OFT to look at drug pricing: Pressure grows for better competition at the chemist's

THE OFFICE of Fair Trading is making a preliminary study of the system whereby manufacturers are allowed to fix the price of drugs sold to the public over the counter and on prescription, writes William Kay.

This is the last remaining category of goods still protected by resale price maintenance - other than books, on which the OFT announced a formal investigation last month.

The Restrictive Practices Court has the power to allow manufacturers to control the resale of the goods or services they supply. Since 1963, they have otherwise been prohibited from doing so, in order to promote retail competition.

In the case of books and drugs, the OFT can ask the court to reconsider the exemptions. An OFT spokeswoman said: 'We do monitor pharmaceuticals, but we have nothing planned.' However, inquiries by the Independent on Sunday have uncovered a faction within the OFT that believes drugs should come under the same scrutiny as books.

The reason that manufacturers such as SmithKline Beecham, Glaxo and Merck are allowed to control the resale price of their goods in Britain is principally to enable them to recoup the often high costs of research and development. This can take years, and a retail price war would put severe pressure on makers' margins - as it has in food and drink.

But an OFT insider said: 'Some of us believe that the prices they charge are frankly outrageous. If books are worth looking at, then drugs certainly should be, too.' This would fit in with the known views of Sir Bryan Carsberg, the OFT's director-general.

He said recently: 'We need to be vigilant about things that reduce competition at the retail level.'