APPENDIX 4
Memorandum by The Association of Town
Centre Management (PS5)
1. INTRODUCTION.
This paper comments briefly on the report published
by the Office of Fair Trading in January 2003 (OFT609), which
recommends the relaxation of entry regulations for retail pharmacy
services in the UK, and, in particular, its wider implications
for town centres and neighbourhoods.
2. GENERAL PRINCIPLES.
The Association of Town Centre Management (ATCM)
supports fair and competitive trading conditions that act to the
benefit of consumers in terms of price and accessibility. We do
not believe that these conditions can be sustained without a degree
of regulation, since they are key elements in reducing both urban
decline and social exclusion, which, by definition, demand intervention.
In our view, this principle is specially relevant to the availability
of essential services and crucial to the provision of vital services
such as the retail pharmacy.
3. THE POSSIBLE
IMPACT OF
DEREGULATION.
The relaxation of entry regulations for retail
pharmacy services has clear implications for existing national
policies in key areas of neighbourhood renewal, social exclusion
and planning. Specifically:
(i) Out-of-Town Shopping.
The OFT acknowledges that out-of-town retail
outlets have already taken exceptional measures to relocate pharmacies
in their stores, including a willingness to pay "inflated
prices" to do so. The proliferation of this trend through
deregulation, encouraging greater use of the car to collect prescription
drugs from outlets which already account for 40% of total retail
sales, will inevitably affect high streets. The widespread addition
of this vital commodity to the extensive product lines which enable
out-of-town outlets to open on average 80 hours per week, compared
to about 50 hours for an independent pharmacy, will pose a serious
challenge to the viability of local provision, possibly changing
the face of neighbourhoods and town and city centres. It is difficult,
in the circumstances, to avoid asking whether deregulation is
consistent with the aims of existing Planning Policy Guidance
(PPG6) to control major out-of-town retail development, influence
transport choice and increase the vitality of town and city centres.
(ii) Social Inclusion and Cohesive Neighbourhoods.
The OFT report states that the UK ranks slightly
above average for the number of pharmacies per head. Common sense
suggests that the situation would change with increased competition
following deregulation, although it is admittedly difficult to
predict exactly how many of the approximately 12,000 pharmacies
currently dispensing NHS prescriptions will be lost, or how many
of their 22,300 pharmacists would be affected. Community Pharmacies
in the UK rely on dispensing NHS prescriptions for 80% of their
revenues, so a large-scale displacement of trade would have serious—and
probably rapid—consequences. It is possible to imagine that
a small town with four pharmacies may lose two of them through
increased competition, or that a village may lose its only pharmacy.
Major out-of-town retail outlets would clearly
seek to drive down their costs to establish market share and it
seems unlikely that substantial numbers of displaced pharmacists
would be re-employed. Perhaps even more significantly, the loss
of local provision would have the greatest impact on those who
rely on it most. At present, nearly 60% of people in need of prescribed
medicine choose their pharmacy on the basis of its convenient
location. Many of them belong to the socio-economic group that
is both most likely to suffer ill health and least able to travel
to out-of-town outlets. It is hard to avoid the conclusion that
one effect of deregulation may be to disadvantage low income families,
parents with young children, the elderly and disabled and to undermine
the social cohesion of neighbourhoods.
4. ECONOMIC FACTORS.
We find it difficult to conceive that any change
with the potential to influence the effectiveness of established
policy in such important areas as neighbourhood and urban renewal,
planning guidance, social inclusion and health could be sanctioned
without clear evidence that it would generate comparable or greater
benefits. In fact, the OFT paper accepts that two prime reasons
for deregulation—an existing monopoly and excess profits—do
not apply to pharmaceutical retailing in the UK. The OFT also
acknowledges that the cost to the consumer of NHS prescription
medicines is fixed, reducing the likelihood of immediate direct
price benefits from entry deregulation in this area. In any event,
costs to those most in need of local provision—for whom
prescriptions are free—could only increase with the need
to travel longer distances to the nearest pharmacy.
5. The OFT estimates that deregulation would
deliver administrative savings in the order of £10 million
from NHS administration costs. The argument that taxpayers would
benefit from such savings is open to question if deregulation
led to increased costs in maintaining the Essential Small Pharmacies
Scheme, whereby the state supports pharmacies that are not economically
viable but vital to the community, let alone if it impaired health
care provision in local neighbourhoods. Similarly, the estimate
that deregulation would save £16 million in compliance costs
to business pales into insignificance if it also detracts from
the creation of flourishing and easily accessible town and city
centres.
6. CONCLUSION.
On balance, we are concerned that the potential
costs of deregulation appear to be more obvious than its potential
benefits. This seems to be true both from a social perspective
and in the interests of urban and out-of-town retailers alike.
No retailer would stand to gain from a change that threatened
to undermine the contribution to the nation's wealth made by prosperous
towns and cities.
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