Health is priceless; supply shortages come at a high price, as determined by the sanctions imposed by the French Health Agency
As is often the case, France has been a pioneer in implementing a mandatory safety stock, especially for essential drugs. Since 2021, pharma companies must hold at least a 2-month safety stock to meet the needs of patients on French territory, the level of which may be increased up to 4 months in case of risk of shortage.
The implementation of these measures illustrates how shortages matter in France.
After increasing the sanctions grid in 2022, the ANSM conducted a survey in early 2023 of the stock levels for the entire list of products concerned by the maximum safety stock level.
On 9 September 2024, the ANSM released 33 sanction decisions, targeting 11 companies, and imposing a total of 8 million euros in fines, an unprecedented level of sanctions.
These decisions appear to aim at creating a deterrent factor to put an end to this long-lasting increasing risk of shortages.
What are the key takeaways for the companies?
- All companies are concerned: Out of 11, 7 are generic companies, which are sanctioned for shortages of several of their products.
- On average, the sanctions amount to 20 percent of the turnover generated by the concerned product over the last financial year. The 1 million euros cap has been reached for one of the products, leading to a sanction representing 18 percent of the turnover.
- The breach is objective and may apply automatically as soon as the level of stock is not met. The ANSM does not appear to have considered any individual circumstances.
- The level of sanction is the same regardless of the magnitude of the discrepancy with the safety stock requirement: companies declaring 3.5 months of stock have been sanctioned at the same level as companies declaring 1.5 months. No doubt the administrative courts will have to rule on the proportionality of the sanction.
- These investigations appear relatively easy for the ANSM to conduct. They have been carried out through a simple circular letter requesting companies to declare their stocks. The ANSM may therefore easily repeat this process now that the list of essential drugs subject to the 4-months safety stock has increased to 750 products.
- As the maximum level of fine is set at 30 percent, the next round of sanctions might be closer to this ceiling, taking into account the recidivism or even just the increased knowledge of the rules by the companies based on these precedents.
As these sanctions are only one tool among the toolbox deployed in France to remedy shortages, they may have a spillover effect and trigger the implementation of other measures. Notably, if companies consider terminating the supply of certain products which are at too high a risk of sanctions, the ANSM may use the obligation to divest the product which was passed in the Social Financing Bill last year.
This creates even more expectations on what will be set in the draft Social Financing Bill for next year, which should be known in the coming days.
