Europe is launching a 2 billion euros (1.57 billion pounds) scheme to boost drug discovery in a bid to re-establish itself as the "pharmacy of the world" and close a growing gap with United States and Asia.

The Innovative Medicines Initiative, being unveiled in Brussels on Wednesday, offers grants to academic institutes and small companies to research ways of beating bottlenecks in the drug development process.

The work is "pre-competitive", involving common solutions to issues in drug development, so no individual company stands to gain a competitive advantage.

The European Commission is to contribute 1 billion euros over seven years, with large drug companies providing a similar amount "in kind" by supplying staff and equipment, officials said.

The collaboration is the largest of its type in the world and marks a victory for Europe's pharmaceutical industry, which has long campaigned for an EU initiative to promote the life sciences sector.

Europe used to be the global centre of global drug development but has fallen behind in recent years. A decade ago, seven out of 10 of the world's new medicines were developed in Europe; today it is just three.

"We hope to send a very clear signal to the world that Europe is getting serious again about being the centre of biomedical research," said Arthur Higgins, CEO of Bayer HealthCare and president of the European Federation of Pharmaceutical Industries and Associations.

"The greatest accolade will be if we are seen again as the pharmacy of the world," he told Reuters.

But the programme will not yield results overnight. The first research programmes will only start early in 2009 and many are unlikely to yield practical results for many years.

The initial areas of disease focus will be diabetes, brain disorders and respiratory disease, with cancer and infectious diseases following later.

The over-arching goal is to find better methods for predicting the safety and efficacy of new medicines. As such, the new programme matches a similar project from the U.S. Food and Drug Administration, called the Critical Path Initiative.