Renewing French Pharmaceutical Innovation—Lessons for the U.S.
The global pandemic has placed public health and pharmaceutical innovation squarely into the public discourse. For the United States, the success and speed of commercializing the novel messenger RNA (mRNA) vaccine technology has demonstrated the vitality of the American pharmaceutical sector and the innovation ecosystem on which it is built. For France, once a global leader in pharmaceuticals, the COVID-19 pandemic has exposed how far the fortunes of a once leading industry has declined. COVID-19 vaccines by French firm Valneva SE (together with American firm Dynavax Technologies) have only just began the formal approval process, while those developed by Sanofi (together with British-American firm GlaxoSmithKline) are still pending approval. France is the last country among those on the United Nations Security Council to offer a COVID-19 vaccine of its own.
In its heyday in the 1980s and 1990s, the French pharmaceutical industry saw a three-fold increase in its capital value, before losing half of that value when the Internet bubble burst in the 1990s. Since that time, the industry has suffered as public funding allocated to research and development (R&D) has dried up, limiting collaboration between universities, research centers, and startups. In 2019, only five drugs were produced in France – placing it far behind European rivals such as Germany, Ireland, the United Kingdom, Italy, and the Netherlands.
How did this happen, and what are the lessons of French pharma for France and the United States, moving forward?
Grow the Biopharma Ecosystem
The decline of the French pharmaceutical industry comes as it has struggled to adapt from a model that is based on expertise in chemistry to one that draws on a complex research and industrial ecology supporting a biotechnology sector. The prevailing strategy of the 1980s and 1990s relied on the so-called ‘blockbuster drug’ model, in which pharmaceutical companies generated revenue from a relatively small number of chemically-based and widely distributed products. In recent decades, the global industry has shifted to more specialized drugs, which are often biotechnology-based and thus much more complex to innovate. They are also more expensive to research and bring to market, requiring inter alia large investments from venture capital.
French companies were slow to adapt to this shift and continue to suffer from a lack of outside funding supporting its pharma innovation ecosystem; even now, many executives report struggling to find sufficient venture capital. When the 20-year patents for many of the blockbuster drugs expired, France had not yet developed a biotechnology industry capable of supporting the country’s leadership position. After leading Europe in pharmaceutical production from 1995 to 2008, France is now behind Germany, Italy, and Switzerland.
Make Public Investments in Research and Development
Another factor in the decline in the French pharma industry has been the decrease in public funding for basic research. In contrast, a major force behind the growth of U.S. biopharmaceutical industry has been the surge in public funding for basic research in biology and medicine. Government investment in the early scientific process has enabled the fundamental discoveries that companies are forming the basis of new drugs. This is especially necessary in a market dominated by increasingly complex biotechnologies including, notably, the mRNA vaccines.
France, however, deprioritized basic health research over the last decade, leaving the private sector to fund these investments largely on its own. In 2011, France spent around $3 billion on basic health research, roughly on par with the United Kingdom and Germany. By 2018, that number had decreased by 28% to $2.16 billion, while the UK and Germany increased their investments by 16% and 11% respectively. A government research agency charged with supporting competitive research projects has also lost funding over this timeframe, meaning some labs do not receive the money they need to conduct health research.
While these developments alone cannot explain the French pharmaceutical decline – which began well before 2011 – they are one piece of the puzzle. Some industry experts cite the lack of basic research investment as a primary reason for France’s COVID-19 vaccine failure.
Leverage University-Industry Collaboration
France also struggles with a lack of coordination between its universities (which are typically responsible for basic research) and pharmaceutical companies (which carry out applied research.) Effective collaboration between these sectors is necessary to make the transition from scientific discovery to commercialization, especially in the era of biogenomic drugs, which are much more complex than traditional chemicals and require significant basic research.
In the U.S., many university-industry partnerships are encouraged by the Bayh-Dole Act of 1980, which facilitates technology transfer by permitting universities that receive federal funding to gain from moving their ideas or products to market. The Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs, alongside, encourage innovation through university-industry collaboration. These policies are not a panacea, but are a part of a broader effort to connect university research with policy objectives in competitiveness.
France lacks similar policies to bridge university-industry collaboration and consistently ranks well behind European rivals Germany, the United Kingdom, and Switzerland in the World Bank’s ranking of university/industry collaboration. Since 1995, the gap between France and Europe’s leaders in number of patents filed has more than tripled. This may be an added factor explaining why France has fallen behind on bringing new technologies to market.
Couple Domestic Research with Local Manufacturing
The growth in offshoring of production is widely cited as a factor in the decline of the French pharmaceutical sector. Even pre-pandemic, France saw a series of drug shortages in part because of manufacturing of the active pharmaceutical ingredients (APIs) for many drugs had shifted to lower cost Asian countries since around 2000.
The COVID-19 pandemic further exposed the fact that most French drugs are no longer manufactured in France, or even in Europe. As COVID tests, drugs, masks, and other medical supplies ran short and as France experienced more COVID-related deaths than neighboring Germany in 2020, President Emanuel Macron visited Sanofi headquarters to announce the state’s intention to invest in reshoring the industry. Based on efforts now underway to secure supply chains around the world, France’s first step may be to near-shore production to other EU nations.
Renewing French Pharmaceutical Innovation
Spurred by the pandemic and the well-publicized French vaccine failure, France is taking actions to renew its biopharma industry. This effort, so far, has had four main components:
· France has made technology transfer initiatives a priority to strengthen the connection between research and industry. These technology transfer offices, known as SATTs, have demonstrated increasing success in the past decade, leading to a significant rise in the number of revenue-earning startups.
· France has begun addressing the venture capital gap within the industry: in 2020, the government announced a partnership with insurance companies and other semipublic organizations to invest $6 billion in the technology sector, with a large portion going to health-related research.
· Since the pandemic the government has worked to reduce the regulatory burden on the pharmaceutical industry by simplifying and consolidating the drug approval process, as well as opening a fast-track option for certain innovations.
· In December 2020, France announced a ten-year plan to increase national science competitiveness, which will raise R&D funding by almost 50% and aims to make research positions more attractive.
While these reforms will not restore the industry’s preeminence overnight, they represent important actions to restore France’s leadership. They also offer broader lessons for U.S. policymakers on sustaining the innovation engine supporting U.S. competitiveness in a critical industry.
Alexander Kersten is a deputy director and fellow with the Renewing American Innovation Project at the Center for Strategic and International Studies in Washington, DC. Benjamin Glanz is an intern with the Renewing American Innovation Project at the Center for Strategic and International Studies in Washington, DC.
The Perspectives on Innovation Blog is produced by the Renewing American Innovation Project at the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).