Medicine prices in Britain will be cut by 7 per cent under a new five-year deal between government and drug makers that will save more than £1.8 billion sterling (€2.57 billion) on the nation's drugs bill.
The move is a further sign of the mounting pressure on pharmaceutical prices around the world as healthcare providers strive to rein in runaway costs.
The price reduction for branded prescription medicines was announced by the Department of Health today, confirming recent speculation a substantial cut was imminent.
The price deal represents the central plank of a new Pharmaceutical Price Regulation Scheme (PPRS) between the department and the Association of the British Pharmaceutical Industry, which represents major companies.
The rolling PPRS arrangement regulates prices of branded drugs and the profits manufacturers are allowed to make on sales to the state health service. The last two agreements resulted in price cuts of 4.5 per cent and 2.5 per cent, respectively.
In return for the price reduction, pharmaceutical companies will get a sweetener in the form of increased research and development allowances.
Under the new scheme, the amount of R&D spending that firms can offset against their permitted profits is increased to 28 per cent of sales to the National Health Service from 23 per cent.