The pharmaceutical industry in France: towards health independence?
The health products industry is a fundamental sector of activity in France. The 271 drug production sites are mainly spread over four regions: Ile-de-France, Centre-Val de Loire, Auvergne-Rhône-Alpes and Normandy. France is now the 4th-largest European pharmaceutical producer behind Switzerland, Germany and Italy.
French production is very much focused on mature products. As such, two-thirds of molecules that make up the drugs manufactured in our factories are almost 20 years old. As a result, French medicines are subject to strong competition from generics produced largely in India, the United States, Israel and Brazil. This increased use of generic drugs has also been reinforced by France's public health policy, which for more than 15 years has been focused on price reduction decisions in order to protect the country's social security system.
As pressure on drug prices intensifies, European laboratories have massively relocated and are contracting out to Asia for the production of active ingredients.
On the other hand, while the health biotechnology sector is undergoing significant development, France does not yet have a strong presence in the market for innovative products. Of its 271 production sites, only 32 are bioproduction sites.
However, the health products sector now represents an annual turnover of 55 billion euros in France. With almost 50% of products exported (by value), this sector is the 4th-largest contributor to the country’s trade balance. As testament to the structuring of the sector and the use of imports, HAROPA - Port du Havre showed a 25% increase in pharmaceutical flows over the period 2015 - 2019.
The pharmaceutical industry in high demand during the crisis
The health crisis and lockdown have not stopped production. On the contrary, it has been maintained or even increased for the most in-demand products, such as resuscitation products. This increase in production has resulted in additional costs: increasing certain production lines, implementation of barrier measures and work schedule adjustments, additional equipment and transport costs with increased use of air transport - despite very high freight rates - to avoid shortages. But overall, the major pharmaceutical companies have seen an increase in activity and hence in turnover.
There is currently a race for a coronavirus vaccine in Europe, with partnerships or mergers between companies in the sector to benefit from research and development skills. Four members of the European Union - France, Italy, Germany and the Netherlands - have also formed an alliance to produce a vaccine with aid raised to finance research and development.
Stakeholders facing a degree of logistical tension during the crisis
Air freight rates have increased six to eight-fold since the beginning of the health crisis, resulting in a shift to maritime transport except for health products with very limited lifespans. Management of maritime traffic in pharmaceuticals has been disrupted by blank sailings, ship delays and the problem of the lack of empty reefer containers.
Laboratories believe that the situation has since almost returned to normal thanks to the reactive responses of shipping companies faced with their expressed warnings, even though they still sometimes report a lack of ship capacity.
Therefore, laboratories now want to prioritise refeer containers for pharmaceutical freight over other goods. They are willing to pay higher freight rates if shipping companies prioritise their products. The shipping companies in turn are seeking to increase the return of reefer containers by promoting the "NOR" (Non-Operating Reefer) between Asia and Europe, which could also allow imported active ingredients to benefit from the insulation of reefer containers.
And now? The desire for health independence
The health crisis has increased the dependence of companies in the sector on some Asian countries, particularly China and India. With 60-80% of active ingredients and medicines manufactured in Asia, this dependence raises fears of shortages of stocks and supplies of medicines, active ingredients and generics.
Faced with this observation, the French government is now advocating a return to health independence for the country. A debate open to all stakeholders within the chain with several avenues under consideration:
- To promote relocation to France or Europe of the production of active ingredients - basic chemicals - and common medicines
In order to avoid stock shortages, the French state has announced the relocation of the production of common medicines such as paracetamol, currently manufactured in China and India and to a lesser extent in Brazil. Moreover, the health crisis has shown that the few laboratories that, exceptionally, had retained part of their production of active ingredients in France were much more reactive when China and India were suffering from operational difficulties regarding their exports. Relocations, however, will face strong price pressure to contain health spending.
- To invest in innovation to strengthen biotechnology in France
In this way, while the field of biotechnology currently accounts for only 20% of drugs by value, this field is booming and the profession estimates that its level will be 50% by 2030.
- To strengthen chemical and biotechnology products
This third avenue aims both to strengthen France's role in the field of basic chemistry active ingredients while investing in innovation.
Leem (French union of drug manufacturers) is also working with the government to establish an industrial pact in favour of health independence that could be presented at the Strategic Council of Health Industries in 2021.