Price fixing of medicines to be ended

AN END to price fixing on medicines was signalled yesterday when the Government's consumer watchdog was given the go-ahead to begin legal moves to abolish the practice.

The Office of Fair Trading (OFT) will now prepare its case for a full court hearing next year which could result in sharp falls in the artificially inflated prices charged for common branded remedies such as painkillers, cough medicines and vitamins, saving consumers an estimated pounds 300m a year.

Allan Leighton, chief executive of the supermarket chain, Asda, which has campaigned against price fixing, said after the hearing: "The writing is on the wall for resale price maintenance and the drug manufacturers should take the hint and now voluntarily stop imposing this health tax."

Price fixing has been outlawed on most products under the Resale Price Maintenance Act, 1964. Medicines were exempted from the ban in 1970 to protect small chemists' shops, which argued that if they could not make enough profit from the sale of the medicines many would be forced to close, leaving large areas of the country without access to medical drugs.

The OFT said that in the last 20 years the market had changed. Chemists sold a wider range of goods and were less dependent on the income they got from the sale of medicines. This had fallen from 10-13 per cent of their total sales in 1970 to 7-8 per cent in the mid-Nineties.

Yesterday, the Restrictive Practices Court in London backed the OFT and agreed that the drug manufacturers had a case to answer. Giving his ruling, Mr Justice Buckley said that he and two lay members felt there was "no doubt" there had been changes in the way pharmaceuticals were marketed since 1970.

"We are convinced it is in the public interest for the court to revisit this matter," he said.

David Oliver QC, representing the OFT, had told the judges at a hearing last month that there was no longer any reason to protect chemists' shops, which had been rising in number or had remained stable since 1987.

There was also evidence of changing shopping habits, with 62 per cent of people canvassed in a survey saying they visited a chemist to have a prescription dispensed. In 1995, 73 per cent of chemists' turnover was from National Health Service prescriptions compared with 45 per cent in 1970. High-street pharmacists had claimed that lifting the exemption would result in one-quarter of all chemists going out of business.

John Bridgeman, the Director-General of Fair Trading, said: "This is good news for the consumers who have been forced to pay unnecessarily high prices for too long. I began the fight to end price fixing in this sector in 1996 and at last we can now proceed to the High Court. This is the last bastion of resale price maintenance in the economy."

A spokeswoman for the Community Pharmacy Action Group said: "We hope the full hearing will grant us a five-year moratorium so that alternative ways of protecting community pharmacies can be found."