VZCZCXRO9390
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV RUEHSR
DE RUEHFR #2285/01 3530928
ZNR UUUUU ZZH
R 180928Z DEC 08
FM AMEMBASSY PARIS
TO RUEHC/SECSTATE WASHDC 5078
INFO RUCPDOC/USDOC WASHINGTON DC
RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHGV/USMISSION GENEVA 2974
RHEHAAA/WHITE HOUSE WASHINGTON DC

UNCLAS SECTION 01 OF 02 PARIS 002285 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON ETRD FR
SUBJECT: FRANCE'S PHARMACEUTICAL INDUSTRY SAYS BIOTECH, GENERICS KEY 
TO COMPETITIVENESS 
 
NOT FOR INTERNET DISTRIBUTION 
 
¶1. (U) Summary:  Lack of innovation, due in part to pricing and 
information controls, has caused the French pharmaceutical industry, 
once a world leader, to fall behind its competitors.  The French 
government has taken steps to support the industry, rewarding 
innovators and promoting research and development through tax 
incentives.  But the French pharmaceutical industry wants to 
convince the GOF that France can become a major center of 
biotechnological research and development, and the EU's leading 
generics producer. The pharmaceutical industry association LEEM, 
which includes U.S. companies, told us recently that U.S. firms 
willing to invest in biotechnology in France would be welcomed with 
open arms.  End summary. 
 
FRENCH PHARMACEUTICALS INDUSTRY: A SNAPSHOT 
------------------------------------------- 
¶2.  (U) Historically one of Europe's premier prescription drug 
producers, the French pharmaceutical industry has witnessed slowing 
growth, down to 3% in 2007 from double-digit growth rates in the 
1990s.  Following the removal of 400 products from the GOF's 
reimbursable medicines list in an effort to cut healthcare spending, 
sales of reimbursable medicines fell for the first time in a decade. 
 With one of the highest per capita consumption rates of medicines 
in the world, France has also sought to reduce pharmaceuticals 
expenditures by curbing prescription drug use, which in the recent 
past has accounted for 20 percent of healthcare spending. 
 
¶3.  (SBU)  Claude Bouge, Economic Affairs Director of the French 
Pharmaceuticals  Association LEEM, told us that although the current 
pharmaceuticals market is "not magnificent," experiencing slowing 
sales and a loss of attractiveness, the health sector is high 
value-added and remains one of France's major assets.  He warned, 
however, that unless the government acts quickly on a number of 
measures to bolster the pharmaceuticals industry, the sector could 
witness a significant decline in the years to come.   Bouge noted 
the growing number of layoffs of sales representatives (Pfizer 
recently let go 500 employees in France out of a total of 3,000 
staff) as evidence of current big pharma challenges.  Bouge welcomed 
President Sarkozy's move to increase tax incentives in favor of 
research and development (see para 4), but cautioned that the French 
Government needed to go further, or watch its six-billion euro trade 
surplus plunge to what trend lines indicate could become a 
five-billion euro trade deficit within the next five years. 
 
 
EFFORTS TO INCREASE INNOVATION, IMPROVE R&D IN FRENCH 
PHARMACEUTICALS 
--------------------------------------------- -------- 
¶4.  (SBU) While general drug consumption remains high, regulations 
in the pharmaceuticals industry, such as a complex and unpredictable 
tax system that punishes growth and, potentially, innovative 
companies, have delayed the introduction of more innovative 
medicines.  Following the lead of the EU, former Prime Minister 
Jean-Pierre Raffarin and industry leaders initiated a Strategic 
Council for Health Industries (Conseil Stratgique des Industries de 
Sant - CSIS) in 2004 to promote France's attractiveness, 
particularly in the biotech sector, through an annual meeting of all 
health stakeholders, both public and private.  These meetings have 
succeeded in speeding up the process of introducing pharmaceutical 
products on the French market.  The CSIS has also played a role in 
influencing the GOF to introduce, and increase, tax incentives in 
favor of research and development.    Industry associations, such as 
AGIPHARM (Association des Groupes Internationaux pour la Pharmacie 
de Recherche), an association of North American pharmaceutical 
companies established in France, are also advocating for increased 
research and development budgets, and a policy environment more 
favorable to innovation. 
 
¶5.  (U) The GOF's tax incentives to promote research and development 
are at the heart of the current policy to improve France's 
competitiveness.  The research tax credit ("Credit impot-recherche") 
has been multiplied by 1.6 between 2007 and 2008, bringing the total 
cost of the scheme to some 3.3 billion euros in 2008, according to 
Ministry of the Economy forecasts.  Large companies of more than 
10,000 employees will receive some 39 percent of that sum. 
 
RESTORING THE COMPETITIVENSS OF FRANCE'S PHARMACEUTICALS MARKET 
---------------------------------------- 
¶6.  (SBU) In addition to the research tax credit and creation of the 
CSIS, the French government has accelerated market authorization for 
medicines, from most to least innovative, and taken steps to expand 
the generics market in an effort to boost industry competitiveness. 
However, LEEM's Economic Affairs Director Bouge says that if France 
is to remain competitive, the government must improve the innovation 
environment for the biotech sector.  (American biotech firms would 
"receive the red carpet treatment" were they to invest in France, he 
said.) 
 
PARIS 00002285  002 OF 002 
 
 
On generics, Bouge said that although only one in five reimbursable 
drugs in France is generic, compared to 60% and 70% in Germany and 
the UK respectively, the GOF has been pursuing an aggressive 
generics policy that has produced results in a short period of time. 
 
 
Comment 
------- 
¶7.  (SBU) Despite complaints on tax policy, our conversations 
indicate the pharmaceutical industry does not/not believe the GOF 
intends to balance its health care books on the back of 
pharmaceutical companies.  The industry rep with whom we met spoke 
convincingly of a government that understands that a thriving pharma 
sector is important to the country's long-term interests.  Given 
ongoing budgetary pressures though, we can expect continued 
differences between industry (including U.S. pharmaceutical 
companies) and the GOF over the valuation of innovation as captured 
in GOF reimbursable medicines policy. 
 
STAPLETON