It’s certainly no secret that the pharmacy landscape has shifted in veterinary medicine. Consultants, practitioners and other industry experts point to a steady transformation rather than a tectonic jolt, but that doesn’t make the shift any less unsettling.
“These days everyone is selling pet drugs, both prescription and non-prescription,” said Karen E. Felsted, DVM, CPA, MS, CVPM, chief executive of Felsted Veterinary Consultants. “There’s no doubt that veterinarians are feeling the competitive pressure.”
From discount online pharmacies to neighborhood drug and grocery stores as well as big-box retailers such as Walmart, Costco and Sam’s Club, competitors for pet-medication business abound, chipping at sales that once were solid for veterinary practices.
The struggle to retain such revenue has stirred emotions, but the challenge is best met strategically, say experts, who suggest new tools to navigate successfully. Considerations range from creating contract partnerships that give practitioners their own pharmacy presence, to the realization that some segments of drug and product sales might no longer be worth the fight.
Those most closely connected to the issue agree that a well-constructed plan can have a substantial effect on the bottom line.
“It’s not like this is a time to prepare for a change in the future; the market has changed, and we all have to adjust now,” Dr. Felsted said.
Studies show that prescription medication and other products account for 27 to 29 percent of total gross revenue at the average U.S. veterinary practice, Felsted noted. And that percentage has actually remained fairly steady over the past eight or nine years.
“You don’t see this in the studies, but I think most people would agree that there has been a change in the mix in recent years,” she said.
Practitioners are selling more units at cheaper prices per unit to keep up with the competition. “Everyone is having to work harder,” Felsted said.
Ernie Ward, DVM, first sounded the alarm on lost pharmacy revenue with a 1999 practice management article, in which he addressed the online threat posed by Florida-based PetMed Express Inc., doing business as 1-800-PetMeds. The company was founded in 1996 and started “desperately discounting” prescription and non-prescription pet medications in an effort to capture market share, said Dr. Ward, who consults and advocates on pet health issues.
“PetMeds captured it brilliantly,” he said. “They could offer better variety” as well as lower prices.
Ward continues to advise veterinarians to search out areas in which they can leverage a competitive edge, such as on issues of trust, care and convenience. He also advises practitioners to think rationally and not emotionally when faced with the realities of competition.
That’s easier said than done, especially regarding PetMed Express. The business has run ads that many veterinarians see as antagonistic and casting them as price-gougers.
PetMed Express has also faced charges that it issued medications without a veterinarian’s prescription and that it contracted with veterinarians to write prescriptions without an examination. While the cases are often cited, they occurred well before PetMeds achieved accreditation by the National Association of Boards of Pharmacy Veterinary-Verified Internet Pharmacy Practice Sites (Vet-VIPPS) in 2010.
Clash at NAVC
Some of the hard feelings surfaced during a panel discussion at the North American Veterinary Conference in January that included representatives of PetMeds as well as veterinary professionals.
Among those on the panel was Doralee Donaldson, DVM, owner-operator of Palmerdale Animal Clinic in Pinson, Ala. When she learned that PetMeds would be a sponsor and exhibitor at the conference, she started an online petition, asking for a reversal of the decision to allow PetMeds in.
The outcry was so large that the NAVC board “saw money flying out the door” from cancellations, said board member Doug Mader, MS, DVM, Dipl. ABVP. Advised of the furor, PetMeds voluntarily withdrew, then agreed to participate in the forum.
Attempts to get PetMeds representatives to comment for this story were unsuccessful.
“My main concern…was to stop a company that has seemed to be against the veterinary profession for so long from actively participating” in NAVC, Dr. Donaldson said in an email interview. “Truthfully, I did not go into the forum expecting a drastic change in the (PetMeds) business practices. There was discussion about a veterinary focus group to work with (PetMeds) concerning their marketing, but to my knowledge that has not come to fruition.”
At times, things got heated, said Mader, who moderated the discussion.
“Nothing was solved—that’s not going to happen in an hour and a half,” added Mader, who co-owns Marathon Veterinary Hospital, a referral hospital in the Florida Keys.
“If anyone made concessions, it was the PetMeds group. They said, ‘We want to work with you,’ but some (veterinarians) don’t want that. They don’t want to give up the income.”
Mader’s own professional reaction to the rise of online and big-box pet pharmacies is not to fight it.
“I can’t compete with their prices, and I don’t pretend to,” he said.
“At first we tried to compete,” he continued. “I told clients to bring in the price in the catalog and we’d match it, but our poor receptionist would spend way too much time trying to deal with it.”
Mader eventually decided to write a prescription for any client who asked for one.
“It’s not worth the extra few dollars,” he said. “The most important thing is to make sure the pet is medicated as needed.”
But he does know of other practitioners in his area who charge scrip fees of as much as $17. One has a sign on the front door: “We will not write scrips for any Internet pharmacy.”
“Honestly, I think some practices may be losing business because of (their strident stance),” he said. “The last thing I want to be known for is being the cheapest veterinarian in town.”
Another possible source of consternation for veterinarians is legislation introduced last year in the U.S. House of Representatives. It would require veterinarians to write a scrip without charge for all prescriptions, whether the client plans to fill them in house or not. Practitioners would also have to provide written disclosure that the pet owner can fill the prescription elsewhere, and would have to verify prescriptions electronically with pharmacies acting on behalf of clients.
Felsted sees potential for “a huge administrative burden” on veterinary practices from the legislation.
“It could require a lot of time and paperwork,” she said.
However, the bill is still in committee and she doesn’t expect it to pass any time soon.
“The issue isn’t that high on anyone’s priority list,” she said.
On the broader issue of lost pharmacy revenue, Felsted agrees with Mader that there are scenarios in which trying to compete on price wastes effort and resources. In certain cases, it can even create a backlash that undermines a practice’s credibility.
“If clients paid $30 for some level of antibiotic, then found out they could have gotten it at Walmart for $4, it would be hard to blame them for being angry,” she said. “It opens the door to a review of the whole process. If you’re ripping me off on drugs, are you doing the same with your prices on everything else?”
When possible, Felsted advises, compete on price. That means knowing what online pharmacies and big-box retail outlets are charging so you can strategize accordingly.
But when you can’t compete, become the go-to source for buying advice, just as you are the clients’ trusted source for pet health information, experts say.
“Do what you can to educate clients about buying at your practice, but if clients want to buy elsewhere, give them the prescription graciously,” Felsted says.
Fill Unmet Needs
So how best to make up for the lost revenue? One way is to better fill gaps in care, authorities say. For instance, the number of dogs getting the recommended 12 doses a year of heartworm medication is probably less than 20 percent, Felsted said. Educating pet owners about unmet needs and boosting compliance serves everyone’s interests.
“If we can grow the market even a small percentage, we can more than make up for the difference in those buying outside the veterinary channel,” she said.
Continuity of care and improved compliance are selling points offered by VetSource, one of the emerging e-commerce options for veterinary practices. The Portland, Ore.-based company partners with veterinarians to offer online Vet-VIPPS-certified pharmacy service and home delivery so practices can retain some of their pharmacy sales without adding overhead or inventory.
Contract clinics no longer can expect 100 percent markup, but they can charge 40 to 70 percent and keep 20 to 30 percent, said VetSource CEO Kurt Green.
Clients interested in the convenience and savings of home delivery can get signed up before they leave the clinic. And they can get their meds repackaged for maximum convenience and compliance.
For example, when pet owners get a six- or 12-pack of heartworm medication, they might administer the first dose but then stuff the rest in a drawer and miss subsequent doses. VetSource repackages for fewer amounts, including single “remind me” doses, to help keep preventive care on track.
Such partnerships for online sales keep pharmacy relationships in house.
Green sees brick-and-mortar retailers, not discount online pharmacies, as the overriding threat to clinic sales.
“Which is why it’s important to get clients signed up from the start,” he said. “Then they won’t be tempted when they go past those pallets of flea and tick medications in Costco.”
Convenience, compliance and better dosing are reasons for practitioners to also leverage relationships with trusted compounding pharmacies, veterinary experts say.
“Different formulations—transdermal, smaller concentrations, etc.—are our best friend with regard to this issue,” Ward said. “There isn’t a day that goes by that we don’t call a credentialed compounding pharmacy and ask, ‘What can you do creatively to help us with administration?’ Yes, it’s more expensive, but there’s convenience in administration. And clients love that.”
For the immediate future, Ward said he will continue to be tactical and proactive in his reaction to pharmacy competition, switching to medications and products that are vet exclusive “whenever it makes sense for our practice and we see a product we feel strongly about.”
What he won’t do is let fear, anger or frustration shape his strategy.
“We’ve had a disruptive force from outside our profession, and some veterinarians have felt out of control with this,” Ward said. “Now we have to say, ‘This is how we move forward.’ It’s business, and each case is different, so there’s no right or wrong way. The key is to stay informed and involved.”
Consultants suggest strategic approach to increased competition.It’s certainly no secret that the pharmacy landscape has shifted in veterinary medicine.
6/26/2012 12:52 PM