[Ip-health] WSJ: Generics Plan Threatens French Jobs, Bristol-Myers Warns

Thiru Balasubramaniam thiru at keionline.org
Tue Feb 4 23:10:06 PST 2014

Plan Threatens French Jobs, Bristol-Myers WarnsCompany Threatens to Cut
Jobs at Two Factories in France



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Feb. 4, 2014 5:20 p.m. ET

AGEN, France—On a recent Saturday, 2,000 people held a protest in this
small southern French city, carrying a large black coffin with a
three-letter white label—BMS—on the lid.

Bristol-Myers Squibb <http://quotes.wsj.com/BMY>,  the New York-based drug
maker, is threatening to cut jobs at its two Agen factories, where a range
of paracetamol painkillers are made, after the French government unveiled
plans to push for wider use of cheaper generic versions.

The government may announce its final decision as early as Thursday,
according to union representatives.

"It is a stab in the back," says Christian Dumon, 59 years old,who has
worked at the Agen facility for nearly three decades. "If the plant shuts
down, we're dead. There is nothing else here."

The job anxiety in Agen highlights a predicament facing the administration
of Socialist President François Hollande, who has made combating
unemployment his top priority: how to fix the nation's generous, but
debt-ridden, health-care system without hurting a key industry.

Mr. Hollande has said he is determined to reduce the health-care deficit,
which reached €7.7 billion ($10.4 billion) last year, in part by cutting
drug costs. The national health insurer, Assurance Maladie, has set a goal
of saving nearly €1 billion this year on its annual drug bill of roughly
€19 billion.

Although France has followed the wider trend of shifting to generic drugs,
the cheaper medications account for only a quarter of reimbursed drugs,
compared with about three-quarters in the U.K. and Germany, according to an
recent Organization for Economic Cooperation and Development study. In
France, generics are about 50% cheaper than branded products, industry data

But pharmaceutical companies warn that the cost-cutting effort could have
devastating side effects, hammering an industry that employs about 80,000
people in France and netted a trade surplus of €7.15 billion in 2012.

At risk, they say, are thousands of manufacturing jobs that will be
transferred to low labor-cost countries if the health insurer keeps pushing
down prices.

"The government's determination to bring down prices is choking the
industry," says Xavier Monjanel, chief executive at Chemineau Laboratoires,
a pharmaceutical contractor in the west of France. "At some point, we'll
just have to get everything from China or India."

In France, the government sets drug prices and the amount the national
insurer reimburses based on the innovative content of each medication and
the patient population.

Still, analysts say successive governments have often granted higher retail
prices to companies that guaranteed manufacturing would be in France.

"Though Europe now bans any kind of preferential treatment for national
players, that process has remained to some extent political," says Sylvain
Pichetti, an economist with the French research institute IRDES.

In addition to Bristol-Myers's factories, France is home to two other large
paracetamol-based analgesic plants, which are owned by French drug maker
Sanofi <http://quotes.wsj.com/FR/SAN> SA.

For now, Bristol-Myers's business in Agen is flourishing. The company
employs about 1,400 people at two plants where some 400 million packs of
medicines are manufactured each year, mostly for the French market.

Dafalgan and other paracetamol-based drugs made by Bristol-Myers generate
revenue of about €180 million a year, according to the company. Together
with Sanofi, Bristol-Myers enjoys a quasiduopoly on paracetamol drugs in
France because, while generic versions exist, most doctors prescribe brands
made by the French and U.S. companies.

That may not last.

French health authorities have informed Bristol-Myers of their intention to
add paracetamol, the active ingredient in Dafalgan, to the list of drugs
for which cheaper generic versions can be systematically substituted.

If that happens, Bristol-Myers officials say, the U.S. company's sales in
France are likely to plunge. "Clearly, we would no longer be 1,400
[employees] in Agen," said Benoît Gallet, vice president for public affairs
at Bristol-Myers Squibb France, without elaborating further.

During a works-council meeting in Paris last week, Bristol-Myers told
employee representatives that adding paracetamol to the list of generic
drugs would immediately lead to 550 job cuts in Agen, according to people

Bristol-Myers warned that even then, the plants would no longer be
competitive, raising a question mark over its future, the people said.
Already, the company has frozen a €60 million investment plan for 2014 and
2015, according to union officials.

A Bristol-Myers official didn't respond to a request for comment on the

A spokeswoman for French Prime Minister Jean-Marc Ayrault referred calls on
the matter to the Health Ministry's agency in charge of drug safety and
rules on the use of generic drugs. The agency, known as ANSM, said a
decision on paracetamol is imminent.

The job-cut threat has alarmed the center-right Agen mayor, Jean Dionis du
Séjour, who is afraid his city, where unemployment peaks at 16%, well above
the national average of 10.9%, may lose its main private employer. He says
his letters to the French government have remained unanswered.

Write to Noémie Bisserbe at Noémie Bisserbe at wsj.com

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