Japanese drugmaker Eisai is to stop selling its new epilepsy therapy Fycompa in Germany - the biggest market for the product - following a row over the price it can charge for the drug. The case highlights the growing battle-lines between drug companies and healthcare providers in Europe, where governments are taking a tough line on social spending at a time of economic austerity.

Germany's new system for determining drug prices is a particular point of friction because it requires manufacturers to demonstrate that new medicines work better than older ones before they can charge a premium. The German system was implemented in 2010 as part of a drug pricing law designed to save billions of euros.

It has already led to clashes over prices for a number of other drugs from several companies. GlaxoSmithKline last year decided to keep its rival epilepsy treatment Trobalt off the German market after a similar pricing row.

In the case of Fycompa, the German Federal Joint Committee, or G-BA, decided the drug offered no additional benefit and, as a result the price for the once-daily medicine would be less than €1 per dose, an Eisai spokeswoman said.

That is in line with generic drug comparators but is way below the €7 to 8 that Eisai has been charging for Fycompa in European markets. Eisai said it could not accept the G-BA decision and it would therefore suspend commercial distribution temporarily while it seeks to have the assessment overturned - although it will not be able to apply for a review until March 2014.

Between 3,000 and 4,000 German patients suffering with epilepsy currently take Fycompa and the country is the largest single market for the medicine, which is approved but yet to be launched in the United States and is not on sale in Japan.

The new German drug pricing system is especially controversial because there are inevitable differences of opinion over whether or not a new drug really does offer benefits over existing products.

Furthermore, German drug prices are frequently used as a reference point by healthcare providers in other European countries, so accepting a sharply lower price there has potentially damaging knock-on effects on the price companies can charge elsewhere.

Eisai's drug, chemically known as perampanel, is the first approved anti-epileptic that selectively targets AMPA receptors, which are thought to play a central role in seizures.

Commercial availability of Fycompa is expected to continue in Germany until the end of the year, as existing stocks are run down. Eisai said it would put in place a continued access program for existing patients, details of which will be announced shortly.