EUROPEAN drug price controls are threatening to provoke a trade dispute with the US, the chief executive of the world’s biggest pharmaceutical company says.

Henry McKinnell, the chief executive of Pfizer, gave warning that Washington would no longer accept that Americans bore most of the burden of paying for research and development into new drugs.

Mr McKinnell predicted that the issue of drug pricing could move from the domestic to the international political arena. “The US, very quickly, is going to turn this into trade policy,” he said.

Prescription drugs can cost up to 40 per cent more in the US than in Europe and American drug companies have come under pressure from Washington over the rising cost of medicine. The expense has prompted some municipal government health insurers to buy medicines in Canada, which regulates drug prices.

A leading European competitor of Pfizer said that a trade dispute was not the answer but conceded the US paid a disproportionate cost. “The US definitely subsidises the rest of the world,” a spokesman said.

In Europe, drug companies negotiate the price of prescription medicines with governments, which tend to view pharmaceutical companies as the first port of call in their efforts to reduce the public healthcare bill. Britain is cutting the price of prescription medicines by 7 per cent, while Pfizer is embroiled in a dispute with the German Government over the price of its cholesterol drug Lipitor.

Mr McKinnell, who is attending the World Economic Forum in Davos, said he planned to raise the issue today with Gerhard Schröder, the German Chancellor.

Price controls have rebounded on Europe, encouraging industry flight from EU countries to the main profit centre, the US. Last year a report by the World Health Organisation warned EU governments that price controls were harming Europe’s pharmaceutical industry by failing to reflect the cost of research.

Cross-border trade in medicines in Europe is a hot political issue and has prompted lawsuits by distributors who complain that drug companies are preventing the reimportation of cheaper medicines from countries within the free trade area of the EU.

The pharmaceutical industry says that the trade costs it €4.5 billion (£3.1 billion) a year.

BOEING SUE THREAT

Thomas Pickering, senior executive at Boeing, said the group would sue if “unfair” subsidies to Airbus did not cease. He hopes that subsidies will be discussed by Robert Zoellick, US Trade Representative, and Peter Mandelson, European Trade Commissioner, when they meet in Davos. Boeing will next week unveil the first commercial aeroplane that can fly London to Sydney without having to refuel.

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