It halved the price of a packet of 24 Anadin Paracetamol from pounds 1.72 to 86p, in a move which was condemned by manufacturers and pharmacists for breaching long-standing Resale Price Maintenance (RPM) laws designed to ensure the survival of small pharmacies as a public service.
The pharmacists immediately called on Asda to reverse the measure until after an Office of Fair Trading (OFT) inquiry into RPM reports later this year. Whitehall Laboratories, Anadin's manufacturers, said it was considering bringing legal action.
But Gwyn Burr, Asda's marketing director, said: "We can't sell this straightforward commodity product at this price with a straight face.
"The margins on Anadin Paracetamol are amongst the highest available to any retailer in Britain. They rank alongside high fashion and expensive perfume."
The mark-up on over-the-counter drugs and vitamins amounted to a pounds 300m hidden tax on the British consumer every year, he added.
Asda launched its campaign against the RPM laws last October by cutting the cost of 82 well-known brands of vitamins and minerals by up to 20 per cent.
It was forced to put the prices up again two weeks later, after an injunction was served by manufacturers Seven Seas and Roche. But the wrangle prompted the OFT investigation.
A Whitehall Laboratories spokesman said the company believed it was the "responsibility of every interested party to await the outcome of the OFT review . . . before taking any action".
Tim Astill, director of the National Pharmaceutical Association of 12,000 pharmacists, said members believed Asda's action threatened the survival of small pharmacists, because they could not offer such discounts, even if they were legal.
"This would deprive millions of people of access not only to a full range of medicines but also to a convenient source of health-care advice and a dispensary for their prescriptions. It would especially hit the less mobile."
He was also concerned that Asda described paracetamol as a "mundane health aid".
"Paracetamol can be dangerous if too much is taken. Discounting to make people buy more shows a reckless disregard on the part of Asda for the safety of its customers."
David Dickinson, who investigates drugs prices for the Consumers Association, said there was increasing evidence that the cost of medicines was putting people off buying them. Anything that made them more affordable for more people was good news.
But he wondered whether the RPM was necessary to support pharmacies. "The question is . . . whether consumers paying artificially high prices for medicines is the best way to keep a high street service in medicines and advice going."
Phillip Evans, the association's senior policy advisor, said supermarkets reported a 100 per cent mark-up on RPM medicines, compared with 20 per cent on groceries, although the National Pharmaceutical Association claimed only a 30 per cent margin existed on its goods.
Mr Evans challenged the motives of those supporting the RPM. The smallest independent pharmacists won 70 per cent of their revenue from prescriptions which were not affected by the agreement, he argued, and manufacturers stood to lose out if the laws which allowed them to dictate prices were abolished.
RPM laws also covered books until last year, when the collapse of the Net Book Agreement under pressure from Asda and publishers signalled the unofficial end of price-fixing in the market. This is expected to be ratified by the courts.
Although some the prices of some books tumbled, the expected revival in trade did not take place and some publishers subsequently reported a fall in profits.Reuse content