Pharmacies will be the big losers
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Your support makes all the difference.The City yesterday shrugged off news that the Office of Fair Trading is to take steps to end resale price maintenance on over-the-counter medicines, saying the impact on the major pharmacy groups would be limited. Analysts said the end of price fixing would benefit the large pharmacy chains such as Boots, Britain's largest chemist, which would be able to use their economies of scale to cut prices and drive volumes higher.
Supermarkets such as Asda, which led the campaign for cheaper medicines, should also benefit. Asda claimed the OFT decision was a "victory for ordinary working people". It also represents a personal triumph for Archie Norman, Asda'schairman, who started the campaign a year ago. He is now the prospective Conservative candidate for Tunbridge Wells.
The real loser of the OFT's decision is expected to be the smaller pharmacies, which are already losing much of their regular toiletries business to the supermarkets. Manufacturers and wholesalers will also find their margins squeezed.
However, it is by no means certain that the OFT decision will lead to a change in the law. The issue must first be reviewed by the Restrictive Practices Court. The Community Pharmacy Action Group, which represents smaller chemists, is certain to campaign for Government intervention.
Boots shares fell 5.5p to 638.5p on the news while Kingfisher, owner of the Superdrug chain, only fell a penny to 654.5p.
Sean Eddie, of NatWest Markets, said the impact on the market was unlikely to be significant. He said that since the collapse of the Net Book Agreement last year, only 4 per cent of books were being discounted. "WH Smith has gained market share in books since the Net Book Agreement collapsed," he said. "Boots should be able to do the same. It is the corner shop, which relies on convenience trade on the high street, that will suffer."
Boots said it was surprised and disappointed by the OFT decision: "We firmly believe that RPM operates in the public interest and that this will be the conclusion of the Restrictive Practices Court in due course."
SmithKline Beecham said it was disappointed by the move.
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