Pharmaceutical Journal Vol 263 No 7067 p653-654
October 16, 1999 Forum

Unichem convention

RPM debate: Superdrug makes some converts, but support stays strong

Our report of Unichem's annual convention concludes with coverage of the convention's set-piece debate which centred around resale price maintenance.Voting after the debate revealed a small swing towards abolition of RPM, although retention was still favoured by the overwhelming majority of the audience

Retention of RPM is against the public interest

Pharmacy was doing itself no favours by campaigning for the retention of resale price maintenance on over-the-counter medicines, Mr Barry Simner (pharmacy general manager, Superdrug Stores Plc) told the convention in putting the case against RPM. Customers did not benefit from RPM - it put vital products out of the reach of those who would benefit most from them and thus, in supporting its retention, pharmacists were failing those who depended upon their services. It also made the profession seem backwards-looking and insular. Mr Simner said that RPM had been introduced in the 1970s as a way of supporting struggling pharmacies and assuring patient access to pharmaceutical services. However, 30 years on, it was not achieving its purpose: the position of low-volume pharmacies was getting worse not better, pharmaceutical services had failed to respond to changes in shopping habits and lifestyles, and pharmacy had been slow to innovate and as a result had been excluded from many new primary care initiatives. Control of entry regulations and RPM had stifled competition and consumer choice.

Barry Simner: does the retention of RPM benefit customers?

"As an industry, I feel that we should remember that for fixed pricing to be justifiable, the beneficiary has to be the patient and the consumer, not the supplier. All too often the arguments in favour of RPM on medicines cite the supposed benefits to some retail pharmacies and assume rather than demonstrate that these benefit consumers."
Mr Simner said that subsidies for essential small pharmacies could be targeted more effectively than by the current price fixing through RPM. Support could be given selectively in areas where patient access was a problem.
He pointed out that many of the Community Pharmacy Action Group's arguments had been made by booksellers before the collapse of the Net Book Agreement. In fact, since then, research had shown that the decline in the sale of books had slowed and, in fact, market share growth among supermarkets had been curbed and the pendulum had swung back towards bookshops.
"If the removal of the Net Book Agreement is anything to go by, the majority of pharmacists will be able to adapt and, importantly, survive."
In many areas of England, the problem was that there were too many pharmacies. Overall, there was not a shortage, but there was an imbalance in the distribution.
"All too often consumers are faced with a choice of two or three substandard pharmacies clustered around the GP surgery, but little or no choice in the areas where they work and shop."
Mr Simner said that he believed that pharmacy was being left out of developments in the Nation Health Service because it was seen by the Government as inward-looking and backward. Pharmacy needed to maintain its positive public image, yet it was campaigning to retain a regulation which was against the public's best interests.
"The profession needs to examine its motives and determine whether it is narrow self-interest which is preventing it from embracing a modern and competitive market, and turning its back on the opportunities in the future."

Football case gives boost to RPM cause

A recent case in the Restrictive Practices Court over television rights to Premier League football matches had produced a result which was relevant to the case to retain resale price maintenance on medicines, Mr David Sharpe (chairman, Community Pharmacy Action Group) told the convention. In this case, television companies had had to persuade the court that their agreement for exclusive rights to broadcast Premier League matches, undoubtedly a restrictive practice, fell within one of the so-called "gateways" in the relevant legislation under which a restrictive practice could be justified. Like pharmacy would have to do, they had to convince the court that, on balance, the public interest was better served by retaining the agreement than by removing it and, in the case in question, force football clubs to negotiate individually with broadcasting companies. This had to be done against an assumption that any restrictive practice was against the public interest.

David Sharpe: football case shows OFT can lose in court

The television companies had won their case. More importantly, Mr Sharpe said, the Office of Fair Trading had lost a case in court. Looking at the case in detail, five arguments had been made and won. Each had a point of comparison with pharmacy's case.
First, if the agreement had been overturned, the Premier League would have lost or had substantially diminished its ability to sell television rights in the league. This could be compared with the accessibility to pharmacies argument. Secondly, the Premier League would have lost income and clubs would have been unable to improve the quality of their stadia and squads. This could be compared to the maintenance of small pharmacies. Thirdly, the Premier League would have lost its ability to divide television revenue fairly and to maintain and improve a competitive balance. In the same way, competitive balance was needed between large supermarkets and small pharmacies. Fourthly, the ability of the Premier League to confer benefits on football outside its own league would have been seriously diminished. This could be compared to the services pharmacies offered to customers. Finally, competition between broadcasters, which was partially dependent on them being granted exclusive rights to sporting events, would have been impeded. It was also necessary to maintain competition between different brands.
"The case we have to put is, of course, different, but the public interest was the overriding consideration of the court. We are much encouraged that the court was prepared to examine the issues carefully and fairly, and not subscribe to the received wisdom of some economists that all restrictions are bad restrictions."
Mr Sharpe reminded the audience that the RPM case had initially started at the end of 1995 and the case before the Restrictive Practices Court was not due to be held until late 2000. The crux of the case had to be whether the public would suffer if any pharmacies closed as a result of the removal of RPM.
Shopping habits had changed since the last court case in 1970, but there were still many people who could either not drive or who did not have access to a private car with which to visit an out-of-town megastore. In any case, many of those who did have cars did not have the money available to invest in a single large set of purchases.
Mr Sharpe said that Superdrug and Asda, in their campaign against RPM, were seeking free publicity, to build their reputations for value on the back of misunderstandings about branded product prices and to gain extra business through siphoning off customers who currently used local pharmacies.
He promised that he and the CPAG would continue to fight for the retention of RPM all the way through the courts.
Are medicines price sensitive?
After the debate, the two opponents were asked whether they thought medicines were goods which were sensitive to changes in price.
Mr Simner said that, with the exception of some seasonal lines such as hayfever treatments, he did not believe that medicines were price sensitive. Mr Sharpe said that he, too, would like to think that medicines were not price sensitive, but when the activities of Asda were looked at it was clear that what they had tried to achieve was an impression of cheapness.
Mr Simner said that he understood that Asda had gained publicity for its actions but not extra sales.
Mr Nick Foster (managing director, Norton Healthcare) said that one of the problems with the loss of RPM could be a slow drift away of customers from pharmacies. The first time they wanted a medicine they would go to a pharmacy for advice, but after that they would be susceptible to being lured away by offers of the same medicine at a lower price.