Spain is to cut the prices of a wide range of patented prescription drugs from August 1, in a move which it estimates will save around 1.3 billion euros. However, the industry says the measure will cause its turnover to plummet by 20% and has called for patient co-payments to be increased instead.

The Spanish national drugs bill rose 4.4% last year to 12.5 billion euros and the government - which is introducing the measure as part of a package aimed at cutting the country’s massive budget deficit - hopes it will reduce this by as much as 23%. Medicines account for 32% of Spain’s total health care expenditures, and the government is the pharmaceutical industry’s largest customer, said Trinidad Jimenez, Spain’s Minister for Health and Social Policy. Some estimates suggest that this year’s drugs bill could reach nearly 15 billion euros.

1 billion euros of the expected savings are to be made by cutting the prices of patented drugs, and a further 300 billion euros through changes to the production and dispensing of single-dose treatments. Medicines which are included the reference pricing system will not be affected.

Just one month ago, the prices of generic drugs to Spain’s autonomous regions were cut by 25%, in a move aimed at saving 1.5 billion euros annually. Taken together, the two measures “will mean the destruction of the current model of pharmaceutical industry that operates in Spain,” Jesus Acebillo, president of the national research-based industry association Farmaindustria, warned, responding to the latest announcement last week.

The viability of many small and medium enterprises (SMEs) in the sector and 20,000 jobs - 5,000 of people directly employed by the industry plus 15,000 who are indirectly employed - are now in danger, he said. One in three companies will close and two out of every three will incur losses, he forecast.

Mr Acebillo said that medicine prices in Spain are 23% below the European Union (EU) average and have risen just 1% in the past year. Instead of cutting prices, he urged the government to act on demand by increasing patient co-payments for drugs. These are currently very low in Spain, standing at just 7% of the medicine’s total cost compared with averages of 12%-15% around the EU.

The announcement was made last week by Spain’s Prime Minister, Jose Luis Rodriguez Zapatero, as part of a package of cuts aimed at saving 15 billion euros over the next two years and reducing the national budget deficit from 11% of Gross Domestic Product (GDP) to 6% by 2011.