Cablegate: France Special 301 2010 Annual Review

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STATE FOR EB/TPP/IPE JOELLEN URBAN
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E.O. 12958: N/A
TAGS: ECON ETRD EIND EINV EUN KIPR FR
SUBJECT: FRANCE SPECIAL 301 2010 ANNUAL REVIEW

Refs: A) Paris 336 B) Paris 1499 C) Paris 1560 D) Paris 1267 E)
Paris 1729

PARIS 00000237 001.2 OF 002

1. (SBU) Summary. Post has reviewed PhRMA's Special 301 submission
on France and recommends against inclusion of France on the 2010
Special 301 Watch List. France has, in fact, improved the
pharmaceutical R & D environment and post sees no evidence of lack
of IPR protection or market access. France has also been at the
forefront of copyright protection and anti-counterfeiting on the
Internet, establishing Europe's first graduated response
enforcement mechanism and a public-private sector charter against
online counterfeits. End summary.

PhRMA Concerns
--------------

2. (SBU) As we reported in 2009 (ref A), France is cutting costs on
state health insurance spending on pharmaceuticals, making for a
challenging environment, particularly for less innovative
prescription drugs.
Pricing and distribution margins on non-reimbursable pharmaceuticals
are unregulated in France. Pharmaceutical companies that do not
seek to include their products on the list of drugs to be reimbursed
by the state health insurance can market products immediately upon
receipt of market authorization (either via the centralized European
procedure or via national procedure). The GOF is employing
different strategies to limit the cost of its reimbursable drug
program, including aggressive use of generics and campaigns to
reduce consumption.

3. (U) Companies wishing to get a drug included on the reimbursable
list first approach France's "Transparency Committee." Made up of
epidemiologists, pharmacologists, medical doctors and other experts,
the Committee assigns an "innovation" rating from ASMR I to ASMR V
(I representing a "major therapeutic advance," V "no treatment
benefit") based on clinical criteria. Once the ASMR rating has been
assigned, price negotiations with the Economic Committee for Health
Products (CEPS) ensue. Innovative outpatient drugs are considered
in an accelerated process, which who is now extended to all the
drugs up to ASMR III and some low-cost ASMR IV drugs. Maximum delay
for setting a price during the registration of a new drug is 180
days. According to a 2008 working paper by the Institut de
Recherche et Documentation en Economie de la Sante (IRDES), the
average was 164 days in 2007.

4. (U) IRDES also noted that the structure of pharmaceutical sales
in France has changed in recent years to favor more expensive
products. IRDES concluded that French patients and doctors both
"seem to prefer innovative and expensive drugs, even when less
expensive ones are as effective," and that the possibility of higher
prices for innovative specialties "makes France an attractive
location for the early commercialization of innovative therapies."
Therefore, notwithstanding the GOF's cost-cutting measures and
reliance on generics, innovative new drugs benefit from accelerated
access to the reimbursable list and are still preferred by doctors
and patients.

5. (SBU) Furthermore, as noted favorably in PhRMA's Special 301
submission, President Sarkozy personally re-convened the relatively
inactive Strategic Council for Health Industries (ref B) that
brought together himself, five government ministers, and 15 CEOs of
major U.S. and other foreign pharmaceutical and medical device
companies to discuss how the health sector can become an engine of
economic recovery in France. During the meeting, the GOF announced
it will begin to allow pharmaceutical companies to charge two prices
for drugs: one fixed price for drugs reimbursed by government health
services and an unregulated price for non-reimbursable drugs and/or
exports. This pricing strategy would prevent parallel imports that
undercut market strategy and sales in export markets, a key issue
for U.S. firms. Sarkozy and the CEOs also signed an agreement for a
newly-established 140 million euro (USD 208 million) investment fund
for innovative firms in the medical biotech sector. Finally, the
GOF mandated that there be counterfeiting specialists in all
pharmaceutical companies capable of providing information in real
time, and over the Internet, to authorities at ports and airports.

6. (SBU) These measures, along with the fact that no pharmaceutical
companies have requested post's assistance with IPR or market access
issues, support post's conclusion that France should not be included
on the Special 301 Watch List for failure to protect the
intellectual property rights of, or allow market access for,
pharmaceutical products. When asked throughout the year about
PhRMA's longstanding concerns, American firms operating in France
responded that they are able to work with the applicable

PARIS 00000237 002.2 OF 002

constraints. While some companies such as Abbott Labs choose to
create a larger base of operation in Ireland than in France, these
decisions are based on Ireland's more liberal fiscal policies, good
transportation connections, and English-speaking population rather
than a lack of market access in France.

France's Aggressive Copyright Protection
----------------------------------------

7. (U) In other areas, such as copyright protection, France has also
been a trailblazer in 2009. The GOF passed the "Creation and
Internet law" that introduces a new legal framework to deter and
sanction online piracy. (Ref C and D) A signature feature is the
graduated response ("three strikes") to illegal downloading wherein
a public authority (HADOPI) will issue escalating warnings to
illegal downloaders that, if unheeded, could result in a cut-off of
Internet access. Despite strong political opposition and repeated
legal challenges, a reformulated version of the three-strikes
provisions will go into effect in 2010, with the first warnings to
be issued this summer. The GOF also convened a commission to
develop a legal alternative to illegal downloading and financing
cultural content creation (ref E). Unfortunately, one idea
developed was to tax online ads (the "Google tax") as a way to
compensate authors (mainly publishers) for their losses. This idea
is still alive in 2010. President Sarkozy is taking an
anti-competitive approach and French authorities are now studying
whether Google abused its dominant position in the online
advertising market.

Anti-Counterfeiting Efforts
---------------------------

8.. (U) France also developed Europe's first charter against
counterfeiting on the Internet, signed by Minister of Economy
Christine Lagarde, major trade federations (Unifab), individual
corporations (Nike, Chanel, and L'Oreal), and two e-commerce
companies (Priceminister and 2xmoinscher). Although nonbinding, the
charter calls for better methods to detect fakes and to inform
clients of the e-commerce companies' obligation to guarantee the
authenticity of goods sold on their sites. While American giants
Ebay and Amazon did not sign, the charter demonstrates that the
government takes an active role in promoting anti-counterfeiting
efforts.

9.. (SBU) Comment: France is at the forefront of IPR protection in
Europe and may, in the case of aggressive three strikes laws, may be
more stringent than the U.S. France's national health insurance
cost containment efforts do not deny adequate and effective IP
protection to the U.S. pharmaceutical industry, nor do they prevent
fair and equitable market access. Post will continue to support
U.S. pharmaceutical industry efforts to expand markets in France,
but recommends against France's inclusion on the 2010 Special 301
Watch List.

PEKALA

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