The watchdog's verdict came after a study of Pfizer Inc.'s exclusive "direct to pharmacy" arrangement with wholesaler Alliance UniChem, which is now merged with Boots and is known as Alliance Boots PLC.

The NHS already spends around 6 billion pounds ($12.2 billion) a year on prescription drugs and there is a "significant risk" of rising costs and longer waiting times for patients if such deals become widespread, the OFT said.

Until recently medicines were distributed through a number of competing wholesalers.

The OFT also recommended that the Department of Health revise its price regulation plan to ensure that NHS medicine bills do not rise as a result of the changes.

Manufacturers have traditionally supplied drugs to wholesalers at a discount, and wholesalers then competed to supply pharmacies with the drugs -- cutting prices to attract business. Under new arrangements, manufacturers set the prices paid by pharmacies and then pay wholesalers a fee for their services with no conventional discount for the pharmacies.

Those agreements have led to concerns over higher costs as well as reduced distribution of medicines through using fewer wholesalers, leading to longer waiting times for patients.

Pfizer denied that the program increased the cost of its medicines to the NHS.

"Patient safety is our paramount concern," said managing director John Young. "Our scheme has resulted in increased confidence in the secure supply of Pfizer medicines since its introduction in March 2007 at no additional cost to the NHS."

UniChem said it was "pleased" that the OFT had found no grounds for interference in its deal with Pfizer on competition grounds.

But the OFT said widespread use of the practice in the future could lead to competition concerns and it was prepared to launch an investigation if necessary.