VZCZCXRO7428
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHFR #0409/01 0661713
ZNR UUUUU ZZH
R 061713Z MAR 08
FM AMEMBASSY PARIS
TO RUEHC/SECSTATE WASHDC 2181
INFO RUCPDOC/USDOC WASHDC
RUCNMEM/EU MEMBER STATES COLLECTIVE
RUCPDOC/DEPARTMENT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 02 PARIS 000409 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
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 2008 ANNUAL REVIEW 
 
 
NOT FOR INTERNET DISTRIBUTION 
 
REF: A) STATE 9475  B) 07 PARIS 834 
 
¶1.  (SBU) Summary: Post has reviewed PhRMA's Special 301 
submission on France and recommends against inclusion of 
France on the 2008 Special 301 Watch List.  Cost 
containment efforts on the part of the national healthcare 
system create a challenging environment for the 
pharmaceutical industry, but also reflect broader industry 
dynamics that are not unique to France.  On narrower issues 
of IP protection, Post understands that a French judge 
authorized the marketing of a generic prior to patent 
expiration sometime prior to 2007.  The GOF subsequently 
established a consultative mechanism (in early 2007 Q ref 
B) to ensure that appropriate protections are provided to 
on-patent drugs.  Industry representatives say this is a 
Qmajor improvementQ to the IPR environment.  End summary. 
 
Intellectual Property 
--------------------- 
¶2.  (SBU) An Addendum to the Framework Agreement between 
the French State and the pharmaceutical industry, 
established in January 2007 (ref B), introduces a procedure 
to improve pharmaceutical patent protection. 
Pharmaceutical companies provide patent expiration and 
other information to FranceQs Economic Committee on Health 
Products (CEPS), which in turn shares the information (at 
the request of the patent holders) with pharmaceutical 
laboratories.  Per the Addendum, a generic product cannot 
go to market more than six months before patent expiration 
if it has been notified to the CEPS.  If a laboratory 
believes it can commercialize a generic product without 
breaking patent law, it may advise the CEPS, which in turn 
informs the originator of the patent. 
 
¶2. (SBU) Claude Bouge, Director for Economic Affairs at the 
French Pharmaceutical Association LEEM (60% of whose 
membership consists of foreign companies), told econoff on 
February 29 that industry sees the new preventive system as 
Qa major improvement.Q  Bouge noted that in a case 
involving a U.S. firm prior to the 2007 Addendum, a French 
judge had authorized the marketing of a generic product 
prior to the patentQs expiration.  Calling the incident 
"unfortunate," Bouge said the Addendum had succeeded in 
creating a Qclimate of trustQ and that there had been no 
recurrences since its implementation. 
 
Healthcare Budget Constraints 
----------------------------- 
¶3.  (SBU) The share of healthcare in FranceQs overall 2007 
social security deficit was 6.2 billion euros.  It is 
expected to grow to 7.1 billion euros in 2008 unless more 
cost-cutting measures are taken. LEEMQs Bouge estimates 
that nearly 60% of overall healthcare costs currently go 
towards care for patients who suffer from long-term 
illnesses and related prescription drugs.  Spending in this 
category grew by nine percent in 2007, he claims.  LEEM 
announced on January 11, 2008 that overall sales of 
reimbursable products grew by 4.5 percent in 2007 to some 
19.5 billion euros, a major jump from industry expectations 
of a one to two percent increase. 
 
¶4. (SBU) The 2008 Social Security Law includes some 118 
articles containing measures designed to address the social 
security deficit, ranging from the introduction of co- 
payments to efforts to cut fraud related to work accidents. 
The GOF notes that currently 90% of doctor office visits in 
France end with the patient receiving a prescription, twice 
the rate of some EU partners.  Pressure on pricing and 
aggressive promotion of generics are clearly part of the 
GOF strategy to manage the costs of the state reimbursement 
program.  But it is part of a broader strategy to 
rationalize what many observers believe is a serious 
prescription drug over-consumption problem. 
 
¶5. (SBU) LEEMQs Bouge admits there are no easy policy fixes 
to current healthcare deficits and says the real challenge 
is not so much FranceQs regulatory environment, but rather 
a worldwide evolution in the industryQs business model. 
Bouge says LEEM favors deep-seated structural reform of the 
current French system -- particularly as relates to 
medicines for long-term illnesses -- even if that 
ultimately reduces turnover.  This would be preferable to 
increases in taxes or further price pressure, he says. 
Whatever the solution, Bouge says industry should not be 
 
PARIS 00000409  002 OF 002 
 
 
considered as a short-term "adjustment variable of social 
security deficits."  Long-term measures that create a more 
predictable operating environment are far preferable to 
QexceptionalQ GOF measures that attempt to address near- 
term shortfalls. 
 
¶6. (SBU) LEEM intends to renew discussions with French 
authorities over pricing at the end of 2008.  As PhRMA 
explained in its submission, medicines receiving the ASMR 
I, II, III (and even a quarter of category IV) designations 
(which reflect decreasing levels of innovation) benefit 
from a fast-track approval procedure introduced last year. 
The first three categories obtain a European average price 
for reimbursement.  Industry wants to extend ASMR 
designations beyond the current five year validity period 
to "get return on investment in innovative products."  The 
GOF had originally proposed a three year period but 
compromised on five.  In the end LEEM believes industry is 
able to buy extra time by starting discussions on ASMR re- 
designation -- during which time the product continues to 
benefit from the previous designation -- at the end of the 
five years.  LEEM estimates this will provide an additional 
six months of coverage under the initial innovation rating. 
 
¶7.  (SBU) LEEM believes that 2008 will be an important year 
for moving forward on a number of issues raised by PhRMA. 
In April government and industry will meet as part of a 
yearly exercise to give "new impetus to therapeutic 
innovation."  Industry will be able to put its issues on 
the table.  GOF officials and the French pharmaceutical 
industry also want to promote the attractiveness of France 
as a major European destination for U.S. laboratories. 
They believe U.S. firms are not carrying out enough 
clinical studies in France and intend to make concrete 
proposals to boost R&D in France.  U.S. labs will take part 
in these discussions. 
 
¶8. (SBU) Comment:  France remains one of the largest 
pharmaceutical markets in Europe, ranking second only to 
the United States in per capita drug expenditures according 
to OECD data.  In a tight budgetary environment it is not 
surprising the GOF is looking to rein in high levels of 
reimbursable spending.  We will remain vigilant to the 
evolution of GOF social security spending and its impact on 
the U.S. pharmaceutical sector.  But as the pharmaceutical 
sector worldwide adapts to evolving business conditions, we 
do not/not believe the state reimbursement program here 
warrants Special 301 Watch List mention. 
 
Stapleton