Health spending across Europe fell in 2010 for the first time since 1975 as the economic crisis started to bite and governments started to cut back on expenditures, according to a newly published report on health care spending in Europe.

After an average annual growth of 4.6 percent between 2000 and 2009, health spending per person declined by 0.6 percent in 2010, according to the report, "Health at a Glance – Europe 2012."

The study was published Friday by the European Commission and by the influential Paris-based policy think tank the Organization for Economic Cooperation and Development (OECD), which is backed by 34 governments.

Not surprisingly, the countries that applied the brakes most sharply were those that were most affected by the crisis. In Ireland, according to the report, health spending fell 7.9 percent in 2010, having grown by 6.5 percent every year from 2000 to 2009. In Estonia, per-capita health spending dropped 7.3 percent in 2010, having grown by an average of more than 7 percent every year from 2000 to 2009. In Greece, according to the study, "estimates suggest that health spending per person fell 6.7 percent in 2010, reversing annual growth of 5.7 percent between 2000 and 2009."

All that may come as no surprise to the pharmaceutical industry, but the declines are permanent rather than temporary and, according to a senior official associated with the report, the industry is likely to face further price falls in the coming years.

The study, which draws on health and health system indicators for the period of 2000 to 2010, provides an extensive analysis of health care spending in 35 countries – the 27 European Union (EU) member states, plus five candidate countries (Croatia, Macedonia, Montenegro, Serbia and Turkey) and three members of the European Free Trade Association (Iceland, Norway and Switzerland).

It found that, in relative terms, the Netherlands was Europe's highest spender on health care in 2010, devoting 12 percent of its GDP to the area. It was closely followed by France and Germany, each of which spent 11.6 percent of GDP on health. In terms of per-capita health spending, the Netherlands also was the highest, with €3,890 (US$4,974) per head of population, followed by Luxembourg (€3,607) and Denmark (€3,439).

Ireland, however, was by far the biggest spender on pharmaceuticals, with an average expenditure of €528 per person in 2010, even though its overall health care spend had dropped sharply that year. Its drug spending was still 50 percent above the EU average of €349.

The other big spenders included Germany (€492), Belgium (€479) and France (€468). In total, the EU's drugs bill reached €190 billion in 2010. Even before the economic crisis began in 2008, however, growth in spending on drugs had started to slow more quickly than on other aspects of health care.

"For pharma, the good times had already gone," Mark Pearson, head of the OECD's health care division, told BioWorld Today. "Already there was an intolerance for letting pharmaceutical spending get out of control, which it clearly did," he said.

In Ireland, per-capita spending on pharmaceuticals grew on average by more than 8 percent every year, in real terms, between 2000 and 2009.

By 2010, that had slowed to less than 2 percent, and it is now entering a period of decline. The country recently finalized a new agreement with the pharmaceutical industry, which, over the three-year period from 2013 to 2015, will take around €400 million from its total drugs bill, which currently stands at more than €2 billion annually.

Other countries grappling with the economic crisis responded more rapidly. In 2010, drug spending in Iceland declined by 6.3 percent, in Lithuania by 4.6 percent and in Portugal by 3.3 percent. The report could not provide any figures for Greece, however, despite widespread anecdotal reports about drug shortages in the country because of its inability to pay its bills. "It gave up collecting credible numbers on its health care system," Pearson said.

He sees no let-up in the current retrenchment. "Pharmaceuticals will continue to be targeted for many years to come," he said. "That area will continue to be seen as an area where there will be spending gains [available]."

Value-based pricing represents one way to reward genuine innovation and provide incentives to companies developing drugs that have significant effects on patients' health. "Broadly speaking, we like that approach," Pearson said. However, putting in place transparent value-based pricing regimes is not a straightforward undertaking.

"It's much better in theory than in practice," he said. "Generally, I don't think any country has found a good way of doing that."