French Drug Company "Contribution" defined

France's Council of Ministers has defined the detail of payment of the "exceptional contribution" of 2.5 billion French francs ($495 million) made by the pharmaceutical industry towards cutting the health care budget deficit under the Juppe plan for the social security regime (see also page 3).

The contribution will be subdivided into three parts, as reported earlier. There will be a tax of 4%-6% on promotional and advertising spending and medical visits by representatives to doctors, based on the spending undertaken by the drug companies since the previous fiscal year; this is expected to raise about 600 million francs. Drug companies with strong sales growth in 1995 will be taxed on growth at variable rates; if growth was 3%-6%, their contribution will be equal to a percentage of the growth, fixed by decree at 12%-18%. If growth was higher than 6%, the tax on growth will be 24%-36%. Drug companies whose growth was less than 3% in 1995 or whose sales are less than 100 million francs will be exempt from the contribution.

Finally, drugmakers will be taxed at 1.5%-2% of their sales achieved in France, but will be able to offset the costs of R&D. This tax is expected to generate 1 billion francs and the growth tax about 900 million. However, the total contribution made by any firm will not be allowed to exceed a level of 4%-6% of sales.