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Calls to ring-fence drug discounts for bailout nations

The head of Europe's drug industry has written to EU leaders ahead of their summit tomorrow seeking concessions to ensure that the sector can continue to export pharmaceuticals to crisis-hit countries such as Ireland and Spain.

Faced with deep price cuts, drug companies want special measures to prevent discounts offered in southern Europe and Ireland from being exported to rich states in the north where governments can afford to pay for innovation.

GlaxoSmithKline chief executive Andrew Witty, who heads Europe's pharmaceuticals association, said failure to ring-fence austerity cuts would undermine a sector that provides 660,000 European jobs.

Mr Witty said the cost of pharmaceuticals in Ireland and other bailout states should not be included in a European basket of pharmaceuticals prices, which health services across Europe use to determine how much they should pay for drugs.

The letter said concessions made to bailout countries contained "exceptional" price cuts worth €7bn and discounts to national health services.

As a result, the sector wants these countries removed from price-referencing baskets.

Philip Hannon of the Irish Pharmaceutical Healthcare Association said Mr Witty's written pleas carried his organisation's support.

"At the moment, the sector faces serious problems because it has cut prices to those countries worst affected by the debt crisis. What it means is that other countries are likely to try and measure their prices off those in Greece, Ireland and Spain in order to get a discount.

"New medicines cost an average of €1.3bn to develop and the prices paid are now being cut to a level which is uneconomic.

"Ireland is one of the largest producers of pharmaceuticals but the debt crises and the recent attitude of governments, including ours, is making the sector reluctant to invest further in European markets."

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Opponents argue that the "basket" system is a counterbalance to profit-driven drug companies who price their products too high.

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