The British government expects to save about 300 million pounds ($545 million) a year on the cost of generic medicines to the state sector, under a five-year agreement signed with industry, officials said on Wednesday.

The new deal allows for reductions in the price paid by the National Health Service for generic, or unpatented, medicines if the market rate offered by manufacturers to wholesalers falls.

The previous scheme worked by setting a maximum price for generics.

Jane Kennedy, the junior health minister, said the new arrangements would promote a more transparent and competitive market for generic drugs.

Britain already has one of the highest rates of generic drug use in Europe, with unbranded prescription medicines accounting for more than half of the overall market by volume but less than 20 percent in terms of value.