On January 17th 2003 the OFT published its report 'The control of entry regulations and retail pharmacy services in the UK'. On March 20th I told the House that we welcomed the OFT report which is a useful analysis of the market impact of the current control of entry rules on pharmacy provision on consumers and competition. I strongly support the OFT's role in conducting analyses of this kind, which are useful in considering the economic effects of government regulations.

We empowered the OFT and other economic regulators under the Enterprise Act 2002 to advise where laws and regulations may create barriers to entry and competition or channel markets in a particular direction, thereby holding back innovation and progress. Recently we accepted the broad conclusions of similar OFT and Competition Commission investigations into the markets for private dentistry and prescription-only veterinary medicines.

In responding to this report for pharmacy provision in England, the Government must take into account wider NHS policy objectives, and the impact of changes in regulations on NHS services and patients. That was not part of the OFT's remit but its recommendation must be seen within that broader picture.

Community pharmacies play a vital role, particularly in rural and poorer areas. Pharmacists are trained clinicians and not simply shopkeepers. 80 per cent of their income comes from NHS prescriptions whose price is fixed by government. As well as increased competition and choice we want to improve the services provided, and patient access to those services, as part of our wider programme of improvements to the NHS.

Today my Rt Hon Friend the Secretary of State for Health is publishing a new vision for NHS pharmacy - 'A Vision for Pharmacy in the New NHS' - which builds upon the foundations laid in 'Pharmacy in the Future -Implementing the NHS Plan'.

We want to maintain and improve access to pharmacists in all our communities while continuing to raise standards. We want to encourage innovation and excellence in pharmacy provision and to reward pharmacists that provide the fullest possible range of services, including to our most vulnerable communities.

We do not believe that simple deregulation is the best way to achieve our aims. The OFT made a strong case that the current control of entry rules impede competition and reduce benefits for consumers. But given the current shortage of pharmacists, which will persist for some years until measures which we as a government are taking increase supply, and the Government's desire to see pharmacies given a new and strong role in the modern NHS, the Government does not believe that this is the time to move to a fully deregulated system. It therefore intends to move cautiously in the direction recommended by the OFT.

My Rt Hon Friend the Secretary of State for Health is today publishing a statement reporting progress on the proposed new national contractual framework for community pharmacy.
The current contract is based on an agreement put in place in 1987 and needs updating. The proposed framework will provide a better basis to promote and reward high quality services for consumers. The aim is to introduce the new framework from April 2004.

In addition we will ensure that when considering applications from new pharmacies, or pharmacies wishing to extend service provision, Primary Care Trusts will seek to promote consumer choice and harness the benefits of increased competition. This can be achieved through secondary legislation by incorporating these new criteria for a "necessary or desirable" pharmacy. A potential entrant to the market will, as now, be able to appeal against a Primary Care Trust's decision and the procedures for doing so will be simplified.

We want pharmaceutical services to improve further their accessibility and convenience to consumers. So we will also make it easier for pharmacies to locate in areas where consumers already go, namely large shopping developments. But in doing so we must not undermine the market available to smaller community pharmacies. So only pharmacies wishing to locate in shopping developments over 15,000 square meters in size will be exempt from the control of entry requirements. And, in order to prevent cherry picking of the most profitable areas of pharmacy business, an exemption will only be available to pharmacies providing a full and prescribed range of services, appropriate to local needs determined by the Primary Care Trust. We will consult on our proposal.

Similar arrangements and conditions will apply to pharmacies that intend to open for more than 100 hours a week, and to those that are part of a consortium to establish one of the new one-stop primary care centres proposed by my Rt Hon Friend the Secretary of State for Health.

Some patients prefer to get their medication through internet or mail-order based pharmacy services. For that reason we will now implement the provisions of the Health and Social Care Act 2001, subject to the range of services we want such companies to provide being agreed within the proposed new national contractual framework.

Our aim in all of these cases is to put the needs of patients first. We will also reform and modernise the control of entry regulations to make them more business-friendly, to provide more certainty and reliability for companies who depend upon them and to make the process less time-consuming. This will include ensuring that decisions on applications are taken quickly by the Primary Care Trusts and that there is ready access to a sound appeals mechanism. Consistent with our approach to devolution within the NHS we will as soon as possible - assuming the pilots continue to demonstrate effectiveness - simplify the Local Pharmaceutical Services scheme by removing the need for Primary Care Trusts to obtain approval from the Department of Health.

We expect this package - including the new contractual framework - to improve the already high quality of pharmacy provision in England.

However should problems of access or convenience arise in particular areas, the Essential Small Pharmacy Scheme will continue to be available, to ensure patients can access the pharmacy services they need.

We will consult on how these changes will be implemented and expect to publish our consultation document at the end of August, giving a full 12-week consultation period for comment.
We will also form an Advisory Group, drawing on expertise from the pharmacy and medical world, the NHS, patient, consumer and competition interests, as well as those with a track record on regulatory reform, to advise on the details of implementation.

We will review progress in mid-2006, involving the OFT in this review, and publish our findings. Taken together, we believe the measures that we propose today comprise a balanced package that will continue to raise standards for patients, will support the needs of small businesses, and will do so without jeopardising the vital role played by community pharmacies particularly in poorer and rural areas.

(countrydoctor will keep readers abreast of developments)

Earlier comment on OFT proposals