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OFT recommends liberalisation of pharmacy market

PN 4/03    17 January 2003

Removing restrictions on entry to the community pharmacy market would give consumers greater choice, benefits from greater competition and better access to pharmacy services, an OFT market investigation has concluded. There would also be large regulatory cost savings for business and government.

The OFT report recommends that regulations currently controlling entry to the industry should be lifted to allow any registered pharmacy with qualified staff to dispense NHS prescriptions.

Download The control of entry regulations and retail pharmacy services in the UK (revised edition March 2003)  (pdf file 415 kb)
[This report was revised in March 2003 to take into account a number of small corrections and amendments. These in no way affect the OFT's final analysis in the report or conclusions.]

The report's annexes can be downloaded from the investigations section of this website.

There are some 12,250 community pharmacies in the UK, providing NHS prescriptions and selling over-the-counter (OTC) medicines (see note 2) worth a combined total of £8.6bn. Though demand has grown steadily - and is set to grow further - entry restrictions have kept the number of pharmacies essentially static.

This study is the third market investigation to be published by the OFT's Markets and Policy Initiatives Division and the first which has focused on Government regulations. Government is committed to responding to the report within 90 days.

The OFT found that regulations which currently control entry to the industry:

• restrict consumer choice and convenience in terms of location of pharmacies and opening hours
• restrict access to lower priced OTC medicines resulting in consumers paying around £30m a year more than in a deregulated market
• reduce incentives for pharmacies to compete on additional customer services
• cost businesses an estimated £16m in compliance costs every year
• cost the NHS approximately £10m a year in administration costs
• hold back innovation and responsiveness to changing and growing consumer needs.

Under the regulations, pharmacists can dispense NHS prescriptions only if local health authorities are satisfied that this is 'necessary or desirable' for the adequate provision of pharmaceutical services in the local community. Effectively,  the regulations have blocked entry by new pharmacy businesses. Almost all pharmacies in the UK have a NHS dispensing contract.

Launching the report, Director General of Fair Trading, John Vickers said:

'Pharmacies are a vital part of the UK healthcare system. But entry regulations are impeding new sources of supply to the public. These regulations restrict competition and choice for consumers, impose a regulatory burden and limit the ability of businesses to respond to evolving customer demands.

'Liberalisation should benefit consumers, businesses and healthcare provision. So we are recommending deregulation to Government.'

NOTES

1. The control of entry regulations were introduced in England and Wales, Scotland and Northern Ireland in 1987. For England and Wales they are now contained in the National Health Service (Pharmaceutical Services) Regulations 1992; for Scotland, the National Health Service (Pharmaceutical Services) (Scotland) Regulations 1995; and for Northern Ireland, the Pharmaceutical Services Regulations (Northern Ireland) 1997.

2. The two categories of over-the-counter medicines are non-prescription products which can be sold:
i) through pharmacies by or in the presence of a qualified pharmacist ('P' medicines)
ii) by any type of outlet (General Sales List or 'GSL' medicines).

3. The first Markets and Policy Initiatives Division (MPI) study examined the supply of extended warranties on domestic electrical goods and referred the market to the Competition Commission (see OFT press release 40/02). The second MPI study found that the consumer IT goods and services market was working well but could serve consumers better and made a number of recommendations (see OFT press release 85/02). Other MPI market studies currently in progress include:

• private dentistry - launched in January 2002 following a super-complaint from the Consumers' Association. We expect to report in February 2003.
• estate agency - a comprehensive study of buying and selling residential property in England and Wales which commenced in June 2002. We aim to report by June 2003.
• taxi services - an examination of the market for licensed taxis with particular emphasis on their regulation launched in August 2002. We expect to report in the summer of 2003.
• doorstep selling - launched in response to a super-complaint by the National Association of Citizens Advice Bureaux (now known as Citizens Advice), this examination of the practices surrounding doorstep selling was commenced in November 2002. We expect to report by the autumn of 2003.

5. In this press release the functions of the Director General of Fair Trading (DGFT) are for simplicity described as the functions of 'the OFT'. The Enterprise Act 2002 will replace the office of the DGFT with the OFT, to which will be transferred the DGFT's functions.

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