Diversion: No walk in the park for the veterinary industry (and what that means for your vet costs)
“Diversion” is a fun term we in the retail industry use to describe the re-selling of products purchased by one legitimate retailer to another, illegitimate retailer.
Often, it’s illegal. And almost always, it’s unethical. Some vets play this product-swapping game to make an extra buck. And other vets bristle—sometimes Halloween cat-style—when they do. (Read the Veterinary Practice News cover story from April for more insight.)
Yeah, as a topic I know it sounds potentially less than exciting but it’s a fun issue for vet industry geeks like me. It involves you and your money, too, so it makes sense I’d pitch you the line on diverted products like Frontline, Advantage, Heartgard….
Like it or not, we vets are in the retail business. We sell “stuff,” not just our services. Comfortis, Rimadyl, Previcox, whatever…it’s all “stuff.”
Mostly, vets sell products and pharmaceuticals because it’s convenient for you. Some vets say these sales also help to keep you coming back for our services, which we want to sell you not just because we need to make money but because we believe your pets require it.
Problem is, other retailers want to sell you “stuff,” too. They want to get a cut of the stuff the manufacturer or distributor won’t sell them directly.
These retailers (like 1-800-PetMeds) know they can move Revolution at a hefty premium given their low, online overheads and large volume of sales…but Pfizer won’t sell it to them. They’ll only sell it to vets so that they can keep their reputation as a producer of vet-only products with all the benefits that confers (i.e., vet recommendations).
That’s why a small handful of vets buy loads of these products and later sell them back to online pharmacies at a profit. These outlets, in turn, make a big buck on selling them directly to you so that you don’t have to go to the vet to pick up the meds and so that you can save a couple of bucks on each box of Interceptor. That’s diversion, in a nutshell.
That’s a great service, you may think. I like diversion. I don’t want to have to schlep to the vet hospital every time I need a new box, bag or bottle of something. Why not order it online or pick it up while I’m at PetSmart so that I can save some time and a reasonable amount of money, to boot? That’s convenience. And when you have multiple pets that kind of cash savings adds up.
But that’s not how the economics of the vet profession stacks up. Diversion of veterinary-only products throws a monkey wrench into the machinery of the veterinary marketing industry.
Manufacturers, wanting to be sure their veterinarian preachers continue to reveal the Gospel according to Novartis, Bayer or Boehringer-Ingelheim, refuse to stand by their products when sold through non-veterinary retailers.
That means that if Fluffy gets sick and you think the vaccine you bought through Drs. Fosters & Smith did it, you have no legal recourse through the manufacturer. If you bought it from a fly-by-night lowest cost online shop you’re doubly screwed.
Well, how the heck would they know where I got it? Ask Fort Dodge, a big manufacturer of vet vaccines and the new flea med ProMeris. They’ve installed traceability features on ever box, carton and pipette in their new flea med packaging. It’s the new industry standard for all manufacturers looking for ways to prove their product isn’t skirting your veterinarian on its way to you.
Manufacturers want to make it impossible for you to bypass your vet and save your few bucks. That’s because we vets believe we’re in the best position to recommend these products. It’s also because we fear you’ll never use us for more than just a prescription pad if you’re not required to buy them through us. And manufacturers don’t want to lose these vet recommendations by selling to the highest bidder.
So why does your vet freak the heck out when you buy your products elsewhere anyhow? It’s the same s---, isn’t it? In fact, you might think it’s somewhat abusive for your vet to put roadblocks in the way of your ability to get smart and save dollars wherever you can.
Well…yes and no—depending on who you talk to.
Ask most practice owners and they’ll tell you it takes a lot of time, money and education to bring the right products to you. And I won’t disagree:
Staff time on sales and inventory is increasingly expensive now that we’ve opted to pay for a higher priced work force, health insurance and skyrocketing cost of living-enhanced wages. Space is also at a premium since we need to pay for expensive retail locations due to our foot-trafficky business. And don’t forget to factor in the cost of our expertise in selecting the products we think are just right for your pet.
All this makes sense until you begin to consider the human medical model. Well, they don’t make money on all this “stuff” so why should you?
For starters, that’s not exactly true. Last time I went to the dermatologist (for a serious burn I got after cooking with wild abandon one fateful evening), I was plied with about four different (very expensive) products. Sure, I could’ve bought them online but I was there already and I needed to start using them right away so what choice did I have? And my dentist? Let’s not go there…
The bottom line: Human docs still sell “stuff,” but much of it is reserved for certain types of medical practices—typically, the less insurance-heavy variety where they’ve got to make up some money for the expense of their more “retail friendly” locations.
It’s more complex than that, but let it suffice to say that though I hate pushing products (and won’t demand that my clients buy from my place of work), I still understand that the survival of the practice I work for depends to no meager extent on the sale of products I recommend.
Without product sales, the prices for our services would undoubtedly be higher. And yet pushing service prices up would make our clients very angry. As it is my clients complain when I give estimates for spays. Why should I pay $225 for a cat spay when the place down the street does it for $125?
My answer? Well, either they don’t provide all the careful monitoring and pain relief I do or their spay prices are artificially low just to get you I the door. In the latter case, they probably also sell loads of food and cartons of Frontline every month—at a premium you’d be shocked to learn is the norm since you’ve been buying from us for the past ten years. Wanna script for your Derramax from your less-expensive-spay place? Good luck with that.
Again, it’s a lot more complex than what I’ve just presented and varies hugely by provider. But product sales in the vet profession is a sophisticated game of chess a smart pet owner knows how to play—but which many vets and all manufacturers want you not to learn. Can the words “collusion” and “anti-trust” be far behind? Maybe.
Yet there’s no doubt about it. “Diversion” is a bad word. And the unethical reselling that goes on behind the scenes is undoubtedly wrong. The question is: Can the vet industry sustain its current vet-only product marketing model given the pace of our clients’ veterinary industry IQs?
I think not. Which means that soon you may be seeing bigger increases in the cost of services at your vet’s office. Now, was that boring?