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An inside look at parasiticide product diversion

Veterinarians respond as drug companies fail to control distribution lines


April 7, 2009
By: Edie Lau
For The VIN News Service


PART TWO OF A TWO-PART SERIES

When veterinarians hear that their clients want to buy flea, tick or heartworm medication over the Internet, many offer a standard caution: The product might be counterfeit, they warn, or otherwise substandard. You just don’t know.

Along that theme, Dr. Kate Thompson used to tell her clients that the medications aren’t guaranteed by the manufacturers if purchased online. But when she tried to get that policy in writing from several companies, she couldn’t.

“That makes me nervous about making that statement with nothing to back it up in writing,” she told colleagues on a Veterinary Information Network (VIN) discussion board in 2007.

A VIN News Service look at parasiticide product diversion found the subject heavy with passion, rumor, half-truth, secrecy and tenuously supported beliefs.

Many clinicians are passionately upset that drug companies as a whole are failing to control distribution of product that the companies themselves say should be sold only by veterinarians. Rumor says that some of the companies are complicit in making their product available to general retailers and online pharmacies. Companies say they fully support veterinarians and don’t tolerate diversion, but most refuse to detail how they combat over-the-counter sales or explain how so large a volume of product escapes their control.

Some veterinarians, in turn, raise doubts in their clients’ minds about the authenticity of product purchased outside their clinic doors. But as Thompson learned, that’s a risky card to play. She has since changed her approach with customers to emphasize what she knows to be true:

“What we focus on with online meds is our similar pricing,” she said, “and the fact that if there is a problem, the online provider won’t be able to immediately provide care the way a local vet can, and we can handle all interactions with the drug company if we are the seller of the product.”

It is not misleading to say that counterfeit pet parasiticide products exist, but the magnitude of the problem is unclear. Drug companies aren’t universally concerned about it, if their product guarantees are any indication. Spokesmen for Merial, Pfizer and Bayer said that the companies back their products regardless of from whom they were purchased.

Only Novartis conditions its guarantee on where the product was purchased. “We only guarantee what is sold through licensed veterinarians with a Novartis account,” said Mickey McDermott, vice president of communications in North America for Novartis Animal Health, Inc.

While not posted on the company Web site, the terms of the guarantee are “routinely faxed to clinics and expressed to customers calling into customer service,” McDermott said.

Online retailers, for their part, bristle at the suggestion that their goods are any less authentic than those purchased in a veterinary clinic.

Robert Drucker, president of RxUSA and the brother-in-law of VIN President Dr. Paul Pion, said: “Anyone could be selling counterfeit, including the charming vet. Whoever I’m buying this product from, I’m 100-percent satisfied that it’s good, or I wouldn’t touch it.”

Drucker acknowledged that some online retailers are shady, but said that if an outfit’s name, address, phone number and state pharmacy license number are prominently posted on its Web site, “you’re 99-percent safe.”

Like other non-veterinary sellers of animal health products queried by VIN News Service, Drucker declined to identify his suppliers. He said only that he’s buying from “secondary and primary wholesalers” and not directly from veterinarians.

While dealing in diverted drugs is not illegal, selling counterfeit products is. Federal agencies detected a burst of counterfeiting activity earlier this decade. On Feb. 9, 2000, for example, the U.S. Environmental Protection Agency (EPA) issued Stop Sale Orders against Eaton Veterinary Laboratories of Phoenix, Ariz., for selling and distributing unregistered versions of Advantage and Frontline flea and tick medicines for dogs and cats. (Those products are regulated as pesticides rather than drugs, and as such, are overseen by the EPA.)

The EPA said in a press release: “There has been a recent increase in the number of companies bringing unregistered pet products into the United States. Last year, EPA assessed a fine against a San Diego pet store for selling unregistered Advantage for Dogs and Advantage for Cats. Also, a Stop Sale Order was issued to a distributor for importing unregistered Advantage products from Mexico with Spanish labeling.”

On its Web site, the EPA warns consumers to beware of counterfeit Frontline Top Spot, Frontline Plus and Advantage. Clues to counterfeit product include: writing in a language other than English; product volumes expressed in milliliters rather than ounces; packages not child resistant; instructions missing; and lot numbers on the cartons not matching lot numbers on applicators.

During six months in 2003 and 2004, U.S. Customs and Border Protection seized nearly 60,000 pieces of counterfeit Frontline and Advantage from China, according to agency spokeswoman Erlinda Byrd. The seizures happened on nine different occasions but were traced to a single importer, who claimed to have purchased the product in the United States, shipped it to China for repackaging into smaller quantities and returned it to the United States for distribution.

Byrd said most of the items seized were empty packages, although some applicators and product were confiscated, as well. The shipments arrived by air cargo and mail, and most were intercepted at the border, she said.

Customs has made no more seizures since then, Byrd added.

Although EPA’s Web site calls attention to counterfeiting, the agency could not say whether the problem has become rampant, commensurate with the growth of over-the-counter sales. “(The question is) beyond the scope of the agency’s regulatory authority,” spokesman Dale Kemery said.

The U.S. Food and Drug Administration (FDA), which regulates prescription drugs, weighed in on the risk of patronizing online pharmacies in an article published in 2006 by FDA Consumer magazine. The article stated that some Internet pharmacies are legitimate and reputable, and some are “unscrupulous businesses operating in violation of the law.” It said the agency has found companies selling counterfeit product, making fraudulent claims, dispensing prescription drugs without prescriptions and selling expired drugs.

The FDA’s Center for Veterinary Medicine expressed particular concern about Internet sales of nonsteroidal anti-inflammatory drugs and heartworm preventives, the use of which could endanger pets without professional guidance and monitoring.

Russ Heimerich, a spokesman for the California Department of Consumer Affairs, which oversees the state Board of Pharmacy and state Veterinary Medical Board, echoed FDA’s observation that online pharmacies run the gamut.

He said the agency has uncovered some online operations that kept on staff veterinarians whose job was to authorize prescriptions over the telephone for patients they hadn’t seen. “That's illegal in California, and we’ve nailed a couple who did that,” Heimerich said.

At the same time, the agency has received no complaints against large online pharmacies such as 1-800-PetMeds, which he noted are required to be licensed by the state in the same manner as bricks-and-mortar drug stores.

Meanwhile, 1-800-PetMeds has made a complaint of its own.

The online pharmacy based in Florida called its state’s Attorney General’s attention to a letter-writing campaign aimed at drug companies organized by the Alliance of Veterinary Hospital Owners (AVHO). The AVHO had rallied more than 100 of its members to send letters demanding that pharmaceutical manufacturers enforce the veterinarian-only sales policies or risk losing their business.

The campaign ended abruptly when the Florida Office of the Attorney General sent what it termed “civil investigative demands or subpoenas” to the AVHO, the American Veterinary Medical Association, the American Animal Hospital Association and five animal health pharmaceutical companies, notifying them that the department was investigating possible violations of state anti-trust law.

The department said the companies under investigation are Bayer, Merial, Novartis, Pfizer and Virbac. The investigation is ongoing.

1-800-PetMeds Chief Financial Officer Bruce Rosenbloom said his business is not trying to detract from veterinarians. “In no way are we a replacement for the veterinarian. We want the same thing, and that’s a healthy pet,” he said. “We are going after a niche player who wants the convenience of home delivery, to save some time, save some money.... The bottom line is, we offer a choice to consumers. In the past, the veterinarians have had a monopoly for themselves.”

Some pet owners in New York may share that sentiment. Laura Lynch, a program assistant II at the state Board for Veterinary Medicine, said her agency is fielding a rising number of complaints from the public about veterinarians who are reluctant or flatly refuse to write prescriptions that clients want filled by online vendors.

“It is the policy of New York State that any medication that they would dispense, they must write a prescription to allow the client to get it elsewhere unless there’s a justifiable medical reason,” Lynch said, noting that such complaints are coming in at a rate of more than one per month.

Lynch said she has heard veterinarians at board meetings express displeasure over retail competition. “It seems they’re concerned about losing revenue,” she said.

The role of retail sales in clinic budgets has inspired many a spirited exchange on VIN discussion boards. Dr. Paul Sessa, a veterinarian in Salida, Calif., triggered the most recent such discussion in December when he asked about a rumor that Costco had begun carrying Frontline.

In an interview, Sessa said the result of competition from big-box stores and Internet retailers might be to drive up the cost of veterinary medicine. “People who are aggressively pricing everything they buy may not realize they're pricing themselves out of veterinary care,” he said.

That’s because the profit from sales of pharmaceuticals, food and so forth in many clinics subsidizes the cost of medical services. “It’s a profit center that helps pay overhead,” he said. “As it goes away, the cost to the public for other services has to go up.”

By how much, Sessa wasn’t sure, but he figures it’s a significant chunk in his practice. “It’s a very complicated calculation,” he said.

What’s more, people who call to compare prices cost the clinic money, Sessa said. “You’re paying your receptionist to answer a lot of price-shopper calls for every one (item) you sell,” he said.

Dr. Zack Mills, Vice President of Pet Sales for Merial U.S., maker of the leading flea product Frontline, suggested that veterinarians could stymie the competition by pursuing sales more insistently. “It’s a matter of making strong recommendations to the client: ‘This is what we want on your dog,’ ” he said. “If you put it in the hand of the client, 99 percent of the time, they’ll buy it from the vet.”

Mills said veterinarians’ sense of injustice on this issue is misplaced because the partnership between the company and clinicians has benefited both. “Together, we’ve grown the business...” he said. “They’ve made millions of dollars through flea and tick (medications) and they continue to make millions of dollars.”

Dr. Tai Federico, a practitioner in Chattanooga, Tenn., would agree. He said he’s grateful for the money he’s made and continues to make from selling flea and tick products, even though he’s taking less per unit today to stay competitive.

“Merial has paid for my house, basically, (through) the profit I’ve gotten on Frontline,” Federico said. “Obviously, I would like to make as much money as I could for as long as I could on the product, but what it’s going for at Costco seems like a fair price. There’s still plenty of money to be made with a 60-percent markup.”

Federico said he has his staff check the prices at 1-800-PetMeds every couple of months to make sure his are comparable. “We just want to be within two to three dollars, so that in the client’s mind, it’s a wash,” he said.

Dr. Randy Carsch, a practice management consultant in Texas whose expertise is setting fees, said matching online prices is exactly what clinicians should do.

“I believe you have to be equal to or under the Internet,” Carsch said. “If it’s $20 above what the Internet is, they’re going to think all your prices are (inflated).”

Carsch said most practice owners mark up flea products an average of 100 percent. If, to be competitive, they must reduce the markup, he said they should simply adjust their other “non-shopped” fees to make up the difference.

One aspect of the debate that’s received little attention is the inherent conflict of interest in veterinarians’ time-honored practice of writing prescriptions for or recommending medications that they also sell.

Although the practice is a tradition and convenient for pet owners, “It’s clearly a conflict of interest to be prescribing and selling the drug at the same time,” said Dr. Carol Morgan, a practitioner in Victoria, Canada, a doctoral student in applied ethics at the University of British Columbia and a member of the Society for Veterinary Medical Ethics. “It certainly leads to a question of trust in the profession ... and that’s a negative for everybody.”

Morgan suggested two ways of mitigating the conflict. The first is not to sell medications at all. The second, she said, is to be upfront about it, and give clients a choice. “I’ll say, ‘I think we should put Fluffy on this antibiotic. I can write you a prescription for it and you can get it filled at a pharmacy, or I can fill it for you,’ ” she said.

“People are becoming more savvy consumers,” Morgan said. “They want more choice, and I think that’s reasonable.”

In human medicine, physicians and pharmaceutical companies have come under hard scrutiny in recent years for becoming too cozy. Today, drug companies are prohibited by their professional code of conduct not only from sending doctors on junkets to Hawaii or serving them lavish meals, but even from making small gifts of coffee mugs or pens, said Laura Perry, who has worked in the pharmaceutical business for 25 years.

Although most animal health companies are subsidiaries of companies that deal in human drugs, Perry said attention to veterinary practices may be much less, in part because the stakes are lower and the pressures, lighter.

“So much of where the changes come from in human pharmaceuticals is initiated by lobbying groups, unions, government and other interested parties. This can impact the cost of medicines, among other things,” said Perry, who currently works at HealthBridge Practitioner Access Solutions, which does marketing and sales support for the pharmaceutical and biotech industries. “It seems you don’t have the same lobbying groups (in veterinary medicine).”

And perhaps most importantly, she said, veterinarians fulfill dual roles that in human medicine are performed by two people — the physician and the pharmacist. “There really isn’t a source for a pet owner to go to to ask questions about appropriate administration (of medication) or anything else. The vets are really providing a double service,” she said.

Regardless whether the veterinary community maintains its tradition of dispensing medication, change is underway. Consumers are migrating to other sources for medicines, especially flea and tick control. A survey by the American Pet Products Association found that while virtually all dog owners using flea and tick medication in 2000 obtained it from veterinarians, by 2006, one-third bought the product elsewhere.

“At the end of the day, the consumers are going to call the shots,” said Rosenbloom of 1-800-PetMeds. “The consumer demand is overwhelming. I don’t think the veterinarian or the manufacturer is going to get in the way.”

All the same, the companies with policies of selling their product only through practicing veterinarians say they will stick to the policy. “We believe in the value that our sales policy brings to the veterinary profession and will continue to operate under this policy,” said Bob Walker, spokesman for Bayer.

“Why would I throw the towel in?” asked Merial’s Mills. “The vast majority of business is still through the veterinarian.”

In Marietta, Ga., Dr. Michael Good thinks he may have found the answer to diversion. Six months ago, with technical help from a company that peddles pet merchandise on the Web, he put his pharmacy online. Now everything he sells in his clinic is available on the Internet to his clients only.

“We’re averaging about four to five orders per day, $400 to $500 dollars a day in business. This is business that would have gone elsewhere. These people want to order online,” he said.

Good said some of his products are priced the same online as in the clinic, but items that are readily available elsewhere tend to be cheaper in his Internet pharmacy. “We take the most famous one,” he said, referring to 1-800-PetMeds, “and we charge a dollar less. We like to stick it to them and twist the knife,” he added with a chuckle of delight.

At the end of each day, a clinic staffer pulls the orders, boxes the products and ships them priority mail. Anyone who spends $39 or more gets free shipping.

“If every veterinarian in the country did this, and only for our clients, then we’d put a serious dent in these activities,” Good said. “I still make a good profit, and I’m making my clients happy.”



Q&A


The following is an example of how one drug company answered questions about veterinary pharmaceutical diversion. The responses were provided to VIN News Service (VNS) via e-mail on March 19 by Bob Walker, director of communications for Bayer Healthcare LLC Animal Health.

VNS: First, my understanding is that Bayer, like many pet-pharmaceutical manufacturers, has a policy of selling its products only through licensed veterinarians. What is the origin of this policy and is it still in place?

Bayer: Bayer's sales policy is to sell our products only to licensed, practicing veterinarians. This policy dates back at least 20 years.

VNS: If a retailer or online pharmacy has one or more veterinarians on staff, would it be in keeping with the policy to sell product to these veterinarians?

Bayer: We adhere to our sales policy and choose to sell only to licensed, practicing veterinarians.

VNS: How do you enforce the policy?

Bayer: Same as #2.

VNS: Besides renegade veterinarians diverting product, do you know of or suspect any other sources of product diversion?

Bayer: We have a program in place to routinely monitor and address illegal and unregistered foreign product.

VNS: How often does Bayer identify product diversion? Can you give me a sense of scale?

Bayer: As indicated in Q4, We have a program in place to routinely monitor and address illegal and unregistered foreign product.

VNS: The retailers I have spoken with tell me that it is very easy to obtain product. In order to supply the 1800PetMeds, the Amazon.coms, and the Costcos of the world, it seems that "gray marketeers" would have to have access to a tremendous volume. Among the products well-known for their ready availability are Frontine and Advantage. In fact, discountpetmedicines.com offers both as alternatives for customers searching for ProMeris, sales of which, it says, are strictly policed by Fort Dodge. Why are Bayer products so easily available to non-veterinary outlets?

Bayer: We believe most companies in the Animal Health business are experiencing legal diversion of products, outside of normal distribution channels.

VNS: It's been observed by some sources that there is no financial incentive within the system to truly stop the supply to the gray market. Sales representatives are rewarded for making sales, and manufacturers are reaping the profits. Do you agree? At Bayer, are any incentives in place to identify leaks in the supply system?

Bayer: Bayer Animal Health expends significant time, effort and financial resources supporting the veterinary profession and our sales consultants strictly adhere to our sales policy.

VNS: Veterinarians often tell their clients that they cannot guarantee the quality of product purchased outside of veterinary clinics. In your view, how big is the problem of substandard, expired and counterfeit product? Is there a greater risk of product failure for goods sold outside of veterinary offices? Are Bayer's product guarantees void for those consumers who buy your product from someone other than a veterinarian?

Bayer: Bayer stands behind our products 100%. We have veterinarians and veterinary technicians on our staff that focus on assisting clinics, veterinarians and pet owners with questions regarding our products.

VNS: Retailers and online pharmacies defend their right to sell product, saying they are meeting consumer demand for more choices, convenient delivery by mail and competition on pricing. Many maintain that manufacturers' vet-only policy is monopolistic. The Florida Attorney General's Office currently is investigating whether the policies violate that state's anti-trust statute. The target of its investigation are three veterinary trade groups and five manufacturers, Bayer among them.

Bayer: Bayer does not comment on ongoing investigations.

VNS: What do you say to those who believe manufacturers and veterinarians are trying to maintain monopoly control? Given the proliferation and popularity of online retailers and pharmacies, is the vet-only policy becoming futile and outdated?

Bayer: We believe in our sales policy and continue to abide by it for its support of the veterinary profession and the value that veterinarians bring to pets and pet owners.

VNS: As you know, at least some veterinarians are deeply frustrated with some manufacturers for what they see as a failure to enforce the vet-only policy. Some have argued that they would have more respect for the companies if they openly acknowledged that the policy is too difficult to enforce. Have you considered doing so? If not, why not?

Bayer: We believe in the value that our sales policy brings to the veterinary profession and will continue to operate under this policy.




VIN News Service commentaries are opinion pieces presenting insights, personal experiences and/or perspectives on topical issues by members of the veterinary community. To submit a commentary for consideration, email news@vin.com.



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