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Cablegate: France - Special 301 2008 Annual Review

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

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