GlaxoSmithKline hit by cuts to spending

By Simon Duke for MailOnline
Updated: 03:25 EDT, 28 April 2011

GlaxoSmithKline warned European governments are forcing through painful cuts to medical spending in a drive to tackle their soaring national debts.

Warning: GSK braced for increased price pressure as cuts kick in

The drugs giant's chief executive Andrew Witty said he's braced for a 'big step-up in price pressure' as austerity measures are implemented across Europe.

The price of a typical treatment fell by between 2% and 3% last year, but Witty is expecting reductions of as much as 5% in 2011 as health budgets come under strain.

The chief executive said: 'If there are very substantial macro-economic problems in major economies, as we have seen in countries like Greece and Portugal, it can upset the apple-cart and stimulate new policy measures.'

His comments came after the pharma giant increased its net profits by 14% to £1.53bn between January and March.

In the fourth quarter of 2010, Glaxo clocked up a rare loss following a £2.2bn legal hit linked to its Avandia drug.

Savings from a swingeing costcutting programme and disposals helped to offset a 10% drop in its revenues compared to a year ago.

GSK (up 26p to 1286.25p) raised its dividend by 7% to 16p a share and signalled that it would buy back as much as £2bn of its own stock this year.