* UK prescriptions up 3.8 pct in 2011 but cost falls 0.3 pct

* Patent expiries curbing drug bills across developed world

LONDON, Aug 1 (Reuters) - Britons are taking more prescription drugs than ever but the state health service is paying less for them - cheering news for taxpayers, if not for drugmakers.

The trend reflects an increased use of generic medicines amid a Europe-wide drive by governments for lower-cost prescribing, which is squeezing prices and taking its toll on drug company profits.

The number of prescriptions dispensed in the community in England rose 3.8 percent last year to 961.5 million, equating to 18.3 per head of population, with prescriptions for antidepressants showing the largest rise, up 9.1 percent.

Yet the cost of all those pills actually fell 0.3 percent to 8.8 billion pounds ($13.8 billion) due to a steady increase in use of generic formulations of many popular drugs, according to the government’s Health and Social Care Information Centre.

Across the world, an unprecedented wave of patent expiries is generating big savings for healthcare providers, even as ageing populations increase the overall number of medicines used.

IMS Health estimates that patent expiries in developed countries will yield a “patent dividend” of $106 billion in the five years up to 2016, reflecting reduced brand spending of $127 billion offset by $21 billion in higher generics expenditure.

Britain, in fact, has already seen its unit costs fall significantly, with the average prescription cost sliding to 9.16 pounds in 2011 from 9.53 in 2010 and a peak of 11.78 in 2004.

“There’s a misconception that there is a drugs bill problem in the UK,” said Stephen Whitehead, chief executive of the Association of the British Pharmaceutical Industry.

He is concerned that politicians are locked in a mindset linked to an era before the loss of patent protection of some of the world’s top medicines, like Pfizer’s cholesterol fighter Lipitor and Sanofi’s heart drug Plavix.

Recent forecasts by the industry-funded Office of Health Economics show branded medicines, which are still under patent, are set to take a dwindling share of the healthcare budget.

That research predicts Britain’s overall drugs bill - including both community and hospital medicines - will grow by 3.7 percent a year from 2012 to 2015, while brand spending will rise just 1.3 percent, as spending shifts further to generics.

The argument over whether new drugs consume a disproportionate share of the budget is critical for industry as it heads into negotiations with government about a major overhaul of Britain’s drug pricing system from 2014.

Companies are concerned that the new “value-based pricing” system, details of which are still being debated, may spell more direct price controls and delays in new drug launches, making Britain a less attractive place for pharmaceutical investment.