BMI View: Improvements in leading high-frequency indicators for the French economy, including consumer confidence, will continue to pose upside risks to our pharmaceuticals and healthcare growth forecasts over a multi-quarter horizon. However, while domestic and eurozone improved growth readings will put France back on investors' radars, regulatory encumbrances affecting labour market costs will continue to weigh on the country's full potential, including the pharmaceutical sector. Meanwhile, an increase in the uptake of generic medicines and other cost-control efforts by the government will be combined with measures to improve and extend access to healthcare, sustaining demand and overall sector growth over the long term.
Headline Expenditure Projections
Pharmaceuticals: EUR33.06bn (USD44.29bn) in 2014 to EUR32.43bn (USD35.67bn) in 2015; -1.9% in local currency terms and -19.5% in US dollar terms. Forecast in line with last quarter.
Healthcare: EUR246.20bn (USD329.91bn) in 2014 to EUR253.19bn (USD278.50bn) in 2015; +2.8% in local currency terms and -15.6% in US dollar terms. Forecast revised downwards from last quarter.
In Q315 France shifted upwards one ranking position in our Risk/Reward Index (RRI) matrix, standing as the third most attractive market to pharmaceutical investors out of 15 markets in Western Europe. However, lower scores in other markets in the region explain the ranking variation, while France maintains an overall score of 71.7 out of 100. France's score is boosted by the large multi-billion dollar drug market (market expenditure score of 16.0 out of 20), and large pensionable population (pensionable population score of 8.0 out of 8), but dragged down by poor market expansion (sector value growth score of 0.0 out of 12).
Key Trends And Developments
The recent health reforms in France have drawn opposition from doctors, reports PMlive. The long list of reforms proposed by the health minister Marisol Touraine includes a proposal to introduce digital health records and changes in the payment system that will eradicate patients handing over co-pay upfront for consultations. Instead, doctors will be reimbursed through public or private health insurance policies. However, healthcare workers, with a group representing independent physicians, have opposed the reimbursement changes. The workers allege that the changes will affect their income, increase paper work costs and reduce responsibility in the use of services by patients.
The European Generic and Biosimilar Medicines Association welcomed the French health ministry's plan to encourage the use of generic drugs under the new national action plan. The plan aims to increase the prescription of generic drugs at hospitals and retirement homes, and implement practices to promote the prescription of drugs within the French substitution list, the 'Repertoire'. Currently, generic drugs account for 32% of the reimbursement market in France.
The execution of clinical trials is taking increasingly longer time in France, according to a study conducted by the French Pharmaceutical Companies Association. The average time that the CPP takes to give an approval increased to 62 days in 2014 from 54 days in 2012. The median time between the submission of the dossier and a final approval decision being reached by the health authority has been extended from 49 to 55 days. Different French stakeholders in the sector are advocating for the need of a more fluid and simple system.
OSE Pharma launched its initial public offering on Euronext's regulated market in Paris (Euronext Paris). OSE Pharma is currently preparing to start a Phase III study of Tedopi on H215. The trial protocol is common to Europe and to the US. It will look to enrol 500 patients with invasive/metastatic NSCLC, expressing the HLA-A2 receptor. Tedopi will be used as a second-line treatment for patients for whom first-line treatments (such as chemotherapy) have not been able to control their disease.
Sanofi's Board of Directors unanimously appointed Olivier Brandicourt as Chief Executive Officer of Sanofi. In the same month, the Food and Drug Administration approved Sanofi's new long-acting insulin Toujeo (insulin glargine [rDNA origin] injection, 300 U/mL) to improve glycaemic control in adults living with type 1 and type 2 diabetes. In April 2015, the European Commission also granted marketing authorization to Toujeo for adults with type 1 and type 2 diabetes. Toujeo is the company's follow-up product to its EUR6.3bn (USD7.03bn)-a-year blockbuster Lantus (insulin glargine [rDNA origin] injection) and a crucial part of the company's future growth plans.
BMI Economic View: As a result of growing consumer confidence and strengthening readings in other leading indicators, we have notched up our headline real GDP growth forecast for 2015 to 1.0%, up from 0.9% previously. However, growth potential will remain limited by a moribund labour market and declining competitiveness.
BMI Political View: A chance for France to improve its operating risk outlook has been lost, as President Francois Hollande's 'business friendly' reform drive appears to be over before it really had time to get underway, due mainly to political opposition. Ultimately the reform effort will not manage to tackle the major risks that investors face when operating in the country, particularly those related to burdensome labour market regulation and costs.