The government has increased proposed maximum prices for generic drugs by up to 500 per cent after the UK's biggest manufacturer threatened to stop production.

Manufacturer Norton Healthcare had reacted to government proposals to cap pr ices by announcing that it would cease production of a list of commonly used drugs within two months, as they would be 'uneconomic to produce' at the new prices.

Original capping proposals were rushed out for consultation in April in an attempt to tackle the spiralling costs of generic drugs.

But last week a revised tariff - with some drug pr ices raised by as much as 500 per cent on the original proposals - went out for a seven-day consultation, due to end on Monday.

Norton Healthcare sales and marketing director Nick Foster said the company was 'feeling a lot more comfortable' with the revised prices.

'Providing they're confirmed, we're pretty confident that we'll carry on production, ' he said.

The new proposals were 'more sensible' than the 'ridiculousness of some of the original prices - for example, aspirin'.

The proposed price for a 28-pack of 75mg aspirin has risen from 7p to 37p in the new list.

Doctors reacted positively to the move. British Medical Association GP negotiator Dr Peter Holden said the new price proposals were 'a happy medium'. He wondered whether 'the initial list was designed to provoke trouble and get people to respond'.

'Civil servants a while ago told me the cake had been over-egged on pricing, 'he said.

NHS Alliance chair Dr Michael Dixon was 'delighted' that there was going to be a fixed maximum price for generics.

'We want a guaranteed supply at a reasonable price, ' he said. But he added: 'The question is how you decide what that is.

'It must be very difficult for the government to know whether the drug companies are bluffing.'

And he added: 'We welcome stability and companies having a reasonable return, but if the government is going to be generous to industry in raising prices, it's got to be equally generous to us.'

Dr Malcolm Ward, chair of the Dispensing Doctors Association, was also 'much happier' - but he said the DDA still had reservations about the government's proposal to abolish the 'category D' scheme - whereby pharmacists and dispensing doctors are reimbursed for brand-name products when generic alternatives are unavailable.

National Association of Primary Care vice-chair Dr Greg Wilcox said budgeting problems caused by 'volatile' prices had been 'compounded' by delays receiving data on drug use and spending from the Prescriptions Pricing Authority. Data that used to take six weeks was taking 'about three months' , he sa id .

PPA operations director Elizabeth Stobbart said a 'cumulative backlog of three months' in processing prescriptions had been caused by a 'steep rise' in the number of 'category D' prescriptions - sparked by generic drug shortages - from 1 per cent to 17 per cent of the total.

She said a 'recovery strategy' would clear the backlog by September 2001.

A Department of Health spokeswoman said the new prices were 'not down to one manufacturer in particular'.

'There were a number of common concerns on pricing, ' she said. The government had been 'willing to listen to reasons' for certain products' prices going up.