German drugs gatekeeper rejects GSK's Avandia pill

* Watchdog says no payments for glitazone, glinide drugs

* Drugmakers Takeda, Novo Nordisk also affected

FRANKFURT, June 18 (Reuters) - An influential German drugs watchdog told health insurers to stop paying for GlaxoSmithKline's (GSK) (GSK.L) Avandia, which could speed up a decline in sales of the controversial diabetes pill.

Germany's Federal Joint Committee of doctors and health insurers, which makes widely followed recommendations on reimbursement, cited bone fraction and heart risks associated with Avandia's class of drugs.

Sales have been declining sharply since controversy over the drug's heart risks first emerged in 2007. Sales of Avandia products fell 16 percent to 771 million pounds ($1.14 billion) last year.

"The committee's course of action is not justified neither from a medical, nor legal point of view," the drugmaker said in a statement.

However, the committee's chairman Rainer Hess said: "There are other pharmaceuticals that have no such side effects and long-term risks. We believe that patients should be protected against useless and, more importantly, harmful therapies."

The ban on glitazone medicines also include Actos, sold by Japan's largest drugmaker Takeda (4502.T).

The committee also said reimbursement of Novo Nordisk's (NOVOb.CO) diabetes pill NovoNorm/Prandin should be stopped alongside other drugs of the so-called glinide category, which include Novartis's (NOVN.VX) Starlix.

The committee said even though glinides have been prescribed for nine years, studies show no evidence of their benefit.

Sales of NovoNorm/Prandin rose 11 percent 2.65 billion Danish crowns ($441.1 million) last year, but Novo Nordisk expects a decline this year because of competition from cheaper generic versions.

U.S. government scientists earlier this month found that GSK's Avandia increased heart risks and deaths compared to a rival pill, just weeks ahead of a highly anticipated public meeting on the drug's safety. [ID:nN11155135]

The British drugmaker has started settling thousands of lawsuits brought by Avandia patients. [ID:nLDE6500XB]

GlaxoSmithKline said by rejecting Avandia, the medical committee had gone beyond its responsibilities. (Reporting by Ludwig Burger; Editing by Sharon Lindores) ($1=6.007 Danish Crown) ($1=.6743 Pound)