The Spanish government spent 702 million euros on medicines in July, a decline of 24% compared to the 923 million euros-worth of state spending in July 2011, the Ministry of Health has reported. 

The number of prescriptions dispensed in Spain this July fell 14.1% compared to the year before, and government expenditure on prescription items was down 11.4%. However, inflation rose 2.2% during the period, and drug prices increased 36% on average, according to local reports.

The massive drop in drug spending by the centre is to due to the series of severe austerity measures which have been rolling out since 2010. Among these, particularly effective have been the mandatory patient co-payments, ranging from 10% for retirees to 60% for working adults, which were introduced on July 1 on all prescription drugs, and the revision of drug prices which has imposed increases of as much as 56% on around 4,000 drugs used in the treatment of chronic diseases. Both of these were introduced under the Royal Decree 16/2012 healthcare austerity package, which was approved in April, and is forecast to produce savings totalling more than 7 billion euros.

Also on July 1, 426 drugs were officially withdrawn from the government's basic co-payment list, a move which is expected to create savings of 559 million euros by the end of the year. In addition, some regions of the country have introduced a mandatory co-payment of 1 euro per prescription.

Among Spain's autonomous regions, those reporting the biggest savings on drugs spending in July are Murcia, where expenditures dropped by just over 35%, Castilla and Leon, down 32.9%, Castilla La Mancha (-30.9%) and Madrid (-30.4%), say  analysts at IHS Global Insight.

They also warn that while these tough measures may have helped reduce drug spending in the short term, they are expected to create a long-term problem for pharmacies across Spain in terms of sales revenues and purchasing power, and customers' finances will be hit by soaring out-of-pocket expenditures.

Industry experts estimate that the austerity measures are curbing company revenues by as much as 5 million euros annually, and at the industry association Farmaindustria's annual meeting, in July, it was reported that the value of the national market had declined by 2 billion euros, or 8%, in a year.