BBC's consumer affairs reporter Karen Bowerman explains.

What is the Resale Price Maintenance?

The RPM is a 38-year law that has given manufacturers of over-the-counter medicines the right to set the minimum price at which drugs are sold.

It was brought in as an exemption to the Resale Prices Act (which was introduced to prevent manufacturers from price fixing) because medicines were seen as having a special status. The RPM is, in effect, a legal price fixing system.

What products does it affect?

The RPM affects all brand-name over-the-counter medicines, vitamins and supplements. So this includes products such as Beechams flu remedies, Nurofen, Anadin, Rennies and TCP.

And in what way?

Supermarkets claim that while they sell own-brand alternatives cheaply, brand-name medicines remain expensive. For example, RPM for 10 Lemsip sachets is about �2.75, while a supermarket pack of lemon cold powders is around �1.05.

Why has there always been so much objection to it?

For years supermarkets have objected to the RPM because it meant they weren't allowed to offer consumers cheap brand-name over-the-counter medicines, vitamins and cold remedies - even though they were allowed to sell their own-label pain killers and vitamins at whatever price they wanted.

The Office of Fair Trading has also been involved - it has argued the RPM wasn't in the interest of consumers.

Why was the pharmaceutical industry so in favour of it?

Well, because it meant manufacturers could set the minimum prices at which they wanted their products sold - and do so legally.

Also they felt, without RPM, small chemists and pharmacists would be forced out of business through fierce competition and reduced prices. They claim this will also hit people who rely on local pharmacists most - such as mothers and elderly people who may not have cars.

So what happened?

The Office of Fair Trading - backed by some supermarkets and the Consumers Association - decided to challenge the RPM in the Restrictive Practices court. This court consists of a judge and two qualified lay people.

The case began last October. It was up to the industry to show that the RPM was still in the public interest. It had to show:

• that the removal of the RPM would affect the variety of medicines on sale to the public
• reduce the number of outlets where the products could be bought
• reduce the level of service consumers had come to expect
• mean higher prices in the long run.

What argument did the OFT put forward?

The OFT argued that the RPM meant consumers were getting a bad deal. It claimed that if price fixing was dropped there would be:

• more competition between shops which would mean better prices for consumers
• more competition between manufacturers which could lead to better products being introduced in the market
• better service for the public as traditional chemists, forced to compete with supermarkets, focussed on their particular strengths.

What's the latest?

This morning, the pharmaceutical industry withdrew its objection to the RPM.

What does this mean for consumers?

This is good news for consumers. If supermarkets keep their word, the cost of brand-name medicines could now drop by up to half.

Asda has already claimed that 16 Anadin extra strength, costing �2.09 under RPM, would be reduced to just 80p. Lemsip, costing �2.75, would be reduced to around �1.51, while Centrum 30s (vitamins), costing �4.49, would be reduced to around �2.98.

Will this mean the end of local pharmacists?

The pharmaceutical industry claimed 3,000 local pharmacists could disappear if the RPM was overturned.

But the Consumers Association claims 2,500 of these aren't viable anyway.

The association also says that according to the National Audit Office 50-60% of pharmacies are within 300 yards of each other - so elderly people shouldn't be unduly disadvantaged even if some stores do close.