Cécile Philippe // 17 June 2020

Excessively high taxes on production, exceedingly slow authorizations for market launch, and an overbearing bureaucracy. France is ensuring that innovation, especially regarding pharmaceuticals, happens outside of its borders. Opinion piece by Cécile Philippe, president of the Economic Institute Molinari, published in Les Echos.

The Sanofi laboratory has recently been the subject of controversy regarding the vaccine it is developing to fight against coronavirus. We do not know yet whether the vaccine will be an effective weapon against Covid-19, but this controversy reveals French incapacity to efficiently evaluate the conditions for growth creation. It also reflects a country that is hostile to the development and launch of pharmaceuticals. In contrast, we need to loosen regulations and facilitate innovations.

Harmful taxes on production

Since the beginning of the coronavirus crisis, French public authorities have continued doing what they do particularly well: requisitioning, controlling prices, asking for authorizations, and demanding approvals. All of this takes time and appears particularly counter-productive, when we need to quickly create the conditions for an accelerated production of masks, testing kits, treatments, and vaccines. Inversely, we would need to be capable of paying a higher price for what we desperately miss in order to incentivise firms to accelerate production. However, after decades of running abnormal fiscal policies and deficits, France lacks the means to do so.

It is precisely those fiscal policies that smother our creative capacities. Between 1978 and 2019, public revenues increased by 10 points, from 43% of GDP to 53% of GDP. Worse, France has not yet dismantled her “taxes on production”. Calculated prior to the net result, they are harmful to the development and attractiveness of our society. These taxes are real subsidies to exports, and do not encourage the development of vaccines in France. They are evaluated at more than 75bn euros, and tax-research credits, which are evaluated at 6bn, pale in comparison.

These taxes constitute only one part of the disincentives to produce and develop in France. Indeed, in the pharmaceutical sector where clinical trials are an essential step, and despite a clear improvement during the pandemic, French public authorities deliver the necessary authorizations in much longer timeframes than elsewhere. However, the location of these clinical trials is crucial to launch and produce new pharmaceuticals on the market.

Carrying part of the risk

Moreover, France, whose healthcare system is organised according to an accounting logic of costs, pays new pharmaceuticals much less than other countries; to the extent that laboratories have an interest in launching their innovations elsewhere. By doing so, laboratories benefit from a higher price that will serve as a reference for other countries. The timeframes for market access in France are on average 530 days, compared to 106 days in Germany, and 111 in the U.K.

We must note that the American government has agreed to carry part of the risk of the vaccine’s failure. We know how costly that is when only 1 molecule out of 10,000 will be commercialized in the end.

It would be misplaced to blame Sanofi. Rather, we should accept the unappealing reality. By making innovation harder and less profitable in France, it happens elsewhere. We must stop being offended and change our fiscal rules and absurd regulations.

The original article was published by Institut Économique Molinari. The English version was translated by Ombeline Lemarchal.