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Britain Ends Price-Fixing on Nonprescription Drugs 

By: Marjorie Miller
The Los Angeles Times, May 18, 2001

LONDON--The cost of treating a common cold in Britain dropped by as much as 50% on Wednesday when more than 30 years of legal price-fixing on nonprescription drugs came to an abrupt end. 

This was good news for Britons with the sniffles but a headache for the more than 6,000 owners of independent pharmacies, who say they will not be able to compete with drugstore and supermarket giants. 

"That was our profit," said Dipak Patel, the pharmacist at Remedys in West London's Maida Vale neighborhood. "That's what kept us going." 
Large retailers slashed the prices on a slew of brand-name painkillers, cough medicines, vitamins and an array of other over-the-counter drugs by 25% to 50% after a High Court ruling lifting the law that had fixed the cost to consumers. It was the last such law in Britain. 

Many drugstore customers welcomed lower prices, but others worried that this is one more step toward turning a nation of shopkeepers into a nation of supermarket shoppers. They feared losing the personalized attention of a familiar neighborhood "chemist," who knows their medical history and serves as a first-stop health care advisor. 

"We rely on these people for many, many things and what chance have they got against the supermarkets?" said William Millin, the chairman of a real estate company who was shopping at Remedys. "You can't talk to anyone at a supermarket. Or, you can talk to them, but you won't get an answer." 
But consumers will get cheaper nonprescription drugs, countered Tommy Lowe, owner of a flower stand next to Remedys. 

"It's the way it is in this day and age, the wee guys find it hard to compete. Marks & Spencer sells flowers a lot cheaper than I can buy them. People are going to the supermarket and buying flowers, fish, groceries, beef. 

Eventually all these shops will be closed," Lowe said with a matter-of-fact nod down High Street. "I don't think people bother too much whether it's nice or not. It's convenient and cheap." 

Down the block from Remedys, one of the country's 1,300 Boots pharmacies had just dropped the price of a local brand of ibuprofen by a third, in a three-for-two pack sale. The result: While Remedys' price came to about 19 cents a pill, Boots offered the same product for 13.7 cents. Patel said he might be able to come down a bit but not 30% on nonprescription drugs, which represent half his total sales. 

Retailer chains buy medicines in larger quantities and therefore obtain better prices from suppliers. Pharmacists said they hoped that manufacturers will give independent pharmacists a break to keep them from going out of business. 

But even the chain pharmacies said they will suffer initially. Shares of Boots stock fell by 4.5% after news of the end of price-fixing. The company announced that it expected profits to drop between $21 million and $28 million, although it believes that the loss will eventually be recouped in increased market share. 

Pharmacists were critical of stores offering larger quantities of drugs for lower prices to boost sales. They noted that one supermarket had dropped the price on paracetamol--known in the U.S. as acetaminophen--a painkiller that is dangerous when taken in large quantities. And where, they said, do you find a pharmacist standing next to the ibuprofen in a large supermarket warning that it can be bad for asthmatics? 

"Many local pharmacies should still find that there is a market for their services and that convenience will compensate for prices," business columnist Patience Wheatcroft wrote in the Times of London. But, she added, legalized price-fixing was "a relic of rip-off Britain." 

Britain passed the Resale Prices Act in 1964 banning price-fixing, but booksellers and pharmacists won exceptions in court on the grounds that their businesses needed help or they would go bust. 

The booksellers lost theirs in late 1995, but pharmacists fought the challenge by the government's Office of Fair Trading, supermarkets and a consumer association. In the five years that pharmacists have been in litigation, there has been a drop in the number of independent bookstores, according to Sidney Davis of the Booksellers Assn. But he could not cite any numbers and acknowledged that it was impossible to determine whether discounted prices alone were the cause. 

"There have been a lot of changes in the market for books in the last 10 years. Internet books, the arrival of superstores. There has been a slight decline in the number of businesses, but there is more square footage dedicated to books and more books sold," Davis said. 

This week, the judge hearing the case on nonprescription drugs warned pharmacists that he did not see a case for continued price-fixing, so they gave up the fight Tuesday. On Wednesday, ibuprofen was on sale at Sainsbury's supermarket for half the price it was the day before. Asda supermarket cut the price of a leading cold remedy by half and the price of daily vitamins by 25%. 

John D'Arcy, chief executive of the National Pharmaceutical Assn., predicted that he will lose a large number of independent pharmacists. 
"I think we will see deep price cuts followed by a round of closures followed by the return of prices to their previous level," D'Arcy said. "So far, we've been right."