An analogous financial regulation mechanism has just been introduced by the LFSS for 2020 for medical devices.

The similarities between these two legal schemes seem obvious. However, there are several major differences as shown below.

The "cost" of health products innovation

The safeguard clause applicable to medical devices, introduced by the LFSS for 2020, raises the issue of the "cost" of health products innovation.

Indeed, this tax, triggered and calculated collectively, then shared between each taxpayer, is intended to regulate the innovation market. It only applies to innovative medical devices listed on the reimbursable products and services list (liste des produits et prestations remboursables) (LPPR) and reimbursed by the health insurance "en sus" to hospitalisation services (Titles III and V of the LPPR). The additional cost of this innovation is currently set at +3% of the ONDAM.

The financial regulation of the pharmaceutical products market has a much broader scope. The safeguard clause applicable to pharmaceutical products covers products both subject to a regulated price (at least before 2020 - see below), and those covered under early access programs (ATU/post-ATU). It is very likely that hospital (intra-GHS) funded pharmaceutical products will also be included in this tax by the next financing law, as the LFSS for 2020 has introduced the potential limitation of selling prices to hospitals.

Differences in rates also raise questions with regard to the ONDAM

Another major difference is that the basis of the regulation applicable to the medical devices market is based on the "amounts reimbursed" (montants remboursés) by health insurance, whereas the safeguard clause applicable to pharmaceutical products (now Contribution M) is based on the "gross sales excluding taxes realized" by pharmaceutical companies (chiffre d'affaires hors taxes réalisé) - excluding the reimbursement rate.

The Members of the French Parliament, authors of the second referral to the French Constitutional Court (Conseil constitutionnel), had questioned this calculation based on the real expenditure of the health insurance, on the grounds of the "contributory capacities" or the "profit" of the selling companies. Luckily, the French Constitutional Court dismissed this grievance.

The inclusion of the "amounts reimbursed" for medical devices, meets the objective of regulating the health insurance expenditure in relation to the actual expenditure. This basis constitutes the only "tax justice" in this regulatory system, which does not benefit the pharmaceutical companies.

The tax threshold (10%), on the other hand, is based on the turnover excluding taxes, as for the safeguard clause applicable to pharmaceutical products.

The exclusion of "rebates" granted to health care establishments

Rebates granted to health care establishments are not included, even indirectly, in the basis of the safeguard clause applicable to medical devices.

It is surprising that the French Constitutional Court thought it useful to pronounce a reservation of interpretation relating to the non-inclusion of the “Ecart Technique indemnisable” (ETI) provided for in Article 165-7 of the Social Security Code (CSS).

Indeed, the amounts reimbursed "in respect of" medical devices registered on the "liste en sus" cannot include an incentive mechanism between the health insurance and the health care establishment aiming to negotiate lower prices with companies.

In fact, the ETI is not a modality of reimbursement of the product dispensed to the patient as a result of its registration on the "liste en sus," but a mechanism for health care establishments to earn an incentive - when they purchase a medical device at a price lower than the reimbursement price set by the Economic Committee of Healthcare Products (Comité économique des produits de santé) (CEPS). In addition to the reimbursement of the product, the establishments are then paid a premium corresponding to 50% of the negotiated rebate.

The increased reimbursement amount is therefore exclusively the result of the relationship between the health care establishment and the French National Health Insurance Fund (Caisse nationale d’assurance maladie) (CNAM). The "prestation ETI" is different from the purchase price of the product on the reimbursement request communicated by the establishment.

Consequently, considering the purpose of this tax, which is intended to levy the companies on their sales of medical devices reimbursed "en sus," it would have been unjustified to tax non achieved turnover. This was precisely the meaning of the Government's observations, according to which "only the amounts reimbursed corresponding to a remuneration paid to the company are taken into account,... the reimbursement is taken into account, for the purposes of the safeguard clause, only up to the amount of the price actually invoiced by the company."

The calculation of the safeguard clause applicable to medical devices, even if it is based on the amounts reimbursed, must be carried out by URSSAF (and the CEPS, which is now the "supervisory" authority) on the basis of the companies' reporting their "gross sales realized during the year for which this tax is due, before April 1st of the following year" (Article L.138-19-12 of the CSS).

For this reason, the law also states that the CNAM's expenditure amounts, or the data from the Program for Medicalisation Information Systems (Programme de médicalisation du système d’information) (PMSI), must be communicated to the Central Agency for Social Security Authorities (Agence centrale des organismes de sécurité sociale) (Acoss) (Article L.138-19-9 of the CSS). The decree will have to specify the practical details. The data from the Technical Agency for Information on Hospital Care (Agence technique de l’information sur l’hospitalisation) (ATIH), in charge of collecting PMSI data, will thus make it possible to cross-reference the information between the turnover reported by the companies and the products coded within the establishments. These different amounts will have to be analysed by URSSAF.

The deduction of "clawbacks" paid to health insurance

The "clawbacks" paid to the health insurance reduce the basis of the tax, which will not be charged on this part of turnover re-paid to the CNAM.

Whether it is the "clawbacks" provided for in the agreements with the CEPS (still rare and recently ruled in principle - LFSS for 2017) or the "clawbacks" relating to the new early access program (LFSS for 2019), they reduce the basis of the safeguard clause applicable to medical devices.

This was not the case for the pharmaceutical companies before 2015 and from 2017 to 2019, as they were penalized in respect of turnover repaid to the health insurance.

The deduction of these various "clawbacks" nevertheless raises timing difficulties in view of the reporting and payment dates to URSSAF. Forecasting the annual amount of these safeguard clauses is also problematic.

The non-retroactivity of the new regulation, in the spirit of this reform, is also to be noted. The Government does not anticipate any revenue from this safeguard clause in 2020, but rather an incentive to negotiate lower prices. On the other hand, the safeguard clause for pharmaceutical products, and its successive amendments by the various financing laws, has been applied several times to the previous year (this retroactivity was validated by the French Constitutional Court).

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These unequal treatments will no doubt lead to individual disputes by the companies who are marketing medical devices and pharmaceutical products, considering that these safeguard clauses have not been invalidated during the a priori control by the French Constitutional Court.