On the GC Grapevine, ed3, vol1

IS SUE 3 V OL UM E 1 O CT, 2011

Issue 3: Pharma

In this issue:
“There is less pressure to
impress and sell myself so I
see it as a more down-to-earth
profession.”

“Commonplace but more and
more true to our days: only
change is constant..”

“..where lawyers add value is
not in giving the answers that
everybody already knows, but
giving the answer that nobody
has thought about.”

“Due to the effect of the
changes on their profitability
[..] pharmaceutical companies
may be forced to reconsider
their investments in Hunga-
ry.”
“It is not clear from the word-
ing of the Medicinal Thrift Act
whether any changes that
occur after the notification
would need to be reported to
the Authority.”
“..it is clear that Hungary has
probably the greatest variety
of such measures, including
the highest level of extra taxes
imposed on pharmaceutical
companies.”

This Issue‟s Grapevine Pick:
d r. G e r g ő B u d a i - L e g a l D i r e c t o r - P f i z e r


Issue 3: Pharma

Letter s from the editor s In this issue:
What‟s the prognosis, Volume 1 DR. ESZTER TÖRÖK - GENERAL
Dr.? COUNSEL FOR HUNGARY AND
CENTRAL-EASTERN EUROPE -
The pharmaceutical mar- When we first launched the TEVA GROUP…………………..3
ket in Emerging Europe is GCG in May we could not
clearly facing a need for have imagined what lay
realignment with pressing ahead. 3 editions, 3 sec- DR. J UDITMISKOLCI - LEGAL
issues of reduced health tors, 9 General Counsels, DIRECTOR - SANOFI-AVENTIS….5
care expenditure, govern- 10 senior private practice,
mental cost reductions, product pricing, countless reader submissions for the
generics and the list goes on and on. “Private Practice Strip” and “(My) Word
How is Hungary‟s Pharma industry On The Grapevine” sections, all brought
planning to endure the next 5, 10 years together by a simple idea - building a DR. GERGŐ BUDAI - LEGAL
and beyond? What are the major strong GC community to share challeng- DIRECTOR - PFIZER...…………8
influencing factors in Hungary at present es, solutions and best practices.
and what is everyone debating? Will In retrospect, what makes us most proud
innovation suffer? But in such a competi- about this publication, is the fact that, in
tive industry with patents expiring on big reality, it is not our publication. Almost T HE S ZÉLL KÁLMÁN PLAN
ticket drugs, the industry is in dire need all of the content, ideas, suggestions or PUTS INCREASING PRESSURE ON
of the subsequent “smash hit(s)”. We are PHARMACEUTICAL COMPANIES -
simple funny stories, belong to our read- BY DR . ILDIKÓ CSÁK..………..12
hearing so much talk about the Széll ers that were not shy in reaching out to
Kálmán plan but how is it actually affect- us and expressing their opinions and
ing the industry and ultimately the end comments .
consumer? Everyone‟s asking the same P HARMACEUTICAL COMPANIES
With that in mind, we thank you all and
question “what‟s in store for Hungary‟s FACING NEW CHALLENGES DUE TO
we cannot express enough what an honor THE AMENDED REGULATION OF
Pharma future?”. The GCG has invited PROMOTIONAL ACTIVITIES - BY
it has been to work with you. Your input
General Counsels of some of the most DR . DÓRA P ETRÁNYI..……….13
is what drives this publication forward at
prominent players of the pharmaceutical
the momentum it is going so keep those
industry to share their experiences,
emails coming.
adversities and feats in this challenging EXTRA PHARMA SECTOR TAX-
environment. We‟ve asked the tough We are working diligently on the skele- ES IN HUNGARY: AN EUROPEAN
OVERVIEW AND INTERPRETATION
questions about generics, price competi- ton of the next issue and next volume, ISSUES - BY DR. HELGA BÍRÓ &
tion, governmental policies and many but we need your nominations to pick DR . GERGELY RISZTER ……….14
more pressing issues. The controversy the first Grapevine Pick for 2012. Write
and zeal associated with many of the to us by December 1st and let us know
topics we thrash out in this edition has who should be given this honor.
undoubtedly resulted in, we hope, a very We are always happy to hear from our
exciting and informative product not readers so, please, feel free to write to us
only for us to work on, but foremost to at GCG@hudson.com or join the
share with you. We hope you enjoy the dedicated group here for more details.
read!
Orsolya Endrefi Radu Cotarcea
Associate Director - Emerging Europe Marketing Manager - Emerging Europe
and Latin America and Latin America
Hudson Legal Hudson Legal

PAGE 2


d r. E s z t e r T ő r ő k - G e n e r a l C o u n s e l f o r H u n g a r y a n d
C e n t r a l - E a s t e r n E u r o p e - Teva G r o u p
one of three. I also had a lot of firm, do not be afraid to look large organization, you need to
friends here who I had not seen around. There is another life. It be patient. For example, a lot of
for years and part of my family is pretty rare and pretty lucky to my work today is internal
was living here as well. I think, find a company that has a good politics, liaising with different
overall the quality of life was reputation and great work expe- people and reaching compromis-
better and I found living here a rience but they are out there. es, which most of the time I do
lot more pleasurable. not mind, actually quite enjoy,
HL: What makes a good GC
but sometimes it can become a
in your view?
“There is less pressure bit frustrating.
to impress and sell ET: First of all, I think it the case
HL: You mentioned commu-
with most lawyers that they start
myself so I see it as a nication. What would you
as external counsels, most often
say are the differences
more down-to-earth with an international firm, and
between how an external
later in their career they move
HL: I am sure our readers profession.” in-house. When working in
counsel interacts with a
client and how you interact
would enjoy to learn a bit private practice, especially with
HL: One of the myths relat- with your colleagues?
about your background.. large international firms, lawyers
ed to in-house lawyers is need to specialize in one particu- ET: It really is a very different
ET: I have been with Teva for that their workday ends at 5 lar practice and, as a result, one type of a relationship than when
nearly 8 years. Before that, I pm. How accurate do you of the main challenges is to wid- you are an external lawyer. In
worked with CMS Cameron find it? en your scope when you move in that situation you have a
McKenna in Budapest. Prior to -house. question, you write an answer
that, I worked with the same ET: It is indeed much more
balanced. You have less push along the lines of „you can do
firm in London as a trainee I had the same challenge since, as
from clients, although you have this, you cannot do this‟ and at
solicitor. I am Hungarian by birth a GC, I had to have at least a
your own internal ones. I think it the end you write a very large
but I lived in the UK for 11 years basic idea of most areas of the
is a lot more flexible as people disclaimer. As an in-house
and studied Law in Oxford. In law so I had to become more of a
care a bit less of how and where lawyer, if you say „this cannot be
truth, I was not really planning generalist. Before joining Teva, I
you do your work. They do not done‟ your colleague will come
on coming back but I did in 1993 was doing M&A, corporate and
mind if you send them an e-mail back the next day and ask „ok,
for the first time and then again commercial work so my experi-
from home or on a Saturday still, how can I do this?‟. It is
in 1997 when I quite simply got ence with other areas was lim-
evening. They simply want much more of a practical
stuck. I just loved Budapest and ited. On the other hand, that is
solutions. There is less pressure exercise, and you learn to avoid
while London is beautiful, it is why I find my current role so
to impress and sell myself so I see the very first step and not go out
not a great city to live and work much more interesting, because
it as a more down-to-earth pro- and say „this cannot be done‟ but
in. it is much more varied.
fession. I simply work with my try to come up with a compro-
HL: What was it that made colleagues towards a common At the same time, you need skills mise of sorts.
you stay? goal rather always need to that go beyond the legal skills:.
HL: Having worked mainly
impress the client and to You need good networking skills;
in M&A prior to Teva, how
ET: As a very junior lawyer, the convince them they are the best strong communication with all
did you manage the move
work was much more interesting there is and ever will be. levels of the company is also key;
to the pharmaceutical in-
and challenging here. It was you need to have basic feel of the
dustry?
simple math since, at that stage in With that in mind, my advice to company and what it is doing;
London, I was one of the hun- lawyers would be, especially and probably one of the most ET: The way I became involved
dreds of trainees and here I was when you work with a large law important aspects, especially in a with Teva was by sheer coinci-

PAGE 3


Andrékó Kinstellar

The Pr ivate Practice Str ip
dence. When I applied for the What made you stay? and extremely damaging, espe-
role, I was replying to a job ad- cially in the long run. To offer
ET: I tend to stay unless I have a
vert that only said „multinational some background information, Euromedic refinancing
very strong incentive to leave. I
pharmaceutical company‟. I had Teva has 3 divisions in Hungary,
like being familiar with what I
no idea it was Teva. Moreover, manufacturing, marketing and Kinstellar advised Euromedic
am doing and I like the environ- Group (a pan-European medical
after I learned it was Teva, I did wholesale. The plan introduced
ment, I like the people. You will services provider) on the EUR 250
not even know much about the very hefty taxes making it
probably laugh but I like Monday million refinancing of the group
company. At the time, 2004, the basically impossible for pharma- including related regulatory and
mornings... I like coming to
Teva brand was not so widely ceutical companies to promote employment law advice.
work. Most of the time I just
known. On the other hand, what their products. This is based on
enjoy what I do.
did help was the fact that at times the notion that pharmaceutical
I can be a bit of a hypochondriac HL: Your role as GC must be companies are greedy and „evil‟. Johnson & Johnson
so, even then, I already knew even more challenging since The idea is that the new Govern- competition law advice
quite a bit about various medical your responsibility is at a ment measures should stop us
conditions and pharmaceutical regional level. Which of the promoting our products so that Kinstellar advised and represented
Johnson & Johnson (a global
products. markets do you need to people buy less and, as a result,
healthcare products manufacturer)
spend most time on and, cut some of the Government‟s in cartel proceedings at the
from a regulatory point of spending. This rather simplistic Hungarian Competition Office
“I was blessed with view, which one is the most approach is based on the notion regarding Vision Care products
great colleagues who problematic? that the reason people buy so including related regulatory advice.
never made me feel many pharmaceutical products is
ET: These days, it would be
not the health state of the popu-
uncomfortable for Hungary. We have a lot of very
lation but that we promote our
good lawyers and a large team
asking what they might for example in the Czech Repub-
products too much. Unfortu-
nately whoever was responsible
Gide Loyrette Nouel -
have perceived as silly lic. If something really big comes D‟Ornano Iroda
for writing the changes in the
questions.” up then I would get involved but
law was probably under quite
generally I know I have a strong
some pressure and did not have a
Even so, when you come into team and I let them get on with Balkan operations sale
lot of time to draft the law
this industry for the first time, it. advice
properly. The way the law is
you need to interact with
From a regulatory point of view, phrased is very far from ideal. Gide Loyrette Nouel, with the
doctors, researchers and business
currently Hungary is the most When we got it for the first time active participation of its Budapest
people who have a very strong office, is currently advising an
problematic and it is all the most we spent hours reading it simply
knowledge of the industry, so it important European distribution
worrying to see that other Gov- because there were many sec-
is quite a challenge. I guess, in group on the potential sale of its
ernments such as those of the tions that could be read in many
the early stages, I learned how to operations in the Balkans, including
Czech Republic and Poland have different ways. It is a very uncer- Romania, Serbia, Bosnia and
ask questions without revealing
taken a liking into what the Hun- tain piece of legislation. At the Kosovo.
that I was asking them because I
garian one has done and are same time, the fines and other
was not really familiar with the
thinking of following their exam- sanctions that can be imposed for
topic. Of course, reading and
ple. breaching the law have been Advising on the creation of
researching a lot was key in
considerably increased. It is real- regional joint venture
bringing myself up to speed. At HL: In Hungary we have
ly a very tough balancing exer-
the same time, I was blessed with seen a lot of changes with Gide Loyrette Nouel Budapest is
cise at the moment.
great colleagues who never made the introduction of the Széll currently advising a Swiss
me feel uncomfortable for asking Kálmán plan, which most HL: Will this plan impact investment group on the creation
what they might have perceived GCs are not happy about. your clients? of a regional joint venture structure
What part of the plan gives operating the wholesale and the
as silly questions.
ET: Yes. There have also been distribution of a clothing brand in
you the most headaches? Hungary, the Czech Republic and
HL: You have been in the radical changes made to the
industry, and the company, ET: How long do you have? I reimbursement system. Obvi- Slovakia.
for quite a few years now. believe it to be extremely painful ously, the aim was to reduce the

PAGE 4


burden on the State health fund manufacturers have lost their patent group does support the would have a litigation but other
as far as possible. To achieve reimbursements on their prod- R&D department as well. It is than that we operate separately.
this, for certain products they ucts. very important for our business
HL: When were you most
introduced a so-called blind development side since every
HL Usually, companies in proud to have been work-
bidding system. Now, every 6 time we want to launch a new
regulated industries compa- ing with Teva?
months each pharmaceutical product, the first test that it has
nies are invited to provide
manufacturer puts in a bid for to pass is whether the original ET: Whenever I have been to
input for such changes. Was
the next few months based on patent period of the originator Israel, Teva‟s home country. It is
this the case?
the price of their products. has expired. a great feeling because there it is
ET: There was some consulta- seen as a national treasure. It is
This is a fairly complex exercise. THE flagship company. I am not
tion but it was carried out under
“Of course, the There are patents in many really sure what to compare it
the form of receiving a 300 page
Government is under a countries and there is no unified with because if I compare it to
draft on a Friday evening and
patent system between all of MAV it does not really cut it.
lot of pressure to cut with a request to provide
them so the time when you can
comments by Monday morning. Whenever I enter Israel and I am
costs but it is very launch a patent differs from asked for the purpose of my visit
This obviously impacted the
frustrating to be singled market to market and when you I tell them I am working for Teva
quality considerably. Of course,
look at your pipeline you need and the way they look at me is
out (along banks or the Government is under a lot of
their know-how.
pressure to cut costs but it is indescribably uplifting.
other "bad people").” very frustrating to be singled out
It is a very different team in a lot HL: What would you rec-
This system has recently resulted (along banks or other "bad peo- ommend to any lawyer con-
of respects. They are patent
in extremely low prices being ple"). sidering going in the phar-
attorneys who, opposed to law-
offered in some cases, especially yers who are either pharmacists maceutical industry?
HL: I noticed your patent
by smaller companies. They won or chemists by education and
department is separate from ET: It helps if you have an inter-
the bid because of the low prices then take a separate course to
your legal department. Why est in the industry itself. You will
and the problem I see in this is become a patent attorney. There
is that? need an ability to adapt and to
that in a few months we might are not that many cross-overs research a lot but, passed that, it
see that these companies will not ET: Patents are actually very either. Rarely, corporate lawyers will really be worth it.
have the capabilities to supply important to us. Not necessarily will work together with them
the market while the largest because of R&D - though the when [knock on wood] we

d r. Ju d i t M i s ko l c i - L e g a l D i r e c t o r - S a n o f i - Ave n t i s
HL: In your view, what are nal requirements and give clear, Therefore he/she needs to be
the top characteristics company-focused, relatively able to justify the solution
needed to be a good GC? short answers instead of citing chosen.
JM: I consider the role of a GC the complicated rules in a
“strange” legal language. The GC HL: Why did you choose to
totally different than the role of practice law in-house?
a free-lance lawyer or a lawyer frequently has to give answers
working at an independent law immediately in the meetings JM: Joining the Sanofi Group as
firm, since being an in-house when questions are raised and an in-house lawyer four years
lawyer means that you live immediately evaluate the possi- ago was a once-in-a-lifetime
together with the company. A ble risk. opportunity for me in my career
GC has to be able to understand Communication skills are very path and it was a radical change
the diverse needs of the busi- important as well, because the in as I had worked before as a
ness, including logistics, R&D, -house counsel is part of an member of a law firm which
manufacturing, regulatory af- organism and a GC not only worked for TEVA industrial site.
fairs, HR, finance etc. One is provides effective legal support, I was also seeking new challeng-
also expected to meet you inter- but makes decisions day by day. es at that time. As the Legal

PAGE 5


Horváth & Partners DLA

Director of the company I am importance to the Group. I‟m HL: What do you look for
not an outsider but I have real not saying that it is easy to cope when you choose what law Piper
relationship with my colleagues with, but with continuous firm to outsource work to? DLA Piper advises Albany
that I really enjoy. “follow-up” and “readiness” it can Molecular Research
JM: The chosen law firm must Institute
be manageable.
HL: What aspect of the GC possess the following features:
appropriate experience, in-depth DLA Piper in Hungary is advising
role do you find most HL: Why did you choose the
knowledge of the pharmaceutical Albany Molecular Research
challenging? Why? How do Pharma sector? What gets Institute, Inc., a major US
you cope with it? industry, reliability, deadline
your blood flowing when biotechnological company, on
keeping and co-operative atti- establishing its Hungarian presence
talking about this industry?
JM: Sanofi has four affiliates in tude. by acquiring the sole ownership of
Hungary, pursuing very complex After graduation I started to a Hungarian biotechnological
HL: What do you definitely company including the assistance in
activities, including R&D, manu- work for an agricultural co- not like to see in a proposal? its restructuring of the subsidiaries
facturing, wholesaling, distribu- operative. However, I felt that it
tion, promotion and clinical (spin off, merger, transformation)
was not really my “dream” so I As I have mentioned above, we
and daily operational issues. We
trials, employing more than took the first opportunity to need clear, comprehensible, also drafted internal patent
2000 people altogether. The change and joined Biogal “easy-to-digest” analysis for the regulation for the Hungarian
legal department is responsible Pharmaceutical Works (known colleagues involved in the subsidy of Albany Molecular
for the legal support of all kinds today as TEVA Pharmaceutical decision-making process. As a Research, Inc. Continuous legal
of activities. Taking everything result, I am really unsatisfied advice concerning filing and
Works). From that point on, my
into account, the most significant when I have to “translate” it for protecting of patents of the client.
life was connected with the
challenge for me is to provide Pharma sector: I‟m continuously them to make it clear, because it
appropriate legal background for keeping my eyes on the relevant is rather time-consuming.
each unit while harmonizing with Financing subsidiary of
news. Since we try to be proac- HL: What do you find to be Hankook
the corporate guidelines and tive and always be sure that we
Hungarian regulation in every the biggest regulatory
follow what is happening in the DLA Piper in Hungary is advising a
field of the company. challenge in the Pharma club of banks, led by Raiffeisen
course of preparation of regula- industry in Hungary?
tions, we had to learn how to Bank Zrt., in relation to the English
“..we had to learn how “read between the lines” of the JM: One important aspect is
and Hungarian law aspects of the
financing of the local subsidiary of
to “read between the statements of the regulating predictability. Every company Hankook Hungary, the Korean tire
lines” of the statements bodies‟ representatives. finds it very important to plan manufacturing giant.
ahead. When regulations and tax
of the regulating HL: As a General Counsel burdens change even within one
bodies‟ representatives.” for a major pharmaceutical business year planning becomes Kajtár Takács Hegymegi-
company, you must receive very difficult. Moreover the Barakonyi Baker &
countless proposals from introduction and increase of
Moreover, reacting quickly to Mckenzie
law firms. surtaxes creates a competition
the fast and sometimes unex- handicap for us not only interna- Successful representation in
pected changes in the regulation JM: Yes, I receive proposals competition proceedings
tionally but also within the
is essential in order to be able to regularly from different law
group, as group projects may be We successfully represented a
meet all the requirements of the firms. However, my options are
implemented in other countries major Italian-based pharmaceutical
law. I have to be proactive with limited by the Group‟s guide-
where the conditions are more company in a proceeding before
regards to implementation of the lines. We only work with some
favourable. the Hungarian Competition Office
pharmaceutical and other rele- of the preferred firms and our initiated due to alleged unfair
vant regulation first step is always to see that A good example is the R&D commercial practices via
there really is a need. We turn to incentive: a 20% abatement was pharmaceutical advertisements to
It is also well-known that this an external law firm only in case introduced in 2007 which was patients. We also regularly advise
industry is heavily regulated in of workforce shortage or when then increased to 100%; but the same client on wide range of
every manner, and ethical the risk is high and the particular pharmaceutical regulatory matters
before the 100% could become
(product promotion, wholesale and
behaviour, compliance, and project requires special experi- effective an amendment negated retail sale of medicines etc.).
transparency are of the utmost ence and knowledge. the use of the abatement, the

PAGE 6


Kajtár Takács Hegymegi-

legal regulation being incon- Which one in particular are cost cutting measures should not
sistent with the implementing you most passionately op- be allowed to reach the point Barakonyi Baker &
rules. posed to and/or keen on where merely fiscal considera- Mckenzie
and why? tions prevail in healing. Advising biotech company
Of course, we are given the op-
portunity to comment on new JM: I hail the recognition that the We advised a major US-based
Patients must get the most effec-
bills and new laws and submit present healthcare system is not tive therapy. Laying stress on biotech company in connection
our proposals, in most of the sustainable on the long run but I with regulatory questions (e.g.
fiscal aspects has dangers for wholesale licensing questions,
cases in cooperation with other cannot agree with those that
patients: for example if a medi- medicine donation, clinical trial
pharmaceutical industry stake- largely blame pharmaceutical
cine that a patient has been taking template agreements, etc.),
holders and, when that is done industry for the problems. I disa-
for a long time is lost by price including the revision of the
properly, transparency and pre- gree with a non-transparent drug standard operating procedures
competition and delisted, the
dictability is achieved. Unfo- financing system causes part of (e.g. Sponsorship Policy, Policy on
patient has to be switched to
tunately the system is far from the money to go to the drug the Interactions with healthcare
another drug that may be less
ideal and does not always work companies. These are exaggera- professionals, Donation Policy) to
effective or even harm his organ- ensure compliance with applicable
out that way. tions.
ism. Hungarian laws and ethics rules.
HL: Without a doubt, the I agree with the importance of
industry took a considera- prevention and believe in solidar- HL: Both in Europe and in this system there is no
ble hit as a result of the ity where pharmaceutical stake- the US, politicians have negotiation.
measures put in place by the holders take part together in the been pushing aggressively The challenge for us is obvious
Széll Kálmán plan. How did struggle to educate people on for Sanofi to lower drug when a product with a new
this affect your work and healthy living. On the longer costs or expand generic active ingredient is being
how do you expect it will in term this may be an important licensing. What are the fore- reimbursed in a new indication,
the long-term? contribution to reducing front issues when we speak because in this case a so-called
healthcare costs. Not incidentally about pricing of pharma- subsidy-volume contract has to
JM: The Széll Kálmán plan and
Sanofi slogan is „from drug com- ceutical products in Hunga- be concluded. Contract conclu-
the rest of the measures affecting
pany to health provider” ry? sion is preceded by thorough
the health sector cause legal
statutes to change all the time “Commonplace but more and negotiations, but the legal frames
JM: As I mentioned, the focus is are given. The essence of the
and impose more and more more true to our days: Only on medicine price cuts and there contact is that the manufacturer
restrictions on the budget. I
change is constant.” is strong support to cheaper has a payment obligation towards
think we have to coexist with this
generic products. Hungary has a OEP according to reimburse-
in the coming years. The greatest HL: Which aspect of the
rather complicated reimbursement outflow generated with the
challenge in the continuously- Széll Kálmán legislation do
ment system - in effect compel- included medicine, by this manu-
changing legislative environment you think should be revisit-
ling manufacturers to go in for facturers contribute to reducing
is the sustenance of operations. ed due to its impact on the
tough price competition. The public burdens upon the inclu-
Commonplace but more and end consumer, the patient?
OEP keeps reviewing the prices sion of a new medicine making it
more true to our days: Only
JM: Governments, and not only ex officio to ensure cost efficacy possible for the patients to buy
change is constant.
in Hungary, are making attempts and adherence to budget, and the modern therapies on affordable
HL: There are many aspects to reduce drug budget expendi- companies make their price bids price.
to the Széll Kálmán plan. ture and patient burdens. But the through an electronic system. In

( M y ) Wo r d O n T h e G r ap ev i n e
RE: On The GC Grapevine - Energy "METÁR", which will replace the "old" If you would like to comment, reply or
mandatory takeover and subsidising system add your viewpoint on any of the
Edition ("KÁT"). "METÁR" is expected to play a articles or the publication overall,
Simandi Bird & Bird is experiencing activity major role in meeting the mandatory targets write to us at GCG@hudson.com to
in the area of traditional energy sources with for renewable energy by 2020 in Hungary.
share your views with the GC commu-
increased interest in gas & oil exploration and nity.
exploitation in the region. This fall's hot Zsófia Szerda
topic will be the new support scheme for Head of Energy and Real Estate in Hungary
renewable energy sources, the so-called Bird & Bird


d r. G e r g ő B u d a i - L e g a l D i r e c t o r - P f i z e r
but when it was time, I did turn wouldn‟t be who I am today. It attorneys, but also to work with
to the legal side of the profes- was really an excellent learning a number of in-house counsels
sional arena. and working experience. and legal advisors. I always
During my university years, I Transitioning to a pharmaceutical perceived them as having a much
closer relationship with the
spent my professional practice company was not necessarily the
periods at the Hungarian Consti- obvious choice, although, while business due to their daily work
and interactions with the compa-
tutional Court as a clerk to Jus- in private practice, I did repre-
tice István Bagi, and afterwards at sent pharmaceutical companies ny‟s board. Having a better
understanding of the specific
a midsized local law firm. My and the Association for Innova-
first real legal job was at White & tive Pharmaceutical Producers. company‟s needs meant that they
provided more business friendly
Case, where I started as a 4 hour- In fact we won a major case for
a-day intern. I ended up spending the Innovative Association. The advice. On the other hand, as an
outside consultant, you are
7 years with the firm, during Government at the time intro-
which time I had very interesting duced a price decrease and price brought in for a very specific
project and, as a result, have a
international assignments and freeze which we were able to
HL: I‟m sure our readers are cases. Amongst others, I got to argue against in front of the more limited perspective on the
interested in learning a bit issues at hand. Ultimately, I
work in Washington D.C. and Constitutional Court and have it
about your background at spent 6 months in White & annulled within a record 3 month wanted to get to the point where
first... I could truly understand an
Case‟s Brussels office on a se- period, one achievement that I
GB: I had a very international condment. That was particularly am very proud of to this day. The industry and, without the insight
you gain as an in-house counsel,
upbringing. My father is in the interesting as it was the time of pharmaceutical industry was,
diplomatic service and my moth- Hungary‟s accession to the Euro- however, only one of the areas I it would have been much harder.
er is a chemical engineer, so I got pean Union making it a great worked on while at White &
HL: Looking back at your in
to live in a few places around the experience. While I did study Case. For example, I was in-
-house experience, was it
world at a relatively young age. quite a bit of European law at volved in several privatisation
the right call?
Like many Hungarian boys, I university, having the chance to transactions, and various energy
played our national sport, water- actually work with EU law in and infrastructure deals, as well GB: After almost 6 years at
polo, throughout my school practice and work with clients in as considerable local and interna- Pfizer, my answer is a definite
years, which I still enjoy as a the European Court of Justice or tional litigation and arbitration. “yes”. For me, working as a
pastime. When I started law before the European Commission Legal Director is pretty much
school I worked at a popular or Parliament was absolutely HL: Why did you decide to like running your own law firm
radio station writing commercial phenomenal. I‟m really thankful move in-house?
because you have so many
jingles and subsequently a sight- to White & Case and especially GB: During my time as an exter- different aspects, or practice
seeing boat company in Buda- István Réczicza as well as other nal counsel I had the opportunity areas. The difference is that you
pest. I really enjoyed these jobs, colleagues, as without them, I not only to work with the best have one client, who you have to

Peter Pazmany Catholic University,
Paul Revere Kerek Utca Doctor of Law and Political Sciences
Elementary School Elementary School University of Pretoria Intern
Bocksai Istvan Robert F. Wagner Szilagyi Erzsebet Law and Human Rights Cou
Elementary School Junior High High School 1998
1983 1985 1988 1990 1991 1995

Budapest New York Budapest Pretoria
PAGE 8


know inside and out. You need extent in a negotiation process, hand, enabling business is the consistent solution. We have to
to deal with regulatory issues, but for me, it is not nearly as most important aspect of the role be committed to raising the bar
mergers and acquisitions. compe- engaging or stimulating. As for since, in my view, a good Legal by challenging traditional think-
tition, labor law, civil law, reviewing documents, sure that Director is one that tells you how ing and ways of operating. We
litigation, etc.. In fact, I used to can be interesting but it is not you can do or achieve something recognize that our ability to
love working in litigation and, really the exciting part. That is or reach a business goal as provide the best legal service
even today, I like to stay close to why even today, time permit- opposed to just someone saying depends on how well we listen to
this classic attorney function. ting, I take almost every oppor- “no” or “you can‟t do that”. Of colleagues and engage with them
I know every day I will be faced tunity to represent Pfizer in front course sometimes you do have to to solve problems and seize
of a court or authority. say no, but finding solutions - opportunities together. As Amy
with at least one question or
issue that will be truly challeng- HL: Well, I guess it is a good creative and legally compliant Schulman says, where lawyers
solutions - is extremely im- add value is not in giving the
ing. This comes as a result of the (or bad) thing you have the
variety of work, the innovative opportunity to do this often portant, and you always need to answers that everybody already
be able to stay ahead of the game knows, but giving the answer
nature of the company, as well then. Talking about your
as, unfortunately, a result of the function at Pfizer, what and try to shape the upcoming that nobody has thought about.
regulatory changes and the envi-
legal environment of the industry makes for a good LD in your HL: Before we move into the
in Hungary at the moment. And mind? ronment.
industry specific issues, we
when I say at the moment, I HL: The idea of creative are always curious what a
GB: I think the best way to
mean the last 3 years. thinking is interesting as Legal Director looks for
describe it is by using the mission
HL: “Classic attorney” func- statement of Pfizer‟s legal most people imagine law- when evaluating different
tion? division: Deliver competitive yers thinking along the lines proposals from law firms.
advantage by understanding our of „this is the law in black on
GB: Well, when I was growing GB: Pfizer has an innovative out-
businesses, managing risks, and white and you cannot med-
up, and this might sound a bit side counsel program called the
inspiring our colleagues to drive dle with it‟.
like a cliché, a lawyer was some- Pfizer Legal Alliance (or PLA in
creative and useful legal solu-
one in a courtroom, arguing in GB: Don‟t get me wrong. There short, started by Amy Schulman,
front of judge and jury. Litigation tions. are a lot of things which are very Pfizer‟s global General Counsel).
is the classical place where a I think that has everything neces- clear cut with regards to what The Pfizer Legal Alliance is a
lawyer can truly present. Sure, sary to describe a good LD. You you can and cannot do, and of collaborative partnership be-
you also have that to a certain need a very strong level of legal course I would never give advice tween Pfizer and 17 law firms
knowledge combined with a very that is not compliant with that aims to transform the way
“In fact, I used to love good understanding of the busi- existing regulation. What I mean legal services are delivered and
working in litigation and, ness. On one hand, the role of a by being creative is that, when valued. These firms have agreed
General Counsel - or Legal someone puts a business need to work on a flat-fee basis, which
even today, I like to stay close Director as we say it - is to safe- forward, the need has to be met. is established at the beginning of
to this classic attorney guard the company from issues The real challenge is being able each calendar year, and to
arising from non-compliance or to blend that need with the provide counsel to the company
function.” outside challenges. On the other regulatory requirements into one on a wide range of matters.

Associate to Senior Associate at White & Case

national Clerk at Hungarian Constitutional Secondment with White & Case
urse Court Brussels
2000 2004 Legal Director - Hungary at Pfizer

2001 2007

Budapest Brussels Budapest
PAGE 9


“..where lawyers add value is not all, but what really matters for team, how small pharmacies, two. The damage, however, is
in giving the answers that me is the day to day interaction physicians, or even consumers not only to the companies, but
that I have with these firms. I and patients keep track of it all, I ultimately to society. One is that
everybody already knows, but simply think it is hard to truly do not know. two years ago, Hungary intro-
giving the answer that nobody has asses a firms value without first- duced a very good R&D incen-
Even on our end, it is not enough
thought about.” hand experience. tive plan for the Pharma industry
to just keep track of all the new
HL: Looking at the pharma- regulations. If we did that, all (which allegedly is identified as
This is something unique, and it one priority in terms of boosting
ceutical industry specifical- our work would be purely reac-
has proven quite effective in ly, the first natural question tive. We need to closely monitor the Hungarian economy),
securing quality external counsel according to which, out of only
is why did you choose it every proposal and, within the
- who if need-be work with each when you moved in-house? applicable legal framework, we the industry-specific extra taxes,
other. Of course this program companies would receive a tax
try to influence the process and
stems from the U.S., and these GB: We need to go back in time deduction if they invested in
provide our input to shape the
firms are not present everywhere for a bit to answer that. As I certain types of research and
environment. The bottom line is
in the world, so occasionally, we mentioned, I loved working in development, like basic research
that we need to be on top of
do need to look at other firms litigation and, while I was or phase I, II and III clinical trials.
every piece of draft legislation
and we make those decisions working at White & Case, one of Knowing the experience and the
from the moment it comes into
locally. the most interesting litigation level of research at the Hungarian
the pipeline.
cases that I worked on was academic institutions, Pfizer
When we need to secure exter- focused on this industry (it “..the Pharma Economic Act. Ever invested in this opportunity and
nal counsel outside the scope of revolved around reimbursements invested significant funds in R&D
the PLA, we look for law firms since its enactment by Parliament
and claw backs from the National in Hungary. Unfortunately, this
that are practical, with good Health Insurance Fund). in 2006, it was amended tax incentive was cancelled as of
knowledge in the relevant prac- substantially at least 25 times. “ July 1, 2011 and, on top of it, it
tice area. When I say practical, I Throughout the case, I practically
had to learn the industry inside was cancelled with a retrospec-
mean to say that it is annoying HL: There is a lot of buzz at tive effect going back to 2010.
when you receive 20 pages of out. I found it challenging and
interesting and I was kind of the moment about the Again, if you look at it from a
admittedly beautiful legal analysis recent Széll Kálmán Plan. legal perspective, a new piece of
when you simply needed a drawn into this world.
GB: It is one of many changes in legislation coming into effect
straight-forward short answer. HL: In general, what do you with a one year retrospective
While I would be delighted to find to be the most chal- the past 5 years. Like many
things in life, it is not black or effect is unheard of and against
read interesting legal analysis lenging aspect of working the very idea of the rule of law.
(which has a beauty of its own) in this industry? white. Every few months we
have to adjust to changes that This I find detrimental to society
and emerge into questions of as well as to the rule of law itself,
academic importance (and we GB: As strange as it may seem, never really lived out their life
the unpredictability. Regulations before they were changed again. not to mention the companies
must find the time for that some- and all the scientists and universi-
time!), unfortunately, in today‟s change virtually every month and I agree that Healthcare needs
change dramatically at least every reform, and there are certain ties that would have potentially
world, you have to deal with so benefited from this tax incentive,
much information on a daily year, if not more. To illustrate elements pointing to true correc-
this, take one of the most tion and reform. However, there or members of society that
basis, that you simply don‟t have would have benefited from the
the time to indulge. important pieces of legislation are also many elements that are
governing our industry, the of purely financial, cost-saving, research results. At the same
On the other hand, there are a Pharma Economic Act. Since its and cost reduction nature, and time, the move will also impact
few things that many firms enactment by Parliament in for true reform you would need the country‟s credibility and will
present in proposals that don‟t 2006, it has been amended investment in public healthcare, cast a shadow over investor trust.
have such a significance. For substantially at least 25 times. investment that is not financed The other measure is the sales
example, firms like to put These amendments have oc- solely by the Pharma companies. representative tax changes.
forward a large number of curred at all levels, from promo- Originally this tax was intro-
HL: Let us dissect it a bit as
lawyers. That I feel is almost tional rules to applicable taxes or duced in 2007 and, back then, all
it is a very comprehensive
never relevant when compared fines, and even to regulatory the pharmaceutical companies
legislative package. Which
to their expertise level. Another structures. An ever-changing reduced the number of their sales
aspect of this plan do you
thing I tend not to follow is all regulatory environment is chal- representatives considerably.
believe will damage compa-
the different awards or rankings lenging but after a certain point it
nies the most?
that they showcase when doing a simply goes against the basic Now this tax has doubled from 5
pitch. Don‟t get me wrong, I principle of the rule of law, and GB: Unfortunately I cannot pick million HUF to 10 million HUF
don‟t mean to devalue these at while we have a dedicated legal only one, but I will limit it to per year per sales representative.

PAGE 10


Initial numbers indicate that at combating wonder pills and India, sometimes transiting introduced, which offer much
least 1000 people industry-wide counterfeit medication. The through Western Europe to better protection. The only
will be made redundant as a re- results are already significant and make the packages less suspi- existing problem that I would
sult and we are talking about can be seen weekly in the news cious. One time a huge shipment identify is that the Patent Protec-
highly qualified people who were media. of pillows came in from a coun- tion Office‟s processes are still
paying a considerable amount in try in Asia. Some were full of quite slow. For example, we had
HL: I know you have quite a
personal income and social secu- few interesting stories in- pills, others had blisters, and a patent claim that lasted from
rity taxes, ultimately making the others had the information leaf- 1994 until 2010.
volving counterfeits.
Government lose out much more lets and the hologram stickers. HL: Since Pfizer has such a
on the long run than they expect GB: Indeed. The one product All separately, as they say, “to be
wide global footprint, what
to earn via these taxes. Quite that is most threatened by coun- assembled” . role do you, as a GC for
literally it will turn out to be a terfeits is one of our erectile
case of putting some additional dysfunction products. As strange “..due to the applicable legislation, I Hungary, play in the patent-
money in one pocket while loos- as it is, due to the applicable cannot say the name in this ing processes?
ing much more from another legislation, I cannot say the name interview. A good example of GB: Most of our patents are
in this interview. A good exam- “sensible” legislation. “ created globally. There are a lot
ple of “sensible” legislation. We of them through the discovery
“..a new piece of legislation coming Unfortunately the Hungarian
fight counterfeits on a daily basis process. Our primary role in the
into effect with a one year regulatory system is not about
as they hurt our bottom line of legal team here, when it comes
retrospective effect is unheard of and treating patients as “adults”. It
course, but that is nothing to this issue, is patent enforce-
against the very idea of the rule of aims at limiting information to
compared to the health risk to ment.
law. “ patients so they have to go on the
patients. We need to make the
internet and look for it from HL: When were you most
general population aware of the proud to be working for
HL: In light of the R&D tax other jurisdictions and sources in
huge dangers that come with
incentive cancellation you foreign languages. How that is Pfizer?
using such products. We found
mentioned, is it realistic to beneficial, I really don‟t know. GB: Luckily, it happens often.
fake pills that contained brick
expect more and more part- The regulators often use the One proud moment was when
powder and food paint, and those
nerships between pharma- reasoning that pharmaceuticals we concluded a number of
were the happy scenarios. In
ceutical companies aligning are dangerous and can be abused research agreements and partner-
certain cases we even came
their efforts in R&D? and one can kill oneself with ships with Hungarian universities
across illegal narcotics and wall
them. Under this logic, we and academic institutions. An-
GB: I believe this is a natural paint on the pills (discovered
should not sell knives and buses other was the launch of the Dis-
process that is going to gain when the patient‟s hands and
and trains should not run either. tribution and Logistics Centre for
momentum globally, not just in tongue turned blue), and we
I‟m really hoping that this men- CEE here in Hungary which
Hungary. It is extremely expen- even received calls reporting
tality will change and patients involved a massive amount of
sive to develop a new product hallucinations. We naturally
will be treated as adults who can work and coordination. Last but
with numbers reaching 3 to 4 want to investigate these cases
receive valuable information and not least, and this occurs regular-
billion dollars before a product is with our global security group,
make judgments based on that. ly every time we launch a new
launched so I do expect a grow- but usually when we ask “where
ing trend towards such partner- did you buy the pills” the imme- HL: Patents play a major product that will touch millions
ships. Further, the research scene diate reaction is „well..I would role and many see it as one and save or considerably improve
is changing, and nowadays its not rather not tell you‟. When we ask of the biggest headache in their lives, one cannot help but
about one big blockbuster prod- for the batch number, from the the industry. What could be feel proud to be a part of a com-
uct, but advancing research step very first couple of digits we improved in Hungary to pany that is truly making a differ-
by step to find cures. know instantly we are dealing mitigate this? ence. If I would want to be a bit
with a counterfeit product. sarcastic, I‟d say I could tell you
GB: I think that, in Hungary,
HL: What are the positive Counterfeiting pharmaceuticals is that I‟m very proud of a new
elements of the plan over the past few years a lot has product developed recently for
big. The return is bigger than on been done. Prior to EU acces-
launched on July 1? illegal narcotics and the prison lung cancer, but I can‟t, due to
sion, only process patents were the applicable promotional rules,
GB: I believe the single most sentences are significantly shorter in place. This simply meant that
for the time being. as if I named the product, and
important benefit is the fact that if you would simply stir a mix you published it, we would both
Gyemszi‟s, the new regulatory Also, every now and then we from right to left as opposed to
be in for a huge fine.
body for the industry and the receive phone calls from border the other way around you could
NAV‟s (National Tax and Cus- police and customs that they copy the exact mix needed to Since the interview, in addition to
toms Authority) scope and discovered counterfeits coming produce the patented drug. Since Hungary, Gergő became Legal Director
authority were strengthened in in from Australia, China, and 2004, product patents have been for the Czech Republic and Romania.

PAGE 11


The Széll Kálmán Plan puts increasing pressure on
pharmaceutical companies
dr. Ildikó Csák, Réczicza White & Case LLP
While pharmaceutical companies made with respect to the sales Comparative Data, as opposed to
have been quite adaptable to the representatives they have the 20% threshold applicable as
continuous changes in the employed; in the amount of their per the old rules. If the R&D
regulatory environment, the total adjusted R&D expenditure expenditure is less than 70%, but
measures that have been put in (“R&D Costs”) as shown in their more than 30% of the Compara-
place as part of the Széll Kálmán year-end accounts. tive Data, the allowance is
Plan caused a major stir among restricted to 50% and 20% if the
pharmaceutical companies, as In order to qualify for the R&D expenditure is below 30%,
well as their employees. allowance, the taxpayer should but over 20% of the Comparative
have incurred R&D costs in the Data.
1. Main measures amounts exceeding 20% of the
As of July 1, 2011, the Hungarian proportion of the amount of state The amendments have also
government implemented the subsidy received under the social caused the R&D allowance to lose
following measures affecting security reimbursement scheme effect as of January 1, 2012,
pharmaceutical companies: based on the sale of pharmaceuti- closing the above R&D Costs
cal products sold in pharmacies, related tax incentives from the
i.increase of the tax payable by and the manufacturer price or end of the year.
“..several companies have pharmaceutical companies on the import price of the same products
calculated their 2010 sale of subsidized products from (the “Comparative Data”). 4. Implications
12% to 20%;
R&D expenditure The allowance could be claimed
ii.increase in the fee paid for the The amendment reduced the
assuming a reclamation of monthly in the form of a extent to which the allowance
registration of pharmaceutical reduction of the payment
100%, however, due to sales representatives; may be claimed in comparison to
obligations in subsections (i) and the allowance which was available
the retroactive legislative iii.introduction of more stringent (ii) above, starting from the under the legislation in force in
changes, many companies regulations relating to promo- fourth calendar month of the year the tax year when the qualifying
will only be able to tional activities (notification obli- following any given year when R&D spending was affected.
gations, increased fines, etc.), the qualifying R&D Costs were
reclaim 20-50% or and incurred up until the full amount In view of the laws in effect prior
nothing at all, causing of the R&D Costs have been to July 1, 2011, several compa-
iv.retroactive legislative changes
significant losses to the credited. This means that the nies have calculated their 2010
regarding the deduction of R&D
allowance with respect to the R&D expenditure assuming a
affected companies. spending.
qualifying R&D spending of 2010 reclamation of 100%, however,
While all these measures have had was to be claimed in 2011 in the due to the retroactive legislative
a significant impact on pharma- form of a deduction from the changes, many companies will
“Due to the effect of the ceutical companies, the legislative monthly payments, up to the only be able to reclaim 20-50%
changes regarding the deduction amount of payments made on the or nothing at all, causing signifi-
changes on their of R&D spending may be the
same grounds in 2010. cant losses to the affected compa-
profitability and together most onerous and controversial. nies.
3. R&D tax incentive as of July 1,
with the increase of the
2. R&D tax incentive prior to 2011 By way of an example, a pharma-
sales representatives July 1, 2011 ceutical company deducted 100%
The new measures reduce and
registration fees, eventually eliminate the R&D tax
of R&D expenditures from its tax
pharmaceutical companies Since January 1, 2010, marketing payment obligations starting Jan-
allowance.
authorization holders have uary 1, 2010 in its accounts.
may be forced to received a reduction of up to As of July 1, 2011, market Accordingly, the company calcu-
reconsider their 100% of (i) monthly payments authorization holders may only lated it would be refunded HUF
investments in Hungary.” they have made with respect to receive the same allowance if the 2.8 billion of the payments made
their subsidized turnovers and (ii) amount of R&D Costs incurred in in year 2010 and another HUF
monthly payments they have 2010 exceeds 70% of the 0.4 billion for January-March of

PAGE 12

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