Governmental incompetence and the economy in today’s Hungary

It often happens to me–and I assume that I’m not alone–that I have so much news to digest daily that some important item passes me by. Or that I have a kneejerk reaction to a piece of news that is only partially informed because I don’t grasp all of its consequences.

This is what happened when I first heard about LMP’s idea to limit the size of supermarket chains and department stores. I became even more worried when Fidesz discovered that the idea might serve its own nationalistic and political purposes. Parliament within a few weeks passed a law stipulating that the maximum size of a department store or supermarket would be 3,300 square feet. If a company wants to build a bigger store it has to apply for an exemption.

This in itself is nonsense and certainly doesn’t serve the interests of the consumers. Moreover, it gives an opportunity for corruption and discrimination. If the owner has government connections, the Ministry of National Economy–György Matolcsy’s domain–will approve the application. If it is a foreign company, no exemption will be granted.

Well, this is exactly what happened even as the Hungarian construction industry was practically dead.  According to Bloomberg, the Ministry’s statistics on granting exemptions are grim. The German discount retailer Lidl applied just this year for 14 exemptions but none was approved. Capital investment that is so badly needed today is drying up, and this limit on new store sizes “symbolizes the uncertain environment in which developers must work.” The dreadful situation that this decision created became obvious only a few months after its adoption.

This is also what happened with the law on the ownership of pharmacies passed a year and a half ago. At the time I listened to all sorts of interviews with people who were for or against the new law. But the real horror of this law didn’t hit me until this morning when I listened to an interview with a man from Pécs who together with his extended family, which includes three pharmacists, owns nine pharmacies. It looks as if he will be forced to sell a 51% stake in these pharmacies to his employee pharmacists, most of whom are not even interested in the deal. What kind of democracy is it where one has only limited economic opportunities? How can anyone think they can do this  in a capitalist society? Well, Viktor Orbán and his friends obviously have no such compunctions.

But let’s go back a little on the topic of pharmacies. The privatization of pharmacies began after the change of regime, and by 1994 all pharmacies were in private hands, though the new owners had to be the pharmacists themselves. There was also a restriction on the number of pharmacies based on geography and demographics, a practice that at the time was not unique in Europe. Since then, however, the rules have pretty much been lifted in sixteen countries.

In Hungary the liberalization of the rules and regulations governing pharmacies took place in 2006. You may recall the upheaval. Pharmacy owners, with the political help of Fidesz, objected to any Tom, Dick, or Harry opening a pharmacy in any old place he wanted. They also objected to the sale of over-the-counter medications like Aspirin in supermarkets and gas stations. Certainly losing their monopoly on the sale of Aspirin and other similar medications cut into the existing pharmacies’ profit.

But there was definitely a need for more pharmacies, and once the geographic and demographic restrictions were lifted 600 new pharmacies opened. Also, after 2006 ownership was no longer restricted to pharmacists. Wholesalers and even pharmaceutical companies, including foreign companies, could own pharmacies as long as there was a pharmacist present at all times.

Proudly announced:
Pharmacy owned by Hungarian pharmacist

The new law passed on December 20, 2010 included all sorts of amendments to the 2006 CLXXIII Law. One of the most important of these amendments specifies that a company–as opposed to a person–can “own” a pharmacy only if at least 51% of the business is owned by the pharmacist on the spot. The rationale? “The more secure and better service of the patients.” What? Why?

This change of ownership will take place in two stages. By January 1, 2014 the pharmacist or pharmacists will have to own 25% of the business and by January 1, 2017 they will have to own more than 50%. Even those who are behind this madness have to admit that the salaried pharmacists simply don’t have the money to fulfill their “obligation” of owning  25% of the pharmacy they are working for. They would need massive government help to do so.

From here on pharmaceutical companies, wholesalers, and people that already own at least four pharmacies are not allowed to expand and acquire more stores. They are not being forced to get rid of what they currently own, but they still have to sell more than 50% of their business to their employees.

Although the law doesn’t specifically mention the ownership of pharmacies by foreign companies, I have the distinct feeling that this law also aims at restricting their role in the retail sale of drugs. First of all, I learned from an interview from last January with the head of the Association of  Pharmacists, who is very happy with this new law, that foreign companies were planning to expand their pharmacy chains, in his opinion a very bad development. By way of explanation he could say only that selling pharmaceuticals is “in the national interest” (nemzetpolitikai érdek). He also had no rational explanation of why service would be better if the pharmacists owned 51% of the business.

One thing, not in the interest of the consumer, is definitely true: the price of drugs will go up due to the small size of the businesses. If someone has 20 pharmacies and can take advantage of bulk orders that pharmacy will be able to sell for less. Moreover, due to all sorts of other government restrictions on the price of drugs, pharmacies that are short on cash are unable to order larger quantities of the same drug. So, it often happens already that the customer is told that he will have to come back because this particular pharmacy doesn’t have the medication in stock.

I’m no constitutional lawyer, but this law must surely be unconstitutional. Even Barnabás Futó, the right-wing lawyer who takes up every case that in one way or another is connected to Fidesz, admitted during an early morning political program on MTV last January that this law was most likely unconstitutional. The pharmacists who are adversely affected asked Pál Schmitt not to sign the law, but they must have known that there would be no chance of Schmitt not signing something put in front of him.

So, here are two new laws, both of which will inflict terrible damage to an already fragile economy. And I didn’t even mention Hungary’s more than fragile, almost fractured democracy. How can all that be undone? It will take a long time, and I am not at all sure whether it can be done at all.

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Kim Lane Scheppele
These are indeed important developments. They are in potential violation of EU law (particularly if foreign firms can never get waivers that domestic firms get) and also in potential violation of the Hungarian constitution. Article M says: “(1) The economy of Hungary shall be based on work which creates value and freedom of enterprise. (2) Hungary shall ensure the conditions for fair economic competition, act against any abuse of a dominant position, and shall defend the rights of consumers.” But the provision of the 1989 constitution that guaranteed that Hungary is a “market economy” is now gone. That would have been the clause under which the old constitutional court would have decided the question and it had an elaborate jurisprudence on what market economies require. Why does that matter? The Constitutional Court has provisionally decided that its prior precedents are still “good law” in cases where the language of the old and new constitutions is nearly identical, which is true for many (though not all) of the rights provisions. But in a case like this, where the language to be interpreted is so different between the two constitutions, the Constitutional Court will treat the topic as if it has never… Read more »

“Scroundels”? Much worse than that.
It’s time for thinking people to sit quietly, contemplate their navel, and wonder what is going
on and why.
Grown men, supposedly bright, and patriotic Hungarians are deliberately sending the country
down the road to ruin. Why would they do this?
Well, one key answer is MONEY–A LOT OF MONEY. But corrupt governments, in Hungary or elsewhere, have ripped off their countries without setting up the ruin of their country.
What gives, then?


I wonder what happens to a pharmacy where the employee-pharmacist does not have the money to buy his/her 51% ? Does the taxpayer pay for it somehow? Or do they have to close those pharmacies?


This national legislation of maximum store sizes is ridiculous. In the US neither the federal nor the state governments get involved to this level. Local zoning rules define some requirements and in those cases where large stores are endangering small local stores, they are occasionally strictly applied. For example some Walmart super stores were stopped from opening by applying zoning laws.

Louis Kovach

“Pharmacy ownership laws are more prevalent in Europe. Eleven of the 27 European Union member states (Austria, Cyprus, Denmark, Finland, France, Germany, Greece, Italy, Luxembourg, Slovenia, and Spain) do not allow non-pharmacists to hold a majority stake in pharmacies.

Some countries, such as Spain, allow licensed pharmacists to own only a single store and place geographic and demographic requirements on the pharmacy’s location. Other European countries allow pharmacists to own more than one store. In Germany, for example, a licensed pharmacist may own up to 4 stores.

In 2009, the European Court of Justice (ECJ) upheld pharmacy ownership requirements in its member states. The ECJ ruled that, although these laws restrict the freedom of establishment and the free movement of capital, they are justified because they ensure safe and high quality medical services. “Where there is uncertainty as the existence or extent of risks to human health, it is important that a Member State should be able to take protective measures without having to wait until the reality of those risks becomes fully apparent,” said the ECJ in a press release on the ruling.”
Maybe a little more homework is needed……


Not bad, Louis. Not bad.


Another funny EU decision.

Are hospitals only allowed to be owned an operated by physicians? And then what kind of physicians? Or all hospitals have to be strictly specialized, and someone with an earache can only go to a hospital owned and operated by an ENT specialist physician? As a matter of fact all patients must diagnose themselves first, to decide what kind of emergency room to go to. Otherwise how can the “safe and high quality medical services” be assured?

After all, if a pharmacist is necessary to own a pharmacy, where nowadays the most used skill is to count pills form a large box, place them in a small box, print labels for the small box and yes, provide instructions to the patients about the side effects, then a hospital where people may be performed surgery on, definitely requires a much more stringent ownership and operational standards.


I have not lived, just visited Massachusetts – but don’t they have a law there that restricts Walmart & other chains to open too many stores? The closest Walmarts to Boston are still in Quincy, Lynn & Framingham – just checked on google.

The rationale given was to support small store owners.

Of course, this law is terrible for the building industry – in Hungary or elsewhere.

Kim Lane Scheppele
Louis is right that pharmacy regulation constitutes a highly specialized and quite unusual area of European law. The Commission has been fighting the pharmacist-owner regulations for years and the ECJ has upheld them, though with a lot of language that indicates that the ONLY reason for upholding these regulations is to guarantee quality of service and supplies. If national legislation openly touted other motives, it is not so clear that the ECJ would approve. The cases that have been brought so far do not deal with the exclusionary effects of these laws – that they disproportionately benefit nationals of the country that has such regulation. i don’t know what the ECJ would do with that challenge. Box stores are widely permitted across Europe, but there is a move in a number of countries to do what Hungary is doing – which is to limit the size of the biggest ones. Here, too, I don’t imagine problems with EU law on this score because box stores, in the places where they exist, tend to have monopoly effects and a regulation based on the concentration of market share in these stores would no doubt meet with European approval. But here, too, i… Read more »

In how many countries have pharmacies been reregulated or “deliberalised”? Was it done so in a similar way to the current Hungarian government?

The major problem with the plaza ban is the lack of transparency. This is a link to an English language news item from a few months ago.

London Calling! ‘Quality of Service’ and ‘Pharmacists’ are mutually exclusive in Hungary. There are too many small ‘shops’ with too little stock to be able to offer any degree of a decent ‘service’. My Partner’s mother requires a drug only available on prescription – and is as rare as rocking-horse manure in Hungary. As I reported before – there is no ‘service-level agreement’ with their customers. If it’s not in stock you just get the Hungarian ‘grimace’ with no offer to get it within a certain time. Or get it at all. After trying four ‘shops’ (And they really are shops with a white be-coated shop-assistants) – you give up. They peer out from glass storage shelves which are stocked with all the products you can buy cheaply in English supermarkets. But they can sell you a product with 25% of the active ingredient – off prescription – at four times the cost. And definitely not what the doctor ordered. The ‘supercilious’ attitude of the ‘white coats’ is completely unjustified. Quality of Service? Don’t make me laugh! And the doctor’s prescribe it KNOWING it’s not available. (Did she not pay enough ‘gratitude’ money?) What to do? Well we send it… Read more »

It seems that in Hungary like in Germany e g pharmacists are a kind of “protected species”.

But there is some change coming:

In many EU-counties you find real on-line pharmacies (not the fake kind that sells blue pills etc …) where you can get otc drugs (Over the counter is the US definition of drugs you can get without prescription) at much lower prices and also prescription drugs (where the prices are often fixed, but you might get some rebate).

My nephew uses one of these for all the family’s needs and gets really good prices and fast delivery too. Some otc medicines we buy in Hungary for the whole family because they’re cheaper – of course a town like Héviz is well off regarding pharmacies compared to a small town in East Hungary …

BTW: We regularly visit CVS and Walgreen when on holiday in the USA (usually once a year) and also buy a lot of otc drugs for us and friends/family. For example Melatonin which helps with sleeping and jet lag is freely available in the USA.

Generally the drugs business is a kind of Mafia business – and I’m not talking about forbidden drugs …


I found the pharmacy situation in Hungary mystifying when I first visited eleven years ago. You couldn’t buy aspirin or paracetamol in supermarkets, but instead had to go to a strange little shop, apparently mostly stocked with herbal ‘remedies’ or folk ‘cures’ and even then they wouldn’t give you what you wanted, but instead a pain killer actually banned in many countries!

Now, as a father of two young children who spend a lot of their time here, ‘mystifying’ has turned into ‘worrying’. We have now resorted to bringing over all the medicines, etc we might need when we visit, so we are as little dependent on Hungarian health’care’ as possible.

What Orbán is doing is clearly madness, but he is right in one respect – Hungarian pharmacies DO need sorting out, and badly.


From what Charlie wrote I must suspect that the problem cannot be legislation. Is that what he describes representative? I have never asked about how the medical system works in practice but next time I have an opportunity to ask, I will certainly do that.

A little OT, but on the general theme of the shopping experience in Hungary: Whilst it’s nowhere near as bad as it used to be, the standard of ‘service’ in many shops is still appalling. Staff are actively unhelpful, and often rude, and will always carry on a phone call, or chatting to another member of staff, or checking something mysterious in or around their till, rather than actually dealing with a customer. Often even large foreign chains will have only one or two tills open, so huge queues rapidly build up – and yet there are always numerous staff around doing God knows what. The concept of all staff being till trained and ‘queue busting’ seems entirely alien here, even in places like Tesco (whose staff, incidentally, can often be quite as rude and unhelpful as in ‘regular’ shops). And yet there are always plenty of staff available to follow ‘suspicious’ shoppers around the store. Woe betide you if you do anything really odd like picking something up off a shelf to look at it, spending a long time in one section, or even (horror of horrors) going back to a section you’ve previously been to. And the greatest… Read more »

London Calling!

O/T Just a little fact I found interesting – when I was given a ‘Hungarian’ aspirin!

In England we spell aspirin with a small ‘a’ – as it is regarded as a generic. And is available in supermarkets here for as little as 15p (50Ft) (25 cents US) for a packet of 30.

In other parts of Europe ‘Aspirin’ is spelt with a capital ‘A’.

Aspirin is still protected by patent where it is sold with a capital ‘A’ owned by Bayer. Apparently, as part of WW2 reparations, Germany had to forgo the royalties from the drug – so anybody in the ‘Allied’ world can make it.

Must have helped with all those headaches caused by the bombs!

(And you all know that prehistoric man chewed willow bark when he had a toothache? Aspirin is medically called Salicylic acid – and the latin name for williow is salix! And aspirin is still being revealed as a wonder drug – but I have to stop now!)




Kirsten – it’s pretty bad. If the arrival of Orbán hadn’t made us decide not to live here, it would have been the state of the ‘health service’.

Arrogant doctors, ancient hospitals, hours of waiting around, patients treated as if they were nothing but a problem, supposedly educated doctors prescribing herbal and folk ‘remedies’, an ‘awareness’ of patients’ needs and medical practise at least 50 years out of date, and the assumption that whatever is wrong with you, it can always be ‘cured’ with pills (even now, after 15 years, my wife finds it odd that doctors in the UK don’t always prescribe something).

And that isn’t to mention the brown envelopes and the appallingly out of date attitude to maternity ‘services’ (being pregnant and giving birth are still regarded as if they were illnesses over here).

There are exceptions – dentistry, for instance, is often excellent, and amazingly cheap. And, as always, if you’re rich things are much better – well equipped, comfortable hospitals, polite doctors, all the latest equipment – but, for the average patient, it’s best to stay healthy in Hungary.


Re Charlie’s post – off-the-shelf packets of supermarket own-brand paracetamol (16 tablets) in the UK – 16p (60 Ft) – 1p a pill. In Hungary, from my experience, you can’t get unbranded aspirin, paracetamol or ibuprofen, but the pharmacist will happily bell you (eg) Nurofen, etc – which is EXACTLY the same drug, but sells for 20 times as much.

And yet Hungarians (eg my wife) are convinced that their system of pharmacies are vastly superior. Why? Because you get to speak to someone in a white coat before they rip you off or sell you rubbish.


bell? sell! Goodnight…

cheshire cat

Paul, you can buy cheaper paracetamol and ibuprofen from Hungarian chemists, still not as cheap as in Britain though. The cheapest paracetamol was called something like Efferalgan last time I checked, and they sell cheapo no-name ibuprofen in huge boxes, too. You need to ask for it specifically.

Algopyrin (metamizol monosodium?) is available in most EU countries, usually on prescription. I showed it to my British GP and he OKed it for occasional headaches, though he can’t prescribe it. That ban is probably a bit outdated.

But both you and Charlie are right: it is also my experience that Hungarian chemists stand out even in Hungary for providing very bad customer service.
Not enough competition might be one of the reasons. Another one is that they perceive themselves to be part of the medical profession and show the same level of arrogance towards the patients.

If your wife is a big supporter of Orban, did she still see the point of leaving the country? (We left more than 10 years ago, my English husband and I, then started the family here.)

cheshire cat

Oh, and aspirin’s is still available under the old Hungarian brandname Kalmopyrin, but I’m not sure how much cheaper it is than Bayer’s now.

” By way of explanation he could say only that selling pharmaceuticals is “in the national interest” (nemzetpolitikai érdek). He also had no rational explanation of why service would be better if the pharmacists owned 51% of the business. “ What national interest? WTH! Everything is related to national interest, it is getting on my nerves! But in actual fact they are the scumbags! At least our Louis pointed out it is to ensure safe and high quality medical services. So far, my experiences with pharmacists have been pleasant, because I just ask for the particular medicine, she takes from the shelf, punch in the til, I pay and that’s it! Not to undermine the profession, they are just cashiers in white coats. I can’t help to wonder, if they limit to only 1 pharmacist per pharmacy, how much cheaper the drugs would have been for the average people and the poor. Right now we stock up on Kalmopyrin or any type “OTC” aspirin, whenever they is a sale at our pharmacy chain. Otherwise, it is just too expensive. —- Paul, Too bad you didn’t have good experience with services in your city. In my city (it is more like… Read more »
cheshire cat

& Paul, did this bus-incident happen in Debrecen? Because if yes, I share your wife’s fate: last time I travelled by bus there, I stood up for ourselves to the bus driver. What followed was a 5-minute heated theatrical performance between the driver and I, which the passenger audience enjoyed very much (I guess). As for me, I was shaking and swearing for the rest of the day…unbelievable, really.

Kim Lane Scheppele
Eva S. Balogh : Kim Lane Scheppele: “The Commission has been fighting the pharmacist-owner regulations for years and the ECJ has upheld them, though with a lot of language that indicates that the ONLY reason for upholding these regulations is to guarantee quality of service and supplies.” Very weak argument. I really wouldn’t mind hearing the justifications. I don’t think they could easily convince me. Why would a pharmacy’s quality of service and supplies owned by CVS less safe and those in another pharmacy owned by a pharmacist. I simply can’t fathom. Yes, these are odd decisions of the European Court of Justice. The citations are (Case C-531/06 Commission v Italy and Joined Cases C‑171/07 and C‑172/07 Apothekerkammer des Saarlandes and Others [2009]. The Court only upholds such ownership regulations with respect to pharmacies. They declined to do so with regard to opticians and biomedical labs, among other sorts of medical establishments. Here’s the relevant quote from the most recent case on pharmacy regulation (Apothekerkammer): “It is true that such a rule excluding non-pharmacists constitutes a restriction within the meaning of Article 43 EC because it allows only pharmacists to operate pharmacies, denying other economic operators access to this self-employed… Read more »