The price of some over-the-counter drugs fell by as much as 50% last night as the last bastion of manufacturers' price-fixing was breached.
Supermarkets immediately slashed the cost to consumers of famous brand names such as Anadin, Calpol, Lemsip, Nurofen and Benylin, as small pharmacies and their supporters abandoned legal attempts to defend a system they had claimed helped to protect a vital local community health service.
Asda, which reduced the price of boxes of 16 Anadin tablets from £1.75 to 87p, estimated that the moves would save shoppers £300m a year, while opponents warned that small chemists among the 1,200 independent pharmacists could face closure. Sainsburys and Tesco announced similar cuts.
Shares in Boots, a major supporter of keeping the system, slumped by 38.5p to £5.78p,nearly 6.25%, the biggest fall by any blue-chip company yesterday, although it had already alerted analysts to the fact that the move could wipe £15m to £20m off its profits.
Over-the-counter sales of medicines and supplements were excepted from the abolition of resale price maintenance (RPM) in 1964, meaning that many stores had to rely on own-brand alternatives if they wanted to cut prices. But the office of fair trading (OFT) has long been seeking to end the exemption for a huge range of products, including cold and cough remedies, painkillers, vitamins and anti-smoking treatments.
Price-fixing on books, another exemption, went four years ago, and there has been a huge, ultimately successful, political and consumer campaign to shame car manufacturers into cutting their prices. In addition, supermarkets and the Superdrug chain have challenged designer brands in products from perfumes to sunglasses and jeans, buying cheap, unofficial stocks and selling them at vastly reduced prices.
The Community Pharmacy Action Group, an umbrella group which had been challenging the OFT in the courts, withdrew yesterday after the judge at the restrictive practices court in London made clear privately which way his decision was going. Mr Justice Buckley did not believe that there was sufficient proof that a large number of independent pharmacies would go out of business.
After the group pulled out, the judge made an order ending the exemption of medicines from price maintenance.
John Vickers, director general of fair trading, said: "This is excellent news for consumers who will now benefit from lower and more competitive prices for common household medicines. After 30 years, retailers will be able to set their own prices competitively. Consumers will save many millions of pounds a year."
Devastating
The Consumers' Association, said: "It is great news. The drug industry for years has wrapped itself in the flag of community pharmacy. It has been a weak case. The industry should be made to pay for the time and money spent by the OFT. It is ridiculous they could take it this far and throw their hat in at the last moment."
David Sharpe, chairman of the action group and a pharmacist in Mill Hill, north London, said the outcome was "a devastating blow" to the network of community pharmacists. The group had believed it had a strong case, but, "having been given the clear indication that we are unlikely to win, it is in no one's interest to continue incurring further costs.
"Many pharmacists will simply not be able to survive, given the buying power and aggressive pricing tactics of the supermarkets ... The potential losers are the elderly, disabled and young mothers who rely heavily on the free advice and services offered by the local pharmacist."
Gill Hawkesworth, who runs a business employing seven part-time specially trained staff in Mirfield, west Yorkshire, echoed Mr Sharpe's concerns. "Quite often over-the-counter medicines [in supermarkets] may be placed between the cigarette kiosk and tins of alcohol. We give advice as health professionals on asthma, diabetes, smoking cessation. We are talking about the health of people. It is not a commodity. It is something that needs a lot of care and attention."
The market for over-the-counter drugs and food supplements is worth more than £1.5bn a year. The Proprietary Association of Great Britain, representing manufacturers, expressed disappointment at the end of RPM , calling on retailers to "take a sensible and responsible approach to the sale of medicines".
Asda, announcing price cuts ranging from 20% to 50%, said these were "just the start". Its trading director, Mike Coupe, said Asda had made a fair profit on its own-label alternatives despite charging half or less than the "anti-competitive" price previously fixed for the branded equivalent.
Asda also pointed out the OFT had found that as little as 6% of pharmacists' sales and 5% of profits were covered by price-maintained over-the-counter products, compared with up to 70% from NHS prescription sales.
Sainsburys cut prices by up to 50% and Tesco said its cuts would be up to 40%.
Boots said it aimed to claw back its losses within two years through gains in market share and cutting margins. "A lot of small pharmacies will go to the wall, but we are used to operating in deregulated markets and will respond with our own promotions," the company said.
The company, which had earlier expressed disappointment at the court's views, moved to extend the price war by introducing a three-for-two offer on Nurofen painkillers, £1 off the children's medication Calpol and 20% off Nicorette anti-smoking gum.
Lloydspharmacy, another high street chain, said the abolition of RPM would not change its strategy and stressed the extra service provided by its pharmacists. "We will continue to offer customers the widest range of products at value-for-money prices," it said. Medicines needed to be provided with the proper advice and care that only a pharmacist could offer.
The decision is likely to mean a huge increase in the number of pharmacies in supermarkets, raising fears that they will hasten the death of the high street chemist by fighting on the availability of prescription services as well. The defenders of the present system have been increasingly nervous in recent months that more medicines available on prescription will be allowed to be sold over the counter.
Asda already has small pharmacies in almost half its stores, while Tesco has pharmacies in just under a third of its 680 stores. The supermarkets are also already competing on other fronts, including in-store opticians. They argue that RPM is not the way to protect vital community services, and that control by manufacturers on costs and prices to consumers has left pharmacists no say in either.
The Department of Health noted the judge's comments that there was insufficient evidence that a large number of independent pharmacists would close, or that the range of products available would be reduced. The government's strategy for the drugs industry stressed that it wanted to see "people throughout the country continue to have ready access to the service of community pharmacies," the department said.
Prices that are easier to swallow
(was now)
Tesco
Nurofen 200mg x 24: £3.15 £1.89
Calpol infant 140ml: £3.49 £2.49
Anadin Extra x16: £2.15 £1.29
Sainsbury
Nurofen 200mg x16: £2.29 £1.14
Haliborange Vit C x 20: £3.69 £1.84
Seven Seas Evening Primrose Oil x 60: £5.59 £2.79
Asda
Anadin regular x 16: £1.75 £0.87
Sanatogen Gold x 30: £4.15 £3.11
Lemsip original x5: £1.80 £0.90
