The move immediately sparked fears that other drug groups would be tempted to follow. Many wondered about Glaxo Holdings and its highly lucrative Zantac ulcer drug which, even before yesterday's reduction, was more expensive than Tagamet. In the year to 30 June Zantac sales rose 20 per cent to pounds 2.17bn.
With the Clinton administration determined to reduce healthcare costs, the SKB cut is likely to be well received in Washington and pressure could build on Glaxo.
There has so far been little evidence of price-cutting among the drug groups. But curbs have been applied by governments worried about the mushrooming cost of health care.
SKB shares fell 13.5p to 395.5p and Glaxo, despite a confident statement at the yearly shareholders' meeting, 2p to 653p.
Wellcome, ruffled by a profit downgrading thought to be from Nomura, tumbled 25p to 677p.
Drug shares have suffered in the past year as the market has fretted about increased competition and the impact of the Clinton reforms.
Food shares have also performed weakly. They have been hit by competition fears and signs of deeper price cuts squeezing margins.
A round of price cuts would end the modest drugs rally evident in recent months.
The SKB reduction came close on the heels of allegations of unlawful selling methods by some groups. Fisons, at the centre of the row, fell 6p to 147p.
The drug sector also had to contend with a profit warning from Bespak, an instruments maker. The shares crashed 155p to 318p. Early this year, before worries about the group's US operations surfaced, they were above 700p.
The rest of the stock market had a roller-coaster session with the FT-SE 100 index ending eight points down at 3,077.6. At one time the index was more than 20 points off and threatening to go even lower as rumours of a big US sell programme swirled in the futures market.
When the wall of shares failed to arrive, there was audible relief and a few bargain-hunters helped to nudge prices higher.
The latest Minet index, at 139.8, showed that fund managers' confidence remains high although well below the 152.5 peak hit last December. A Smith New Court poll found fund managers less bullish on equities.
Continuing regulatory worries and suspicions that interest rates will not be cut kept the pressure on water shares. Negative comments from UBS also helped to dry up enthusiasm.
Electricities fared a little better, led by National Power, interim results tomorrow. Profits are likely to be pounds 210m ( pounds 201m) with a dividend increase nudging 18 per cent. NP gained 6.5p to 411p. PowerGen, which has already announced a near-18 per cent increase, rose 6p to 465p.
BAT Industries was another to ignore the downward tug. It gained 17p to 478p on indications that the US cigarette price war could ease.
The story was that Philip Morris was restricting cigarette sales to wholesalers to prevent them stocking up ahead of a price increase. Philip Morris launched the fierce, costly US battle in April when it shocked the industry by lowering prices of many brands, including the top-selling Marlboro.
Guinness moved ahead 4p to 412p following its jaunt for analysts to Greece.
Julie Bower, at Credit Lyonnais Laing, remains a seller. 'The shares are unlikely to perform until there is some evidence of an improvement in the near-term trading environment,' she says in an internal memo.
Abacus, an electronic components group, made a firm start, closing at 153p against a 140p placing price.
The first of the Lloyd's of London funds made their debut. Hiscox Select stretched to 110p against the 100p sale price but HCG Lloyds got a much cooler reception, closing at 101p.
Owners Abroad, where rights issue rumours swirl, fell 2p to 80p. SG Warburg has replaced UBS as the company's stockbroker. Lazard Brothers has been appointed financial adviser.
Greycoat continued to respond to the rescue package, gaining 3.5p to 29p in a weak property sector. British Land lost 7p to 389p and Slough Estates 6p to 244p.
Geest lost 19p to 342p on the hostilities over banana imports with Fyffes, the Irish group.
Psion, the computer group, put on 6p to 168p following an investment meeting. The company said its US campaign was going well.
Eidos, a producer of video editing equipment, jumped 20p to 118p. A director, C H D Cornwall, has been allotted 115,000 shares at 80p. Storm, the animation group, shaded 0.5p to 15.5p after raising pounds 628,000 through a placing at 17p.
The FT-SE 100 index ended eight points lower at 3,077.6 and the FT-SE 250 index 19.4 down at 3,440.7. Turnover was 557.7 million shares with 30,352 bargains. The account ends on Friday with settlement on 22 November. Goverment stocks were quiet.
Farringford, the small leisure group where the holiday camp pioneer Sir Fred Pontin has a 34 per cent interest, has lost two directors in a week. They are David Cunningham, chairman, and Martin Duffy. The new chairman is Martin Pope. Farringford, owning an Isle of Wight hotel, is known to be seeking acquisitions. The shares eased 0.5p to 7.5p.
Hopes that T Cowie, the car and leasing group, would spring a bid for Alexanders Holdings, the Scottish car group, have been dashed. But Aleksandra Clayton, the company's chairman, may feel she is obliged to make an offer. She has acquired the Cowie stake of 12.39 per cent at 20p a share and now has 68.39 per cent. Alexanders' shares held at 21p. Cowie shaded 1p to 240p.