FRANCE SPECIAL 301 2010 ANNUAL REVIEW

UNCLAS SECTION 01 OF 02 PARIS 000237 SENSITIVE SIPDIS STATE FOR EB/TPP/IPE JOELLEN URBAN STATE PASS USTR COMMERCE FOR ITA 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