Spain has passed a new law requiring doctors to prescribe medicines by their generic names only, a move which political leaders say will save around 2.4 billion euros in a full year.

The new legislation requires doctors to write prescriptions specifying the drug's active ingredient only, plus the dosage and format, and for pharmacists to then dispense the cheapest version available. The measure will not affect newer branded drugs which are still in patent, but as it also stipulates that patients should be told the generic name only of the treatment they are being prescribed, they will not know if it is a branded or generic product.

The new initiatives are part of a package agreed by parliament this week aimed at reducing Spain's deficit to 6% of Gross Domestic Product (GDP) this year, from a level of 9.2% in 2010 and 11.1% the year before.

The move introduced by the ruling Socialist Party has the support of other parties; for example, Basque nationalist deputy Josu Erkoreka told The Guardian newspaper that "the interests of the big drugs companies must give way to public interest, and what matters is reducing the deficit and lowering the drugs bill for millions of people who use public heath services."

However, others warn that jobs will be lost in the pharmaceutical sector as a result of the new policy.

Spain's national drugs bill has already fallen 10% this year, partly as a result of the austerity measures introduced in 2010. These included changes to the reference price system on which pricing levels were determined by the cheapest daily cost of treatment, based on defined daily dose (DDD). Products whose prices were more than 30% higher than the reference price were required to be cut to the reference price level, either immediately or over a period of two years. If by that time their prices were not down to the reference price level, they would no longer be eligible for reimbursement.

Other austerity measures introduced last year included price cuts on nearly all reference-priced generics - which accounted for 23.5% of the national drugs market by value and 38.2% by volume during the 12 months to September 2010 - and new rebates for reimbursable patented drugs. In 2010, Spain's national drugs bill totaled 12.1 billion euros.