In more detail

A special law to prevent from any shutdown

The PLFSS is debated annually by the French Parliament to organize and anticipate the Social Security spending based on the State's revenue forecast. More specifically, this bill is crucial as it notably sets the borrowing capacity of Social Security organizations.

Without the adoption of the PLFSS for 2025, France might have to face a shutdown situation. Fortunately, to avoid such a situation, the former Government has proposed to the National Assembly a "special law". This special law, which is part of an exceptional procedure set by the French Constitution, was promulgated on 20th December 2024, authorizing the French Government and the French Social Security to borrow a certain amount to secure the financing of the Social Security. 

Such special law does not contain any other provisions regarding the financing of the Social Security, leaving aside, for the time being, the special measures previously debated in Parliament for the adoption of the PLFSS. Whilst a Social Security Financing Law for 2025 must in any case be voted and adopted by the French Parliament, we cannot predict whether the new Government will build its new PLFSS from the last provisions adopted before the vote of non-confidence or if it will start from scratch.

The Pharma and MedTech industries are thus forced to wait for the new Government to propose its new PLFSS with the risk that some guarantees previously obtained – in particular by the French pharma trade union association, the "LEEM" – may not be included. This may be the case for the safeguard clause.

The safeguard clause mechanism under the spotlight of the pharma and medtech industries

As a reminder, regarding the safeguard clause (also called "M Contribution" for medicinal products and "Z Contribution" for medical devices):

• Every pharma company ensuring – in France – the commercialization, parallel importation or parallel distribution of one or more medicinal products covered by the French Social Security may be liable for the M Contribution if the net revenue generated by medicinal products sales achieved in a year by all companies commercializing one or more medicinal products exceeds an amount determined by the PLFSS ("Amount M").
• Every medtech company commercializing – in France – medical devices covered by the French Social Security may be liable for the Z Contribution if the amount covered for by the Social Security for these reimbursable medical devices during the current year (excluding certain discounts) exceeds an amount determined by the PLFSS ("Amount Z").
• The M Contribution and Z Contribution amounts are allocated between the liable companies. In any event, the M Contribution due by each pharma company cannot exceed 10% of its turnover (excluding VAT), reduced by conventional clawbacks and the Z Contribution due by medtech companies cannot exceed 10% of the amount reimbursed by the Social Security for medical devices.

Originally, the M Contribution's purpose was to address unexpected increases in medicinal products expenses. However, since 2014, the Amount M is almost systematically exceeded every year resulting in systematic payments by pharma companies subject to this mechanism. The medicinal products safeguard clause has, over time, become more of an instrument to regulate Social Security expenses than an exceptional tool in case of high expenses of medicinal products. As for the medical devices safeguard clause (which was created by the Social Security Financing Law for 2020), it is also being transformed into a regulatory tool to moderate medical devices expenses. The M and Z Contributions paid by the Pharma and Medtech industries are increasingly becoming the adjustment variable in case of high expenses by the French Social Security.

Each year, the debates regarding the PLFSS are an opportunity for the French legislator to review and amend the safeguard clause mechanism (besides setting Amounts M and Z). The last debates held in November were not an exception to the rule. 

Improving the safeguard clause mechanisms: The difficult choice between medicinal products and medical devices – but certainly not both

The PLFSS, as proposed by the former Government in October 2024, was first debated by the National Assembly which did not manage to examine the entire PLFSS within a certain period. Consequently, the PLFSS was transferred to the Senate. Since no agreement was reached between the National Assembly and the Senate, a Commission Mixte Paritaire (joint committee including 7 deputies and 7 senators) was tasked with finding a compromise text. After reaching such an agreement, an amended PLFSS was proposed to the National Assembly. This text was censored by the deputies.

The M Contribution:

What did the PLFSS proposed by the former Government provide for?

• As proposed by the former Government, the PLFSS clarified the reform of the method for calculating the contribution due under the medicinal products safeguard clause (approved by the Social Security Financing Law for 2024 and which will fully be applicable as of 1 January 2026).

Although voted and adopted last year, the LEEM highlighted the economic instability resulting from this calculation method reform and suggested to postpone this reform.

• The former Government had also undertaken to cap the amount that pharma companies would have to pay under the safeguard clause for 2025 but did not formalize it in the bill. 

What did the last version of the PLFSS provide for before being censored by the National Assembly?

• The reform of the calculation method was reported from 1 January 2026 to 1 January 2027, which was welcomed by the Pharma industry.
• So far, the LEEM has obtained from its negotiations with the Government and the members of Parliament, a cap for the 2025 M Contribution to 1.6 billion EUR if pharma companies generate 600 million EUR in savings.

This capping for the 2025 M Contribution is a maximum, meaning that the total amount to be paid by all pharma companies subject to the safeguard mechanism could not exceed 1.6 billion EUR. This is a valuable guarantee for the Pharma industry, which at last sees some predictability in the amounts that pharma companies could have to pay under the 2025 safeguard clause.

As an example, it should be noted that the final amount paid by pharma companies in 2023 under the 2021 safeguard clause was two times higher than the amount originally estimated. While the COVID-19 necessarily impacted the increase, such epidemics are no longer exceptional.

• The PLFSS sets the Amount M at 27,25 billion EUR. The increase of the Amount M is crucial as the M Contribution due by pharma companies is based on the difference between the Amount M and the overall net turnover owned by pharma companies commercializing reimbursed medicinal products.

The Z Contribution: 

The dynamics proposed by the PLFSS for medical devices are not the same.

In its last version before being censored by the National Assembly, the PLFSS provided for the exclusion of VAT from the tax base of the safeguard clause for the medical devices (similarly to the medicinal products safeguard clause). Consequently, the Parliament voted in favor of the decrease of the Amount Z (i) retroactively for 2024 and (ii) for 2025.

• The Amount Z for 2024 was initially set at 2.31 billion EUR. The PLFSS for 2025 proposed to decrease this amount to 2.26 billion EUR.
• The Amount Z for 2025 proposed by the last version of the PLFSS is 2.25 billion EUR.

Such decrease of the Amount Z demonstrates, as the SNITEM (French MedTech trade union association) states, the intention of triggering the medical devices safeguard clause and thus the payment by medtech companies of the Z Contribution. In addition, the decrease of the Amount Z would also mean that it increases the difference between the Amount Z and the total amount covered by the Social Security for medical devices. It is from this difference that the Z Contribution is calculated.

The provisions regarding the medical devices safeguard clause are largely criticized by SNITEM, as MedTech companies are already facing major challenges with the Medical Devices Regulation.

The new PLFSS would likely be published mid-January 2025 and will be closely monitored by the industry. We have no certainty whatsoever as to the provisions that will be proposed by the new Government but the provisions relating to safeguard clauses were not the ones that triggered the vote of non-confidence and we could thus expect those not to be revised.