On behalf of our Superintendent Pharmacist, John Evans, I'd like to thank you for allowing him the opportunity to give evidence to the Select Committee last Thursday.

  Arising from the debate were a number of issues on which you and your committee might like to further information.

  1.  Julia Drown MP asked about the days that any of our pharmacies had to close, on which John Evans did not have data to hand. There were such 21 days affecting 19 pharmacies trading for 361 days (29,241 pharmacy days), 0.07%. These days included pharmacists not arriving because of snow and pharmacists phoning in sick on the day they were due to work.

  2.  The concern over cost control caused Julia Drown MP to argue for the regulator to control all, since the public sector paid for the dispensing medicines activity. There was a proposal that PCTs should be charged with planning pharmacy services in the locality. The ASDA view is to let market competition provide, then ask PCTs to identify where ESPS are needed. (To ask PCTs to look at the whole market, then overlay where pharmacists actually operate would create an unnecessarily heavy workload.) Further, Liz Colling from the Co-op said this healthcare access work could be done through the LPCs and Sandra Gidley MP asked whether the Strategic Healthcare Authorities would be better placed to do this. ASDA would merely observe that SHAs have a management role of PCTs in their hand on one, hence the latter would seem better placed to take a view.

  3.  The question then arose as to what was being paid for, with ideas floated that payment could be tied to providing services other than dispensing medicines. Providing health advice is one ancilliary service, which Sue Sharpe claimed save GPs 2.74 million hours per annum. One way to guage a pharmacy's advisory services could be to peg payment to the value of OTC medicines sold. Other services that could reasonably be linked to payment to encourage to pharmacy market to lift service standards include: the provision of emergency services; extended opening hours; repeat dispensing; supplementary prescribing; provision of private consulting rooms; sums for provision of methadone; blood pressure testing; diagnostic testing such as of cholesterol and diabetes; warfarin clinics; smoking cessation; emergency hormonal contraception (EHC); bone density testing; head lice management; asthma clinics; tests for drug addiction; flu vaccinations; time spent with GPs auditing high use patients' medication records; home delivery. It may be that some of these services would be valued more highly than others and remunerated accordingly.

  4.  ASDA would be willing to pay into a central pot for a NHS dispensing contract if it meant the end of the current system where the value is negotiated by commercial operators. At present, dispensing contracts change hands for over £1 million each, which does not benefit the health service of taxpayer. This sum is vastly inflated by the shortage in NHS contracts. We should be paying the contractor just for the goodwill. I attach some anecdotal evidence of the ASDA experience obtaining licences.

  5.  As the committee focused on retail pharmacy, it did not explore surrounding issues of GP-owned dispensing pharmacies. Prescription Pricing Authority data shows that the average item from a dispensing doctor costs £11.78 compared with £10.82 when dispensed by a pharmacist. We do not know why the system pays them this premium, whether it is justified or may be readily removed. ASDA's pharmacists phone GPs to check or challenge prescribed medicines an average of two or three times each day. We expect this to be the same experience with all pharmacists and therefore ask what safety net would exist where a GP owned pharmacies and so directly employed the pharmacist. Would she/he feel sufficiently confident to challenge their employer?

  6.  Interest in numbers of pharmacists asked whether there were enough being trained. In the ASDA view, there would be enough if more were done to retain trained pharmacists. We at ASDA employ 139 pharmacists in our 81 pharmacies. Their profile is 58 men, 81 women, six people over 50, and 23 part timers (defined as working 30 hours of less per week). Our very low staff turnover is achieved by our flexible working hours policy and good conditions rather than by paying a premium over the market average. ASDA was voted one of the top 10 EU employers and the top UK employer in a study by the Financial Times this year and were voted also to be one of the top 10 UK employers in the Sunday Times survey in each of the last three years.

  7.  The public interest: this lies around having an adequate supply of pharmacies to service the population. Some 11% of respondents to the OFT consumer survey don't have this at present (Source: OFT page 49). As Sue Sharpe said, the problem is a least as acute in inner cities as in remote rural areas. ASDA has 11 million customers, but with only 81 pharmacies in 256 stores, some eight million of our customers are not getting the service they demand above all others: a dispensing pharmacy in the place where they want it—at their supermarket.

  If you or any of your colleagues would care to explore any of these issues in further detail with us, or would like to visit one of our pharmacies to inform your work, I'd be very happy to arrange for our best expertise to be made available to you.

9 April 2003

WHAT ARE THE FACTS ABOUT PHARMACIES IN THE UK?

—  Currently, there are more than 12,300 retail pharmacies with NHS contracts in the UK including 10,47[1]1 in England and Wales. The overall turnover in the retail pharmacy market is estimated to be £18.7 billion for 2001.

—  It's often said that pharmacies are in decline, but this is simply not true. Despite the hype, ASDA's other successful campaign—the abolition of resale price maintenance on over-the-counter medicines—hasn't damaged small pharmacies, in the year to March 2001 the number in England and Wales declined by only three. Over the last 10 years (1991-2001) the number of pharmacies in England and Wales has remained broadly static, reducing by just one, from 10,472 to 10,471[2]The OFT has confirmed that the inquiry could enable pharmacies to begin to grow in numbers.

—  The Department of Health has signalled its desire to see pharmacies play a primary healthcare role—and with up to 50,000 visits per week, stores such as ASDA's are particularly well placed to meet this need.

—  The UK has around one pharmacy per 5,000 people. This compares to 1 per 2,000 in Spain, 1 per 3,900 in Germany, 1 per 2,200 in France and 1 per 3,500 in Italy.

WHAT IS PHARMACY CONTRACT LIMITATION?

—  PCL was introduced in 1987 to prevent NHS-regulated dispensing pharmacies from relocating in and around GP surgeries creating an uneven and unbalanced distribution of pharmacies across the UK.

—  Under the National Health Service (Pharmaceutical Services) Regulations 1992 anyone who wishes to establish a pharmacy in a particular area must apply to the local health authority to be included on a "pharmaceutical list".

—  Under Regulation 4(4), such an application will only be granted if the health authority considers it necessary or desirable for the "adequate provision" of pharmaceutical services in the relevant "neighbourhood". Where an application relates to a "minor relocation" to new premises within the same "neighbourhood", the application should be granted if the move is within the same neighbourhood with the same population served, is minor in terms of distance and does not have any barriers, man-made or natural, to travel between the existing and proposed new site. The same level of service must also be provided from the new location.

—  The Regulation therefore seek to ensure that new pharmacy contracts can only be granted to serve particular "neighbourhoods" but the regulations do not clarify the terms "neighbourhood" or "minor relocation", although the courts have considered these terms in a number of cases relating to the granting of applications under the Regulations.

—  In general, Primary Care Trusts (PCTs) and appeals authorities have been unwilling to broaden the definition of a neighbourhood to include store locations such as ASDA. This is despite an unequivocal demand from shoppers for store-based pharmacies and clear guide in licence application hearings that a store can constitute a neighbourhood in itself.

WHY IS ASDA NOW SO KEEN TO SEE PCL REFORMED WHEN IT WON ITS BATTLE TO ABOLISH RPM (RESALE PRICE MAINTENANCE)?

—  ASDA was quick to implement lower prices when RPM was abolished in May 2001, but the picture has been, at best, patchy elsewhere. The reluctance of existing pharmacy operators to pass on price cuts has led ASDA to conclude that, free from PCL restrictions, they are using their priveleged position to keep prices too high.

—  A price comparison of key healthcare brands shows the abolition of RPM has not impacted high street prices at all:

—  ASDA estimates that around £270 million of post-RPM price cuts have not been passed on to customers.

IF THERE ARE £270 MILLION OF PRICE CUTS NOT BEING PASSED ON TO CUSTOMERS, WHY DOES ASDA BELIEVE PRICES ARE £420 MILLION TOO HIGH?

—  The rest of the sum is made up ot the £150 million spent annually on the purchase of pharmacy contracts. When PCL was introduced in 1987, overnight, pharmacy contracts became a scarce and valuable commondity. With very few new licences granted, the purchase of an existing contract was the only practical way a pharmacy operator could gain entry to the market.

—  The way in which the system can be abused can be seen in the following three case studies:

CASE STUDIES

 (a)   Eastlands, Manchester

—  ASDA opened its seventh ASDA Wal-Mart Supercentre at Eastlands in East Manchester. The £40 million store, directly opposite the new Commonwealth Games stadium, created almost 1,000 new jobs. Part of the wider regeneration of East Manchester, the store is part of wider plans to create a town within a city.

—  ASDA applied for a pharmacy licence in this store in May 2001. The application was refused in October 2001 by the local health authority. ASDA appealed against the LHA decision on 7 November 2001 re-emphasising local plans in place to build around 12,500 homes and improve 7,000 others ASDA's appeal was supported by North Manchester Community Health Council, but opposed by a local chemist and was lost.

—  The same local chemist that objected to an ASDA pharmacy at Eastlands successfully applied to move his pharmacy into the district centre next to ASDA. Full detains are available on the Family Health Services Appeal Authority website at http://www.fhsaa,org,uk.

 (B)   CLAYTON GREEN, CHORLEY, LANCASHIRE

—  In June 2001, ASDA applied for a pharmacy licence for its Clayton Green store in Clayton-le-Woods, Chorley, Lancashire. South Lancashire Health Authority granted this application in August 2001 based on ASDA's plan to have extended opening hours and the intention to provide supervised methodone administration.

—  The owners of a local pharmacy appealed against this health authority decision and won its case in November 2001. Despite this decision, in January 2002, ASDA received a letter from solicitors acting on behalf of this pharmacy seeking planning permission to relocate its business into ASDA. To ensure that customers are offered ASDA prices, it is not ASDA's policy to allow new concessionaires to operate pharmacies in their stores, so this request was refused.

—  The solicitors contacted ASDA again in February 2002 to remind it that their client would oppose any future application ASDA would make for its own pharmacy contract and urge the store to discuss terms for possible relocation.

 (c)   Cwmbran

—  In Cwmbran, South Wales, a local chemist submitted plans for a "minor relocation" of his pharmacy to the new ASDA store in May 2001, six months before it was due to open. It was approved at the health authority stage but Boots appealed and an oral hearing was agreed—only held in January 2002, two months after the store opened.

—  While the members of the oral hearing panel recommended approval of the relocation, the Welsh assembly only released this information in September 2002, another nine months later. Despite the recommendation of the panel, the Welsh Assembly still rejected the application.

WHY AS ASDA COMPLAINED OF THE OFT AND CAMPAIGNED FOR CHANGE?

—  ASDA contacted the OFT as it investigated the UK market for retail pharmacy services and, in particular, whether consumers are best served by the current statutory system that regulates where pharmacies can (and cannot) open. The findings are expected in January 2003 together with recommendations.

—  The OFT has already said that it is important for consumers that a convenient and high quality service is available and easily accessible and stresses that many consumers want to purchase over the counter medicines with the benefit of a pharmist's professional advice, or the need frequent repeat prescriptions.

—  At the outset of its investigation, according to the OFT, restrictions on where pharmacies can open may have an effect on retail competition and not only in dispensing prescriptions. Their invesigation examined the system to see how the present restrictions affect competition and consumers as well as investigating whether there are alternative ways of achieving the public interest objectives behind to present arrangements.

2   Ibid. Back

3   Source: Chemist and Druggist December 2002. Back