Blow for chemists and drug makers as price fixing is referred to court

Drugs manufacturers and chemists may be forced to scrap price fixing for over-the-counter medicines after the Office of Fair Trading (OFT) yesterday called on the courts to settle the issue. The move comes after a long-running campaign by supermarket chain Asda for cuts in the price of non-prescription medicines.

The director-general of the OFT, John Bridgeman has asked the Restrictive Practices Court to end resale price maintenance (RPM) on over-the-counter pharmaceuticals. Price fixing on prescription-only medicines was abolished in the Seventies.

Asda estimates that shoppers in the United Kingdom could save pounds 300m a year if supermarkets and other retailers were allowed to sell a wide range of popular medicines below the price set by the makers.

But the pharmaceutical industry, backed by leading chemists' chains, says that thousands of community chemists could be forced to close if price fixing was scrapped.

In 1970, when the Restrictive Practices Court last looked at the issue, it allowed manufacturers to continue enforcing minimum prices for their branded products. Mr Bridgeman said there had been considerable change since then - in consumer behaviour, the nature of a chemist's business and the structure of the retail market - warranting a new review,

Asda, which in 1995 cut the price of 80 vitamin products only to restore them after manufacturers secured injunctions, welcomed the OFT's decision. A spokesman for the chain said yesterday: "This is something we have been waiting for and we are delighted. Today marks the beginning of the end for price fixing in this country.

"The only disappointment is that [the case] will not be heard until 1999, which means another pounds 300m that consumers will have to pay because of price fixing. That is the excess profit going to manufacturers and multiple chemists."

In 1970, the Restrictive Practices Court decided that without RPM supermarkets would stock a wider range of the more popular products and lower the prices, leading to fewer visits to chemists' shops at a time of decline. But the OFT said the number of chemists' shops was no longer declining and the main reason for consumers visiting them now was to collect prescriptions. The strong growth in the number of chains of chemist shops since 1970 would enable them to withstand price competition, it added.

Boots the Chemist said that it backed the smaller pharmacists in campaigning against abandoning price maintenance. Ian Wright, director of communications, said: "We feel the pricing system should remain. If it goes, small independent pharmacists will go to the wall and that is not in the public interest ... people will always want the option of having a local chemist."

The Community Pharmacy Action Group, which was set up to lobby in favour of RPM, reacted angrily yesterday. Its chairman, David Sharpe, said: "This is clearly an attempt to subvert an agreement between the government and pharmacies. People's access to medicines and healthcare advice should be determined by elected politicians, not unelected placemen."