total health budget is much lower.
However, policy and scientific reports on pharmaceutical expenditure usually compare
pharmaceutical spending among all OECD countries, regardless their economic status. Only few
compared pharmaceutical spending separately in high, middle and low income countries (2).
To compare health expenditures across countries at a given point in time, it is necessary to convert
data from national currency to a common unit, such as USD. Many previous studies adjust health
care expenditures with purchasing power parity (PPP). PPP, however, does not seem to be the
most appropriate for pharmaceuticals, because of the abovementioned price convergence.
We completed an international cross sectional and cluster analysis based on OECD Health Data 2010 and
longitudinal analysis of public pharmaceutical expenditure in Hungary. European and American OECD
member countries with a population above 300 000 inhabitants were included in the study. All expenditures
are in official USD exchange rate. Cluster analysis was performed to compare high income countries (GDP/
capita above 30’000 USD) and middle income countries (GDP/capita under 30’000 USD). Difference in
characteristics of the two groups of countries were assessed by Mann-Whitney-Wilcoxon test. Level of
significance were set to 0.05 unless stated otherwise.
Aims:
Our objective was to assess the current level of pharmaceutical expenditure in Hungary by taking
into account the economic status of the country and benchmarks from other OECD countries with
special focus on Visegrad V4 countries (Czech Republic, Slovakia, Poland, Hungary).
Parameters
Average of
countries above
GDP 30.000
USD/capita
Difference (high
vs middle income
countries)
P-value
1599
464
372
230
141
7.90
5117
1328
694
412
282
10.00
3517
864
323
182
140
2.10
<0.001**
<0.001**
<0.001**
0.001**
<0.001**
0.002**
2.24
2.65
0.41
0.653
total
private
total
public
private
Total health care exp. /
capita (USD, 2008)
pharm & med device
exp. /capita
(USD, 2008)
Health expenditure
Private health
expenditure
Total pharm &
med device exp.
Public pharm &
med device exp.
Private pharm &
med device exp.
Within GDP (%)
Total pharm &
med device exp.
Within total health
care exp. (%)
Private pharm &
med device exp.
Average of
countries under
GDP 30.000
USD/capita
Within total pharm
& med device exp.
(%)
Within total private
health exp.
1.89
1.41
-0.48
0.039*
1.11
0.83
-0.29
0.185
0.75
0.57
-0.18
0.046*
23.58
14.14
-9.44
<0.001**
41.85
37.48
39.93
23.59
-1.92
-13.90
0.928
Results:
Table 1 indicates considerable differences in health care spending between high and middle income
countries. Middle income countries spend less proportion of their GDP on health (7.9% vs. 10%, p=0.002)
compared to high income countries; whilst the proportion of pharmaceutical expenditure from total health
spending is greater (23.58% vs. 14.14%, p<0.001). As a consequence, middle income countries spend
higher percentage of their lower GDP on pharmaceuticals, compared to high income countries (1.89% vs.
1.41%, p=0.039). The proportion of private expenditure on pharmaceuticals is also higher within GDP%
and total private health expenditure (0.75% vs. 0.57%, p=0.046 and 37.48% vs. 23.59%, p=0.016,
respectively).
According to Table 2, total health care expenditure in Hungary (1119 USD) is lower than the average of V4
countries (1241 USD). Nominal pharmaceutical expenditure is higher in Hungary (353 USD) compared to
the average of V4 countries (316 USD), Slovakia, however, spends more on drugs and medical devices
(387 USD). Public pharmaceutical expenditure is also higher in Slovakia (276 USD), compared to Hungary
(200 USD).
The percentage of total pharmaceutical and medical device expenditure within total health expenditure
(31.6%) and within GDP (2.3%) is the highest in Hungary (Table 3). However, GDP% of public
pharmaceutical expenditure is considerably lower in Hungary (1.3%) compared to Slovakia (1.6%). Private
pharmaceutical expenditure is the highest in Hungary (153 USD) within V4 countries (average of V4: 129
USD). The share of private pharmaceutical expenditure is higher in Hungary (43.3%) than in Slovakia
(28.7%). Poland with 61.8% share of private pharmaceutical expenditure has the lowest total expenditure
on pharmaceuticals (220 USD).
Figure 1 indicates the nominal and real public expenditure on pharmaceuticals in Hungary. Without new
cost containment measures, the annual nominal growth of public pharmaceutical expenditures would be
11.3%, and only 1.0% in real expenditure between 1994 and 2010. The government plans to reduce the
public pharmaceutical expenditure to 65% by 2014. The annual growth then would be 6.6% nominally
between 1994 and 2014, whilst the growth of real expenditure would be negative (-1.9%).
Total health care exp /
GDP / capita (USD,
capita
2008)
(USD, 2008)
51685
5117
694
412
10.0 %
Average of countries
under GDP 30.000 USD/
capita
19819
1599
372
230
7.9 %
Average of V4 countries
16960
1241
316
187
7.3 %
Czech Republic
Poland
Slovakia
Hungary
21059
13856
17555
15368
1498
972
1400
1119
305
220
387
353
188
84
276
200
7.1 %
7.0 %
7.8 %
7.3 %
0.016*
Private
Private pharm
Private
Public
pharm &
& med device
health
pharm &
med device expenditure /
exp. within
med device
exp / capita capita (USD, total pharm &
exp. Within
(USD,
med device
2008)
GDP (%)
2008)
exp. (%)
Table 2. Comparison of two clusters with the V4 countries I.
Public pharmaceutical expenditures in Hungary (1994-2014)
Annual nominal growth: 6,6%
Annual real growth: -1,9%
Nominal expenditure (BN HUF)
14.1 %
1.4 %
0.8 %
281
1327
39.9%
23.6 %
1.9 %
1.1 %
141
463
41.8%
25.7 %
1.9 %
1.1 %
129
320
42.9%
Average of
V4 countries
Czech
Republic
Poland
20.4 %
1.5 %
0.9 %
117
261
38.3 %
22.6 %
1.6 %
0.6 %
136
269
61.8 %
Slovakia
28.1 %
2.2 %
1.6 %
111
426
28.7 %
Hungary
Health expenditure
within GDP %
31.6 %
2.3 %
1.3 %
Table 3. Comparison of two clusters with the V4 countries II.
153
324
43.3%
Real Expenditure (BN HUF, ref.: 1994)
Billion HUF
Average of
countries
above
GDP 30.000
USD/capita
Average of
countries
under GDP
30.000 USD/
capita
Total pharm
& med
device exp.
within GDP
(%)
Public pharm &
med device exp.
/ capita (USD, 2008)
Average of countries
above
GDP 30.000 USD/capita
Table 1. Comparison of high and middle income countries (*significant at p=0.05, **significant at
p=0.01
Total pharm
& med
device exp.
within total
health care
exp. (%)
pharm & med device
exp. / capita
(USD, 2008)
4 995 996 997 998 999 000 001 002 003 004 005 006 007 008 009 010 011* 012* 013* 014*
9
9
2
1
1
1
1
2
2
2
2
2
2
2
2
2
2
1
1
2
2
2
2
Figure 1. Public pharmaceutical expenditure in Hungary between 1994 and 2014 – the effects of the
planned pharmaceutical expenditure reduction on the average annual growth
Discussion:
Middle income countries have to pay almost the same uniform price for innovative drugs as high income countries due to manufacturers’ response to international price
referencing and parallel trade. Conversely, costs of other health care services are lower mainly due to lower salaries of health care professionals.
It can be misleading to compare the Hungarian pharmaceutical expenditures to the average of OECD countries. Cluster analyses of countries with similar economic status
should be used for comparison of pharmaceutical spending. However, cost containment initiatives are usually based on comparison with the OECD average.
Cost-containment of public pharmaceutical spending was very successful in the last fifteen years in Hungary. The burden of pharmaceutical market growth has been shifted to
private households. The proposed public budget cut translates to over 30% decrease in real public pharmaceutical spending from 1994 to 2014.
As morbidity and mortality indicators of the Hungarian population are extremely unfavourable, current evidences and international benchmarks do not justify significant
reduction of the public pharmaceutical budget.
References:
1. Huber M, Orosz E.: Health expenditure trends in OECD countries, 1990-2001. Health Care Financ Rev, 2003; 25: 1-22.
2. Hopkins S.: Health Expenditure Comparisons: Low, Middle and High Income Countries, The Open Health Services and
Policy Journal, 2010; 3: 111-117.
TODAY’S RESEARCH FOR TOMORROW’S HEALTH