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Lucia A Keegan  03/06/2007 09:56:11 AM  From  DB/Inbox:  Lucia A Keegan

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UNCLAS    SENSITIVE     PARIS 00834

SIPDIS
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    ACTION: ECON
    INFO:   AMB AGR LABO UNESCO ECSO SCI SCIO TRDO ENGO
            ESCI DCM FCS POL ORA ECNO

DISSEMINATION: ECONOUT /1
CHARGE: PROG

APPROVED: ECON:SDWYER
DRAFTED: ECON:FRADOVIC
CLEARED: ECON:JHENNESSEY-NILAND FCS:JKOLODITCH

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FM AMEMBASSY PARIS
TO RUEHC/SECSTATE WASHDC PRIORITY 5352
INFO RUCPDOC/USDOC WASHDC
RUCNMEM/EU MEMBER STATES COLLECTIVE
RUCPDOC/DEPARTMENT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 02 PARIS 000834 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR EB/TPP/IPE, Jennifer Boger 
STATE PASS USTR 
COMMERCE FOR ITA 
 
E.O. 12958:  N/A 
TAGS: ECON EINV ETRD EUN FR
SUBJECT: FRANCE - SPECIAL 301 2007 ANNUAL REVIEW 
 
 
NOT FOR INTERNET DISTRIBUTION 
 
REF: State 007944 
 
¶1. (SBU) Summary: Following PhRMA's nomination of France for the 
2007 Watch List, Embassy officers have met with two of France's 
major interlocutors in the pharmaceutical sector: the French 
Pharmaceutical Companies Association LEEM, and the Price Negotiating 
Committee (CEPS) for reimbursable drugs.  Both industry and 
government representatives expect shorter timelines for the pricing 
and reimbursement approval process as a result of a recent annex to 
a 2003 GOF-Industry Framework Agreement.  They further note that, 
under pressure from industry, the 1.76 percent tax on 
pharmaceuticals was scaled back to 1 percent and that possible 
further reduction in the tax may be part of new incentives for 
innovative companies.  End of Summary 
 
The Key French interlocutors 
---------------------------- 
¶2.  (SBU)  During the week of February 26, Embassy Econ and FCS 
officers met with representatives of two of France's major players 
in the pharmaceutical sector: Beatrice Kressmann, Director for 
European and International Affairs of the French Pharmaceutical 
Industries Association (LEEM), whose 330 members (60 percent of 
which are U.S., Japanese and non-French EU companies operating in 
France) account for 97 percent of total sales revenues of 
pharmaceutical products for human use in France; and Noel Renaudin, 
President of the  Health Products Economic Commission (CEPS), which 
consists of government representatives from the ministries of health 
and industry as well as health insurance companies. 
 
Speeding up market access of innovative products 
------------------------------------- 
¶3.  (SBU) In January 2007 LEEM and CEPS signed an annex to the 
Framework Agreement that has governed their relations since 2003. 
This annex will allow a larger number of innovative products to 
benefit from a faster price approval mechanism under the 2003 French 
Social Security Finance Bill. LEEM's Kressmann said the annex also 
improves the environment for industry/government dialogue on a range 
of pricing and related issues, including on the potential 
introduction of generics onto the market. 
 
¶4.  (SBU) In France the price for a product is based on a price 
proposal by the company and an "ASMR" level, assigned by a 
Transparency Commission to reflect the level of the given product's 
innovation.  The Transparency Commission consists of industry 
representatives, independent experts and health officials.  The ASMR 
is determined by using three reference products sold in France: the 
most prescribed product; the least expensive product, and the 
product most recently listed on the reimbursed list.  The decision 
on the ASMR level has a direct impact on the price the company will 
be able to receive for its product.  ASMR category I drugs (the most 
innovative) essentially receive prices determined by producers, 
while category IV drugs (the least innovative) are allowed onto the 
market, but at the price of the drug's closest competitor. 
 
¶5. (SBU) The final price is established following discussions 
between the company and the CEPS on the basis of elements such as 
the size of the target population and the number of prescriptions 
for the condition or disease.  The 2003 Social Security Finance Bill 
introduced some flexibility by providing that a company's price 
proposal is automatically accepted unless challenged by the CEPS 
within 75 days of the decision by the Transparency Commission.  The 
CEPS' Renaudin said as long as companies respect the rules of the 
game -- including price proposals that fall within the range of 
prices elsewhere in the EU, and a willingness to practice full 
disclosure on issues that might impact price -- declaratory pricing 
is the rule rather than the exception.  This procedure, which 
previously applied to the more innovative products (ASMR I, II and 
III), has now been extended to ASMR IV products.  According to 
LEEM's Kressmann, improvements in the price notification procedures, 
including those introduced in the recently-negotiated Framework 
Agreement Annex, will have a "very major positive impact" on 
industry. 
 
¶6. (SBU) The CEPS' Renaudin says that France's approach to 
containing pharmaceutical costs revolves around three principles. 
First, the approach to innovation in the ASMR process has become 
somewhat more selective.  Renaudin says this is not an explicit cost 
containment policy (budget officials are not a part of Transparency 
Committee deliberations), but reflects a general consensus that true 
innovation should be awarded the top ASMR ratings, while drugs that 
provide at best marginal improvements should not.  Second, for older 
products (five years minimum) the Committee exercises pressure on 
pricing.  Third, there is an active policy to encourage generics. 
If patients wish to use a name brand drug, they may pay pharmacists 
directly and receive reimbursement later.  But for those willing to 
use generics, no initial outlays are required. 
Promoting Innovation 
-------------------- 
¶7.  (SBU)  Following a meeting of the Strategic Health Industries 
Council (CSIS) in February, Health and Industry Ministers Xavier 
Bertrand and Frangois Loos announced a pledge by the GOF and the 
pharmaceutical industry to increase spending on medical research and 
development by 10 percent over the next three years.  With the new 
target, the Ministers have stated that France's pharmaceutical 
industry could rival that of the UK in terms of money invested in 
research and development.  Currently the pharmaceutical industry in 
France spends 12 percent of revenue on research and development, 
compared to an average of 15 to 20 percent elsewhere. 
 
Remaining Concerns 
------------------ 
¶8. (SBU) LEEM's Kressmann highlights that negotiated price cuts have 
not affected the most innovative products (ASMR I, II and III), 
which remain at an EU price level.  While LEEM regards the February 
5 meeting of the Strategic Health Industries Council as positive for 
research and development in the pharmaceutical industry, it remains 
concerned about the industry's low growth rate of 1.5 percent in 
2006 -- expected to remain depressed through 2008 -- and the 
negative impact that will have on employment and French 
competitiveness.  Kressmann also complains about the 1 percent 
pharmaceutical tax, though she notes that the rate has come down 
from 1.6 percent.  GOF preference for generics (as outlined para 6) 
is equally problematic for the industry, she says.  Generics "must 
come at their appropriate time" and French generic policy 
encouragement does not represent "free and fair" competition. 
 
¶9. (SBU) But Kressmann said industry's main concern was over 
inconsistency in recent GOF policy on pharmaceuticals.  In order to 
plan ahead the industry required a more stable policy environment - 
notably on taxes and spending decisions -- than what it had 
experienced over the past several years.  That said, she thought 
many of the policy shifts were an aberration due to one-off efforts 
to reign in unsustainable deficit growth in French Social Security 
spending.  Her comments were partially echoed by the CEPS' Renaudin, 
who thought targeted pharmaceutical spending growth limits of one 
percent per annum were unsustainable, and that beginning next year 
spending growth would likely increase to levels slightly above GDP 
growth.  Kressmann concluded that from a policy view it is 
"difficult to say that (what the GOF is doing) is not fair, that it 
can't limit expenses."  Nevertheless she says the industry continues 
to argue its position, and is hopeful that it will get back to a 
more robust growth environment in the next two years. 
 
Stapleton