The pharmaceutical firms Novartis and Roche have threatened to pull out of Britain and relocate thousands of jobs abroad, in an ongoing row over pricing for the NHS and rules surrounding safety trials.
The Swiss drug companies made their threats known in personal meetings with a government minister, according to Whitehall documents seen by the Guardian.
The documents also make clear that cabinet ministers have been conducting a vigorous charm offensive to prevent multinational drug companies leaving Britain. Novartis employs 3,500 people in Britain at nine sites while Roche has 1,500 workers in this country.
The ministers, including business secretary Lord Mandelson, have in recent months visited executives at their headquarters in Japan, the US and Europe in what officials call a "programme of ministerial visits".
The visits have been organised to patch up a relationship strained by ministers' efforts to force the firms to cut the prices of the drugs they sell to the NHS, according to the documents.
The politicians have taken with them top officials of the National Institute for Health and Clinical Excellence (Nice) to its rationing decisions on new medicines.
Ministers have been targeting companies they have identified as "particular risks in relation to the retention of existing investment in the UK".
The documents show how health minister Mike O'Brien and an entourage flew to Switzerland to meet senior executives at the head offices of Roche and Novartis last November.
O'Brien explained the government was seeking to "make the UK a more favourable environment for pharmaceutical companies". The government has stressed its determination to "do what it takes to make the UK the location of choice in Europe for biopharmaceutical industry activity".
John Melville, the head of Roche UK, said Roche's profits had been eroded by two developments: the renewed deal between the government and the pharmaceutical industry which sets the prices of drugs bought by the NHS, and the rate of exchange between "a weakening pound" and the Swiss franc.
The net effect, according to the minutes of the meeting obtained by the Guardian under the Freedom of Information Act, is "a price squeeze on Roche products which Mr Melville called a major issue because UK drug prices act as reference prices for many developed countries including most of the EU. He said it may even make sense to pull out of the UK, losing 3% of business, so as to safeguard pricing levels at the remaining 97% of sales sources."
Roche executives had previously identified a number of failings in the UK research and development regime. Their view was that "there is too often a difference between the spin and the substance: HMG rhetoric is all about how good the UK is, but the reality is different, and the gap is rising to worrying proportions. The UK is risking losing business."
After meeting Roche, O'Brien went on to the headquarters of Novartis. Subhanu Saxena, its head of global marketing, said its vaccine production plant in Speke, near Liverpool, needed to be "upgraded and expanded in three to five years if it is to keep pace with technology and the market". The minutes recorded: "Mr Saxena said Novartis would like to find a way to maintain the Speke investment and alluded to funding offered by other countries for similar activities." One of O'Brien's aides countered that "certain investment incentives" were available to help Novartis decide.
Saxena also warned that Novartis could move some of its drug safety trials out of Britain "because the slowness of the NHS system is making them uncompetitive". This complaint had been echoed by Roche executives who said trials in UK were "too expensive and bureaucratic".
Last year, Mandelson and the then health secretary, Alan Johnson, went to see companies in the US and Japan. Johnson had also met AstraZeneca and GSK, whose headquarters are in Britain, while O'Brien had been to the Paris headquarters of the French firm, Sanofi-Aventis.
Department of Health officials said the visits helped to improve the government's relations with drug firms, which are a key part of the British economy and a major employer.
A Roche spokesman said: "We have no plans to quit the UK although we need to work with the UK government to address the uptake of medicines in the UK, many of which are routinely available in other European countries."
Novartis declined to comment.