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Cablegate: France - Special 301 2007 Annual Review

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

Cable
Text:


UNCLAS SENSITIVE PARIS 00834

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

DISSEMINATION: ECONOUT /1
CHARGE: PROG

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DRAFTED: ECON:FRADOVIC
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PP RUEHC RUCPDOC RUCNMEM RUCPDOC
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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

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