Evangelical zeal won't make pill popping cheaper - Brazilian flip

www.guardian.co.uk Evangelical zeal won't make pill popping cheaper Does OFT ruling serve consumers? Saturday January 18, 2003 The Guardian

Just in case anybody thought supermarkets might not be an attractive business to get into, the office of fair trading tipped the scales again yesterday.

Its long-awaited report into the provision of pharmacy services has come to the expected conclusion: full liberalisation of the market.

The government is being asked to sweep away all the present restrictions that limit entry into the industry; instead any registered chemist with a qualified pharmacist will be able to dispense NHS prescriptions.

So we should stand by for new pill counters springing up in every supermarket across the land.

Local chemists will be decimated, while Boots is facing an ever-tightening competitive squeeze.

This is cold, clinical deregulation imposed in the name of the great British consumer - who the OFT reckons is at present being ripped off to the tune of £30m a year. The number of pharmacies across the country has remained just about static, at 12,250, since the current set of industry regulations were introduced 15 years ago.

This, it is argued, has denied shoppers access to cheap over the counter medicines which the big grocery chains could so easily provide with their huge buying power and adherence to cut-throat competition.

Which is all so run of the mill. The British consumer has already abandoned butchers, bakers, fishmongers and most other traditional high street fixtures in favour of identikit supermarket sheds. The OFT does not think they should be forced to make special local journeys for their regular prescriptions, paying more for their trouble.

Yet its findings simply feel too cold and clinical.

"Empirical modelling of a variety of entry and exit scenarios shows that there would only be a limited reduction in local access, even in an extreme scenario where pharmacies are opened in all medium to large supermarkets and, for each new entrant, the two nearest community pharmacies close as a result," declares yesterday's report.

That is a huge and glib assumption. In fact, there are about 2,000 major supermarkets in Britain. If each puts two existing pharmacies out of business, deregulation will result in a third of all local chemists disappearing.

Similarly, the OFT trumpets the fact that consumers are overpaying to the tune of £30m. Yet the industry - the bulk of which is NHS - turns over £8.6bn, so profiteering is running at about 0.4%.

Free markets are all very well. But given the disruption and the clear risks, these proposals feel like deregulation borne of evangelical zeal rather than sensible reforms benefiting society.

Brazilian flip

International investors spent much of last year keeping a wary eye on Brazil as South America's sleepy giant moved towards electing Luis Inacio Lula da Silva - a former leftwing firebrand - as its new president.

Dire warnings were sounded that the former trade union leader would be incapable of tackling Brazil's economic problems and would quickly default on the government's debt. Corus used the uncertainty as a reason to call off its planned merger with Brazilian steelmaker CSN.

Yet the sky failed to fall in when Lula, as he is known, took the reins on January 1. The result has been "a shock of credibility", according to one member of Lula's cabinet. In little more than a fortnight the new administration has calmed market fears with talk of strong measures - to the extent that Brazilian companies are now back in business on the capital markets.

In the past two weeks Brazilian banks have raised nearly $1bn in international bond issues. Domestic investor confidence is up, as is consumer spending. Brazil's currency, the real, has strengthened by 16% over the last month, and the risk premium international investors demand for holding Brazilian assets has halved since Lula's election. As a result, the government is projecting growth of 3% this year.

The contrast with Brazil's opposite number in the northern hemisphere of the Americas couldn't be more marked. There, a conservative president hands out huge tax cuts to the rich, using a policy his own father famously dubbed "voodoo economics". American presi dents - north or south - never quite turn out as expected.

France farce

In order to help France Télécom pay off its record debt a new financial instrument has been created, "the mop". That's not as in multi-option programme, though Télécom needs all the flexibility it can get. It's "the mop" as in bucket. A group of Télécom workers, concerned by headlines about the need to tackle the €70bn burden, have bought a batch of the said cleaning implement and started selling them to colleagues to raise cash.

That suggests other instruments: "the sponge" to soak up the shareholder value that has leaked out of Télécom; "the umbrella" for corporate rainy days. Not that the mop has had a huge impact. According to the union, the Confédération Générale du Travail, sales so far number 10 at one euro apiece. So that leaves just €69,999,999,990 to go.