Healthy Skepticism Library item: 20503

Warning: This library includes all items relevant to health product marketing that we are aware of regardless of quality. Often we do not agree with all or part of the contents.

Publication type: Magazine

French promotional tax survives appeal
Scrip 1991 Feb 62

Full text:

The French Constitutional Council has rejected challenges from a group of senators and MPs to the bill on pharmaceutical promotion which was recently approved by parliament. The bill provides for an increase in the tax on promotional expenditure from 5% to 7%, and extends the tax to expenditure on company reps, meetings and promotion of drugs to hospitals.

The appeals by the senators and MPs were on the grounds of discrimination. The new tax will be payable on December 1st and will be retroactive, applying to all expenditure in the last complete financial year. This means that companies whose tax ends on December 31st will have to pay the tax on all their 1990 promotional spending, even though they were not aware at the time that this would be taxed at the new rate and under the new rules.

However, those companies whose tax year ands on October 31st, for example, will pay the tax retroactively on promotional expenditure only for the last two months of their financial year (ie up to December 31st, 1990), and will be able to plan their expenditure for the remainder of the tax year (to October 31st) taking into account the new rules.

In rejecting the appeals, the Constitutional Council said that the provisions of the bill covering promotional expenditure did not discriminate between companies.

…cost to industry

The 5% tax on promotion was first introduced in 1983, and in 1987 the then Health Minister, Michele Barzach, amended its provisions so that expenditure on sales forces was not taxed. While the new measure is a re-introduction of the tax on this type of spending, its application to meetings and to hospital promotion is a new development.

Health Minister Bruno Durieux has said that the French industry devotes some 17% of its turnover to pharmaceutical promotion, that this leads to overconsumption of drugs, and that an increase in the tax is justified.

The French pharmaceutical industry association, the SNIP, said the increased tax would cost the industry about Fr 730 million ($146 million) more a year, and that it was trying to convince government of the adverse effects it would have on companies. It is estimated that spending on sales forces accounts for as much as 80% of total promotional expenditure, and many companies are clearly concerned about the effect on employment if sales forces have to be cut as a result of the bill. However, one executive commented that it was unlikely that the industry would cut…