Hungary: Stricter obligations for pharmaceutical companies and wholesalers

27 September 2013

On 6 July 2013 significant amendments to Act 95 of 2005 on Medicinal Products for Human Use (Medicines Act) entered into force. The new provisions introduce an obligation for pharmaceutical companies to supply Hungarian wholesalers and also an export ban for certain medicines if it is likely that this is necessary to satisfy the demand of Hungarian patients. The amendment also provides the National Institute of Pharmacy (NIP) with strong investigation tools, including powers to impose a fine of up to HUF 500 million(approx. EUR 1,650,000), conduct a dawn raid, search any premises(including private homes and cars of company representatives), seize a wide range of evidence and clone computer hard drives and other storage media.

The supply obligations aim to tackle the recurring problem of medicine shortages of Hungarian wholesalers and healthcare providers. The increased supply obligation and the export ban are jointly aimed to serve this goal. The strengthened investigative powers of the NIP are also intended to enhance the efficiency of actions against counterfeit medicines (as also required by European legislation including Directive 2011/62/EU).

New supply obligations

The amendments to the Medicines Act were motivated by wholesalers who reported on several occasions that they struggled to supply the needs of Hungarian patients because pharmaceutical companies refused to supply them with medicines. Therefore, the amended provisions state that if a wholesaler notifies a holder of a marketing authorisation (MA) that a given product is necessary to satisfy demands that have arisen on the Hungarian market, then the holder of the MA is obliged to ensure that this product will be supplied to satisfy Hungarian demands. However, this obligation is irrespective of the existence of any contractual relationship – i.e. a distribution agreement - between the holder of an MA and the respective distributor. This may harm the business of certain wholesalers as other wholesalers may also then serve the market. The amending act remains silent on the possibility of pharmaceutical companies asking a wholesaler to provide evidence that the alleged shortage on the Hungarian market actually exists. This seems to remain a task of the NIP as wholesalers must keep separate records of all medicines received under this provision. The new provisions also make it clear that medicines provided under these provisions must be supplied to Hungarian healthcare providers and must not be exported.

There are some uncertainties in relation to the new obligations. The supply obligation is subject to notification by the wholesaler, who is not required to prove or even demonstrate the likelihood that a demand actually exists. The duration of a supply obligation is also not determined, nor are wholesalers required to report the ceasing of any extra demand on the Hungarian market.

Export ban

As mentioned above, medicines which are supplied to satisfy Hungarian demand must not be exported. There is however another obligation to mitigate the risk of supply shortages. The NIP is entitled to order wholesalers to cease and desist from the exportation of a medicine intended for Hungarian patients if it has been notified that the amount of export is so high that it triggers a risk to continuous supply of the Hungarian market. The export ban shall last as long as it is necessary to guarantee supply safety, but no longer than one year.

While the Medicines Act does not address who is obliged to make such a notification, from a practical point of view holders of the MAs may be in a position to do so. They are aware of the quantities of the medicines provided to the distributors, and they are also obliged to report if they are unable to maintain adequate and steady supplies of specific pharmaceutical products resulting in a (potential) shortage of supplies.

It is important to note that the ban applies to a certain product rather than just the distributors who are engaging in excessive exporting activity. This may also create uneven market positions.

Stronger investigation powers for the NIP

The NIP as the supervisory authority of the Hungarian pharmaceutical market is vested with a broad range of regulatory instruments. Pursuant to the new amendments to the act, during official investigation it will be entitled to request declarations, any data and copies of files of any company or organization for the clarification of the matter in hand and may acquire and process the personal data of the party or persons related to a party to the investigation. Furthermore, subject to the prior approval of the public prosecutor, the NIP may conduct a dawn raid, i.e. enter any premises even without the owner's knowledge or authorisation, including private vehicles or property of or used by present or previous representatives, employees or proxies. An approval from the public prosecutor for such actions is valid for 90 days. The NIP is also entitled to clone hard drives and other storage media if it is suspected that these contain relevant data and it can also access information collected by other authorities in separate proceedings. These significantly stronger investigation powers are also intended to facilitate actions against counterfeit medicines. While the new Hungarian Criminal Code imposes a sentence of imprisonment for up to eight years for drug counterfeiting, police and prosecutors may not have the necessary experience to identify and analyse counterfeits and medicaments not authorized in Hungary. Therefore the amendment entitles the NIP to take action on its own, subject to prior approval from the public prosecutor.

The minimum fine imposed by the NIP for the violation of obligations conferred by the Medicines Act, including mandatory supply of pharmaceutical products to satisfy Hungarian demands and the export ban, remained unaffected by the recent amendments and is still HUF 100,000 (approx. EUR 350). However, the amending provisions introduced a cap for the maximum amount which is currently HUF 500 million (app. EUR 1,650,000). The NIP must consider all circumstances of the case when determining the level of fine to impose.

Authors