Spanish Drug Industry and Government Clash on Pricing

As the drug industry in Spain awaits the impact of the government's latest 4.2% price cut this month, the issue is becoming a source of increasing bitterness. Officials are increasingly keen to cut the national drugs bill, faced with an ageing population and a popular but generous welfare system.

In recent years, government cost-containment policy has continued to dominate pharmaceutical sector development in Spain. A new industry tax and reference pricing system has attracted strong criticism, as has the government's generics sector policy. Local drug prices are among the lowest in Europe, which in the past has helped to foment a thriving parallel export trade.

Local research-based industry group Farmaindustria has led the attacks on the government's drug sector policy, claiming that in its present state -- incorporating the new reference pricing system, the new duty on R&D and visas for antipsychotic drugs -- it will cost companies as much as EUR1bn (US$1.34bn) by 2007.

However, the government appears unlikely to give ground on pricing issues. Spain's health ministry has announced that it will attempt to freeze drug prices until 2007, with the freeze continuing to apply to roughly 2,000 reference drugs. From 2007, the list will be revised to include all medicines with a 10-year expiry date. The concern over the effect of government cost-cutting measures on multinational R&D expenditure, as well as on overall investment, is growing among industry groups across Europe's main markets.