The Pharmaceutical Journal
Vol 269 No 7216 p392-394
21 September 2002

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Letters to the Editor

Community pharmacy

An easy target for the Office of Fair Trading?

From Mr P. Cattee, MRPharmS

How interesting to read that pharmacy has been chosen as "an easy target" by the Office of Fair Trading, in the opinion of Nathan Cockrell, European retail analyst at Credit Suisse First Boston (PJ, 7 September, p307). It has always been my fear that once the OFT has expended time and resources on a project it is unlikely to recommend maintenance of the status quo; only some proposal for change will validate its investigation.

But on reading further I was surprised to discover that "at its very heart, this inquiry is about the price of health care products and, by implication, the appropriate levels of profits achieved by retail pharmacies". Have I been missing something? I was under the impression that the inquiry was primarily about whether controlling the number of dispensing contracts served for or against the public interest.

Talk of "Boots The Chemists's very high levels of profitability" raises my concerns even more. If there is one comp-any that is working on a completely different economic model from all other contractors it is Boots. Why? Its turnover must be almost a mirror image of independent pharmacies' "85 per cent NHS/15 per cent counter" split; its sites are hugely expensive in overhead costs; it is one of the largest spenders on advertising; much of its profit must come from the sale of sandwiches; and it is almost as unrepresentative of the economics of pharmacy as it is possible to be — it is a national retailer. What does this have to do with community pharmacy as we practise it?

Superdrug is then mentioned. It, we are told, may be among those that have claimed "that the cost of obtaining pharmacy contracts prevents their expansion and limits their ability to offer competitive prices to consumers". I find this laughable. The average £190,000 quoted for contracts must equal a few pence in a year for each customer — if that. To a company of its size it is nothing and it would never prevent expansion. The point about competitive prices has nothing to do with contract limitation; I presume it is a reference to the P medicine category, and the need for a pharmacist's presence, but not for a contract.

Those who have a stake in this profession may understand the significance of these points, but I wonder just how many people will have sufficient interest to follow the arguments in any depth. More disturbingly, given the tone of the CSFB report, I wonder exactly what the terms of reference of the OFT inquiry are?

Peter Cattee
Chairman,
Association of Independent Multiple Chemists

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