OFT could prove bad medicine for chemists

Roger Pearson reports on the Office of Fair Trading's move to abolish the price fixing of commonly used medicines.

A major legal challenge which could have wide-ranging implications for the cost of over-the-counter medicines – and which some say could lead to the closure of many small chemist shops – is now pending.

The Government's consumer watchdog has been given the go-ahead to initiate legal moves aimed at abolishing price fixing for medicines such as cold remedies, painkillers, cough medicine, laxatives, vitamins, skin treatments and anti-smoking products.

It is estimated that as a result of price fixing consumers pay something in the region of an extra u300m a year for such drugs.

However, the Restrictive Practices Court, headed by Mr Justice Buckley, has now given the Office of Fair Trading (OFT) leave to challenge the practice, under which suppliers set a minimum price that retailers can charge for their products.

Medicines represent the last class of goods to have an exemption under the Resale Prices Act (RPA), which outlawed general price fixing in 1964.

Giving the green light for the challenge, Mr Justice Buckley said that things had changed since 1970, when the RPA medicine exemption order was made. The exemption was made to protect small chemist shops.

Although the case for abandoning price fixing in this area still has to be heard and is likely to meet stiff opposition, Mr Justice Buckley said the court was convinced it was "in the public interest for the court to revisit this matter".

The OFT was represented in the Restrictive Practices Court by David Oliver QC. During the hearing he argued that there was no longer any need to protect small chemists.

Oliver said the number of chemists had been rising, or at least had remained stable since 1987.

On the other hand, high street chemists claim that lifting the exemption will result in a quarter of all chemist shops going out of business, with supermarkets sweeping up a greater share of the trade.

The hearing, which is expected to last at least two months, is now scheduled for later this year.

Director General of Fair Trading, John Bridgeman, has greeted the go-ahead for the challenge as good news for consumers who, he says, have been forced to pay unnecessarily high prices for too long.

Describing the situation as "the last bastion of resale price maintenance", he has made it clear that he does not accept that lifting the restrictions will lead to price cutting by supermarkets and consequent closure of large numbers of local pharmacies.