Fostering France's pharmaceutical recovery

Arecent survey by the Organisation for Economic Co-operation and Development (OECD) revealed that pharmaceuticals accounted for more than 10% of total health spending in most countries, but that in France they accounted for over 20% of healthcare spending despite the fact that it has one of the strictest pricing systems in Europe. A combination of low prices and a high level of government-reimbursement have given patients and physicians little incentive to cut consumption.¹

In France, the top therapeutic categories are cardiovascular (CV), central nervous system (CNS) and alimentary/metabolism.² However, for the 12 months leading up to December 2006, these classes performed below expectations. The market for CV drugs actually declined by 4%, whilst those for CNS and alimentary/metabolism grew at approximately 2%. However, this picture appeared to mirror the general results for Europe's top five markets (Germany, France, UK, Italy and Spain). Promising categories for the French market include antineoplastic and immunomodulatory agents, and blood agents, which grew at 15% and 29% respectively for the 12 months leading up to December 2006.²

Driven by a rapidly ageing population and a known high consumption of pharmaceuticals, the French pharmaceutical market has always appeared buoyant. Yet in practice, pharmaceutical companies have found the operating conditions in France to be tough, as governments continue to exert a downward pressure on profitability.¹ For example, there has been visible encouragement for generics and it has been predicted that the French generics market may grow by over 20% per year by 2008.³ In contrast, annual growth for branded pharmaceuticals was less than 5% in 2006 and may be lower than 4% by the end of 2007.² In recent years, growth rates for the French pharmaceutical market have tended to fall below industry expectations, and it is unclear whether this will improve in the future as cost containment continues to be popular among French politicians.¹

Operating conditions

In 2004, French pharmaceutical production was valued at close to €35 billion and rose by 7.7% in 2006.⁴ Most French pharmaceutical exports go to the US, followed by Germany and Belgium. Out of total French pharmaceutical production, close to 44% is described as destined for EU member states. Despite continuing growth in production, the French pharmaceutical industry body, LEEM (Les entreprises du medicament) has described the operating environment as fragile.⁴

The change in operating conditions is reflected by a steady decrease in the number of domestic pharmaceutical companies. In the 1950s there were around 1000 companies involved in the pharmaceutical sector, but this dropped to 339 in 2005.⁴ As in other parts of the world, the French market is dominated by the large multinationals. It has been estimated that the top 10 pharmaceutical companies represent over 50% of the French pharmaceutical market.⁴

LEEM has also expressed concerns about the state of French pharmaceutical R&D, although in some areas the industry still performs well. For example, LEEM estimates the numbers of pharmaceutical staff have tripled in 20 years with 1000 new posts being created by the industry every year.⁴ At present, the industry employs approximately 100000 personnel with about 18% of these being involved in R&D functions.³ The number of personnel involved in R&D has increased from 14% in 2001, indicating favourable conditions for pharmaceutical research in France.⁴ In particular, demand for clinical R&D staff appears to be at an all time high. Figures from LEEM reveal that a considerable amount of clinical research is being conducted in France — especially in the cancer therapeutic area. They estimate that around 12000 pharmaceutical industry staff work on projects associated with breast cancer alone.⁴

However, other signs are less encouraging and point to an erosion of France's underlying research base. For a start, the industry has seen a marked increase in the taxation of its income — between 1997 and 2001, industry figures reveal that the level of such taxes tripled.⁴ In an industry where sales growth is often in the double digit range, the French industry's figures have noticeably dipped, and companies link this to government cost containment and taxation policies.⁴ As the pharmaceutical industry uses its profits to determine the level of reinvestment in R&D, this has led to some multinational companies shifting new investment to foreign markets where they consider the conditions for long-term profitability more favourable.¹

Boosting R&D

The French Government has launched several initiatives to sustain innovation, including reforming the R&D tax credit scheme and creating a new fiscal status for emerging innovative companies. France has been examining initiatives launched by the UK and Spain to improve their R&D positions to develop its own national approach. The French government has also been following the progress of the EU-focused G10 Medicines Group, which seeks to improve R&D competitiveness in line with social and public health objectives.¹

In January 2004, the French government commissioned a fact-finding report entitled PharmaFrance 2004 detailing measures that could improve France's R&D position (Table 1). To compile the report, a delegation visited several countries representing major R&D centres to hear the views of different companies and organizations involved in the pharmaceutical and biotech sectors. The French government has also attempted to encourage emerging biotech companies through its 'young innovative company' scheme. To qualify for this status, a company must meet certain criteria such as spending at least 15% on R&D. In return they can get a substantive waiver on tax for a period of up to 8 years.¹ The French biotech environment appears to be improving, with an estimated 400 start-ups in the country.³ Although this figure is similar to that in the UK and Germany, many of the French start-ups are at a very early stage compared with these European counterparts.

Table 1 PharmaFrance recommendations.1

Outlook

Historically, France has been the major pharmaceutical producer in Europe. If the country is to maintain this position in the future then much will depend on the initiatives that have been undertaken by its government to revitalize the research environment. It will be keen to learn from the mistakes of neighbouring Germany, where the pharmaceutical industry has suffered a clear decline.

References

1. R. Jones, The Chemical Industry and Globalization, ACS Symposium Series, No. 942 (An American Chemical Society Publication, 2006).

2. IMS Health, "Drug Retail Monitor, 12 months to December 2006," (2006). www.imshealth.com

3. IMS Health, "Generics Market Expected to Soar to $80 Billion by 2008," (2004). www.imshealth.com

4. Anon, L'industrie pharmaceutique, Les entreprises du médicament (LEEM [2007]). www.leem.org