Asda declares war on chemists loomslooms

Shares in Britain's largest high street chemists' groups slumped yesterday following the decision by Asda to cut the price of over-the- counter medicines and increase the prospect of a price war in the UK drugs market, writes Nigel Cope.

Boots fell 15.5p to 568p, Lloyds Chemists finished 17p lower at 228p while Unichem, the wholesaler and retailer closed down 11p at 264p. Asda shares fell 1.5p to 103.5p

The other large supermarket groups have not yet followed Asda's lead, though Sainsbury and Tesco said they would monitor the situation. Boots, the UK's largest pharmacy chain, said it would not break the re-sale price agreement. A spokesman said: "We don't think it should be abandoned. Medicines are not items of everyday commerce; it should be possible to purchase them from a wide range of outlets."

However City analysts believe it is only a matter of time before rival supermarket groups follow Asda.

After its successful challenge to the Net Book Agreement, Asda is now cutting prices by up to 20 per cent on around 80 branded vitamin and food supplements including Sanatogen, Seven Seas and Lucozade. The company says prices are too high and that the price agreement is a tax on people's concern about their health.

Asda's price challenge has been criticised by industry groups which say a drugs price war will reduce choice and force smaller pharmacists out of business.

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