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The Pharmaceutical Journal
Vol 270 No 7233 p103
25 January 2003

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Office of Fair Trading: Investigations — pharmacies (more)

Scrap contract regulations, says OFT

If every supermarket opens a pharmacy and two local pharmacies close there will be only a “limited reduction” on local pharmacy access, says the Director General of Fair Trading

Regulations that have stabilised the pharmacy market since 1987 should be scrapped, the Director General of Fair Trading, John Vickers, has recommended.

After over a year of deliberations, the Office of Fair Trading says in a report published last week that deregulating the pharmacy market will give consumers more choice, benefits from greater competition and better access to services. It adds that the annual regulatory cost saving to businesses would be £16m with a saving to the Government of £10m. Consumers would benefit by a £30m drop in the cost of over-the-counter medicines. The value of the United Kingdom pharmacy market is £8.6bn.

In addition, the OFT says that the regulations restrict consumer choice over pharmacy location and opening hours, reduce incentives for pharmacies to compete on customer services and hold back innovation and responsiveness to changing and growing consumer needs.

Although the contract control regulations only constrain the award of NHS contracts to pharmacies that are neither necessary nor desirable for the proper provision of NHS pharmacy services, the OFT takes the view that they have effectively blocked new pharmacy businesses from the market.

UK is well served by community pharmacies

The OFT accepts that the UK is well served by pharmacies, with 79 per cent of people living within 1km of a pharmacy and 49 per cent within 500m. It expects that, without contract controls, more firms will enter the market and some will leave, but with no substantial net loss of pharmacies. OFT scenario modelling suggests that even if pharmacies were opened in all medium and large supermarkets and the two nearest existing pharmacies went out of business, there would only be limited reduction in local access and that this would not impact more on the elderly or those on low incomes than on the general population.

In any case, it adds, there is more to access than location and there is substantial room for improvement on opening hours and convenience. The OFT view is that the average independent pharmacy, which is open for 50 hours a week provides limited access compared to a supermarket pharmacy open for 80 hours a week.

Mr Vickers said: "The question is whether the regulations that control entry into the industry are unduly impeding the way that the market works to the ultimate detriment of the general public. Our answer to that question is yes. We believe that the regulations have impeded the working of the market in a detrimental way and that they should be lifted. They inhibit price competition, they stifle efficiency improvements and innovation, they limit the availability of pharmacy services and they impose substantial regulatory burdens."

The Department of Health has committed itself to responding to the OFT recommendation by 17 April.

Parliamentary Under-Secretary of State for Health for England David Lammy said: "This long-awaited report is a significant milestone for community pharmacy. But its recommendations have potentially far-reaching implications — not just for pharmacists, but for doctors who dispense, the NHS and for patients as well."

Representatives of pharmacy, GPs, the NHS and patients are to be invited to discuss the report with the DoH and the Department of Trade and Industry.

News feature, p108