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21 February 2020

Hungarian government settles pharma debts: An opportunity for factoring companies? | Hungary

Hungarian hospitals are facing problems paying for drugs and medical devices. Many suppliers have claims worth millions of euros and are having difficulty enforcing them against either the hospitals or the Hungarian government.

To resolve this, the Hungarian government entered into negotiations with suppliers whose claims exceed HUF 100m (approx. EUR 300,000). The government offered to assume the hospitals' debts and settle the claims directly from the central budget if the supplier agrees to a 20 % reduction on the principal and waives all default interest.

The hospitals accumulated debts over years and some suppliers have already taken steps to extricate themselves by selling their claims to factoring companies. Because of this, only the factoring companies can make a deal with the government; the suppliers that sold the claim cannot. The Hungarian government also suggested that further suppliers should consider selling their claims. While the government delegation does not yet have the competence to negotiate sold claims, it may be worthwhile for factoring companies to further explore this opportunity.