SPENDING on research and development by UK-based drug companies has dipped, says a report.
Other indicators also show signs of a downturn in the health of the industry, the report added.
Continuing worries about animal rights extremists and excess red tape were blamed for the trend by the Association of the British Pharmaceutical Industry.
Its president, Vincent Lawton, said: "While the UK-based industry remains highly successful, with key indicators registering figures of which any other industry would rightly be proud, there are some worrying signs."
One was a reduction of research and development investment in 2003, the latest year for which figures were available, from £3.3bn to about £3.2bn.
Other high-tech business had registered an increase over the same period.
Capital expenditure by British-based drug companies fell to £753m in 2003, as against an average over the past five years of £925m.
Last year the industry's exports exceeded imports by £3.4bn, the third highest positive trade balance of any UK industry. But the previous year's trade balance was £3.6bn.
This was despite the fact that exports last year were a record £12.2bn.
NHS expenditure on branded drugs is falling. In the first two months of 2005 prices of modern medicines dropped 5%, and 2.2% fewer were prescribed, meaning a £50m drop in NHS spending.