Adopted as part of the annual Social Security Budget Law on December 30th 2025, and in force since December 31st 2025, a new Article L. 138-10-1 was added to the French Social Security Code.
In substance, the new Article L. 138-10-1 introduces a tax targeting pharmaceutical companies whose patent strategies are deemed to “unjustifiably delay” the market entry of generic medicinal products by more than one year beyond the expiry of the original patent or supplementary protection certificate.
The provision identifies two categories of conduct that would be deemed to constitute an “unjustified delay” giving rise to the tax:
- the filing of secondary patents (i.e., those relating to pharmaceutical forms, dosages, combinations of active ingredients or processes) that do not provide a clinical added value; or
- any “manifestly dilatory” legal or administrative action aimed at preventing or delaying the marketing authorisation of an equivalent generic medicinal product.
The tax rate is set at 3% of the pre-tax turnover (excl. VAT) generated in France from sales of the relevant medicinal product during the financial year in which the delay is observed. The rate may be increased to 5% in the event of a repeat offence within five years. The proceeds of the tax will be allocated to the National Health Insurance Fund as revenue of the Social Security system.
This new provision is the result of an amendment proposed by the Senate aimed at discouraging “evergreening” practices in the pharmaceutical sector – i.e. filing and enforcing secondary patents that would artificially extend patent protection. According to the proponents of the amendment, “evergreening” practices would cost the French Social Security system over 500 million euros a year.
For example, in France, generics sold in retail pharmacies (i.e., médicaments vendus en ville) are launched at a price 60% below that of the originator product, whilst the originator product simultaneously undergoes a 20% price reduction. Proponents of this new tax argue that allowing patent protection to be extended through secondary patents would unduly burden the Social Security system as it would result in higher reimbursement costs.
During the legislative process, the Social Affairs Commission of the National Assembly observed that there were already adequate mechanisms in place for sanctioning abusive practices on the market, notably through competition law. The Commission further argued that the assessment of whether any conduct is deemed “manifestly dilatory” should be determined by the courts, and not the tax administration.
Other stakeholders, such as the French trade association for pharmaceutical companies “LEEM” (Les Entreprises du Medicament), pointed out that the criterion of the “clinical added value” of a medicine – which is assessed by health authorities for reimbursement purposes only after market authorization – cannot be compared with the “inventive” nature of a patent, which is often determined at a much earlier stage. Moreover, sanctioning the filing of such patents solely on the basis that they extend the original patent protection term could also violate the fundamental right to property.
Notwithstanding these concerns, the provision was ultimately adopted and has been in force since 31 December 2025. It remains to be seen how the tax administration will apply this new tax in practice, and how (and by whom) the relevant criteria will be assessed. It is worth noting that this provision was not referred to the Constitutional Council before its promulgation, leaving open the possibility of a constitutional challenge down the road.
For further information, please contact:
Anne-Charlotte Le Bihan, Partner, Bird & Bird
anne-charlotte.lebihan@twobirds.com
