? OTC Pharmaceuticals: international market entry in Hungary by Olga Sviridova GGSB, Moscow MBA Executive summary Hungary is one of the advanced emerging markets in Central and Eastern Europe. It is part of European Union which simplifies regulation and trade when entering the market. Hungary has favorable location and advanced infrastructure in terms of logistics, established partners, life science companies. OTC share of the total European pharma has a long track record of solid growth, often at double-digit rates, consistently outperforming the pharmaceutical sector. Evidence-based industry forecasts show commercial potential. Greater promotion of self-medication, increased access through expanding channels of distribution, national healthcare system’s focus on reducing budgets make OTC market attractive for new entrants. However to be successful in long term, a company should build appropriate enter, distribution and promotion strategy, which include thorough selection of products, timing of entry, innovative distribution channels and marketing technologies. OTC pharma market in Hungary has substantial entry barriers; however opportunities for future growth and market expansion deserve not to be overlooked. Table of Contents Pharmaceutical industry in Hungary overview 4 Analysis of market entry portfolio 7 Entry strategy 9 Distribution strategy 11 Promotion and marketing communication 12 Pricing 14 Potential risks and opportunities 15 Conclusions and recommendations 16 Bibliography 18 Appendix 20 Pharmaceutical industry in Hungary overview Hungarian population is around 10M people. More than 72% of population is urban. Hungary has relatively low GDP per capita (Hungary: $11430; compared to UK: $37955; Germany: $38291; France: $34140) and significant growth potential (in last 5 years average GDP growth rate is 0.54%). Corporate tax rate is 19% (compared to 23% in UK, 29.65% in Germany and 33.3% in France). Let’s consider the Hungarian pharma market from the standpoint of PESTEL analysis. Political. In 2004 Hungary joined EU; hence it has adopted the EU Transparency Directive, which states that the price approval process and reimbursement is governed in accordance with the European regulations. Reference pricing system is introduced in Hungary [ CITATION Dyl12 l 1033 ], which establishes that prices are set free by the manufacturers so far as the product is not reimbursed by the National Health Insurance Fund Administration (NHIFA). Government is recognising the long term cost benefit to preventive medicines, it has started healthcare reforms to cut costs and introduce new price control measures. Economic. Economic growth in 2014 was 2.45%. Many barriers to free trade have been removed, leading to a period of trade growth. Hungary is considered to be an advanced emerging economy with above average per capita spending on drugs. Private healthcare expenditures are increasing. Balance of health and personal care consumption and revenues of pharma companies is likely to shift from developed markets to emerging markets. Sociocultural. Socio-demographic changes (the balance shift between young and old, burden of chronic diseases, total healthcare expenditure and per capita health spending is increasing) put a growing burden on healthcare systems, which have responded with an increasing focus on managing costs, limiting treatment options for physicians and their patients. National healthcare system arguments in favor of an OTC medications class based on possible decrease in number of physician visits and a budget savings that might result from non-prescription status. OTC medications are available to treat easily self-diagnosed and uncomplicated conditions without Health Care Professional (HCP) supervision, approved on the basis of effectiveness and safety, which effective dose is known and label is comprehensive. Technological and environmental. Current technological development in Hungary is ambiguous. On one hand, it has made a big step forward during the last 25 years. On the other hand, negative consequences of the financial crisis and socio-economic problems aggravation lead to technological degradation. Advantageous geographic location, integrated supply chain solutions help many sectors of the economy. Knowledge economy index is comparable to other mature European countries. Relatively high performance in technology intensive sectors (telecoms, IT, R&D, bio-technology), skilled and productive labor force, a lot of industrial parks and logistics centers, investment-friendly environment encourage entrepreneurship. One of the main objectives of the government’s strategy is to promote the sustainable development through innovation and research, improve levels of environmental protection. Legal. New legislation is getting more rigorous, it has started to shift decision-making responsibility from physicians to pharmacies. Payments are shifting from the state to the private secto