The Government has placed the pharmaceuticals industry at the heart of its economic agenda with the appointment of Lord Mandelson and Alan Johnson to a key health sector group that will report to the Prime Minister.

Gordon Brown has summoned senior industry figures, such as Andrew Witty, chief executive of GlaxoSmithKline, and David Brennan, his opposite number at AstraZeneca, to a meeting at No10 to discuss ways of protecting pharmaceuticals and biotechnology companies, their revenues and their jobs, as the economy deteriorates rapidly.

Lord Mandelson, the Business Secretary, and Mr Johnson, the Health Secretary, will also attend the meeting, along with Lord Drayson, the Science Minister, Angela Eagle, the Exchequer Secretary to the Treasury, and a series of other pharmaceuticals industry figures.

The decision to install Mr Johnson as chairman of the Ministerial Industry Strategy Group (MISG), a position normally occupied by a more junior minister, shows how concerned the Government is about safeguarding the industry. It employs about 67,000 people in the UK, attracts £3.9 billion of research and development investment and accounted for £8.4 billion of Britain's GDP in 2007.

The Government's concern is underlined further by its appointment of Lord Mandelson to be a full-time member of the MISG, which, for the first time, must begin reporting to the Prime Minister, starting in the autumn.

Mr Witty is leading the industry delegation, which has been organised by the Association of British Pharmaceutical Industries (ABPI). The meeting formally kicks off an initiative in which the Government and the pharmaceuticals industry will work together to address the barrage of problems they face over the next few years.

The traditional pharmaceuticals companies, for which some key patents will expire in the coming years, are concerned about the increasing cost of bringing new drugs to the market and growing regulatory hurdles. They hope to persuade the Government to introduce a package of measures, which may include changes to taxation and patent legislation. In return, they may agree to conditions, such as reducing the extent to which the manufacturing process is moved to cheaper developing countries.

The biotechnology industry, characterised by small loss-making companies involved in potentially groundbreaking new products, has a different set of concerns. Biotechnology companies are finding it virtually impossible to raise money by issuing equity because investors have deserted such offerings. Meanwhile, the debt markets are totally off limits for most of these companies because they do not make a profit and would struggle to make the repayments.

The BioIndustry Association, chaired by Clive Dix, is expected to discuss with the Government several measures to rescue the endangered industry. In a letter to The Times this month, the Association of Clinical Professors of Medicine (ACPM) warned that British biotech companies “are on the verge of extinction” as they struggle to raise money in the face of the rising cost of clinical trials in Britain.

As if to underline the point, Intercytex Group, the Cambridge-based maker of a treatment for chronic wounds, announced yesterday that it would have to cut about half its 76 staff and halt new projects to save cash. Nick Higgins, its chief executive, said: “This is the first time I have had to impose cuts where there has been no failure. Our projects are going well, but there is just a shortage of cash. These are harsh times.”

At the other end of the spectrum, big established pharmaceuticals companies are considering mergers to ensure their survival by cutting costs.

— Pfizer, the world's biggest pharmaceuticals group, has agreed to buy Wyeth, an American rival, for about $68 billion (£49 billion) to prepare for the loss of a significant source of revenue in 2011, when its Lipitor cholesterol treatment, the world's bestselling drug, goes off-patent. This will allow rivals to manufacture their own versions of the drug. Pfizer, based in New York, said that about 8,000 jobs would be cut from the merged entity, representing a tenth of the workforce, and that five factories would be closed.

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