November 4, 2011
Merial knows, diverting veterinarians assert
By: Edie Lau
For The VIN News Service
Employees of Merial, maker of the top-selling pet parasiticide Frontline, implicitly condone the resale of its products by veterinarians to retail brokers, and have explicitly encouraged the activity, veterinarians who have diverted Frontline maintain.
The pet flea product Frontline Plus, as shown in this display at a Target store in Silverdale, Wash., is widely available from retail outlets even though its maker, Merial has a policy of selling Frontline only to veterinarians. How the product reaches retail channels is a bone of contention in the veterinary field. Photo: VIN News Service.
Interviews with veterinarians who collectively have diverted hundreds of thousands of dollars worth of Frontline show that Merial often didn’t question repeated large orders of product. Even when its representatives did inquire and veterinarians admitted to reselling the goods, the company did not limit those veterinarians’ purchases.
“I’m absolutely certain they just look the other way,” said Dr. Clarissa Meeks, a practitioner in northern Colorado. “...They were making money, I was making money, everybody was happy.”
Merial executives adamantly denied that the company knowingly allows diversionary activity by veterinarians, much less promotes it. They acknowledged that individual rogue sales representatives occasionally may do so.
“If you’re trying to say that occasionally, inappropriate sales are made, I’d have to agree with you,” said Don Schwartz, Merial executive director for business services and business development. “We do not have a perfect system. If you’re talking about, did somehow we have an interest in diverting and not telling people about what we’re doing ... then I’d say you’re wrong.”
Dr. Zack Mills, Merial’s head of U.S. companion animal sales, said that contrary to the veterinary community’s suspicions, the company is not interested in bypassing veterinarians to sell products directly over the counter (OTC).
“We have made a decision as Merial to stay focused on the veterinarian,” Mills said. “If I wanted to go to the OTC channel, I’d have done it. I don’t need sales reps to divert product if I wanted to do it. We don’t want to do it! We want to focus on growing veterinarians’ business.”
Diversion of pet products, usually involving treatments to prevent flea and tick infestations on dogs and cats, long has been a sore point in the veterinary community. The conflict centers on honesty, loyalty and money.
Although generally it is not illegal to sell non-prescription pet therapies on the open market, most veterinary pharmaceutical companies have an official policy of selling only to licensed veterinarians with valid veterinarian-client-patient relationships. Their rationale is that medical products, whether prescribed or available over-the-counter, are more safely and effectively used under a veterinarian’s guidance.
The policy has served over the years to augment clinic revenues, as well, cultivating loyalty to manufacturers by veterinarians, who influence pet owners’ buying habits by introducing new products and generating sales.
Yet despite the policy, Frontline brand flea and tick treatments, along with competing brands, widely are available through feed stores, national retail chains and Internet outlets. Veterinarians have accused manufacturers of secretly selling to outside channels. Manufacturers, in turn, have pointed the finger at veterinarians, maintaining that it’s the doctors who resell product to the brokers that supply the stores.
Both may be right.
Veterinarians throughout the United States who admit to making repeated large orders of Frontline Plus and reselling the merchandise to retail suppliers assert that Merial employees seem to condone — and in one case, actively promoted — the activity.
Meeks, the Colorado practitioner, said she placed successively larger orders over the course of four years, beginning with a $5,000 order and ending with an order for nearly $50,000 in product, and was not questioned by the company.
“I’m a very small practice in a very rural area. There’s no way I could be going through that much product — and they never said a word to me,” Meeks said.
Diversion is by nature a clandestine activity, but Meeks and other veterinarians spoke with the VIN News Service because they are involved in lawsuits against pet products broker WTF Wholesale Suppliers Corp., a company in Florida that owes numerous veterinarians money for unpaid orders of Frontline Plus.
Meeks said she switched from a mobile practice to a stationary clinic at the time she began placing larger orders with Merial, but even still, she said, the volume should seem suspicious to an alert observer. In fact, when she tried on behalf of a different pet products broker — not WTF — to place an order for the Bayer Animal Health non-prescription topical flea product Advantage, Bayer said no.
“The minute I called in and made an order, they said that didn’t jibe with (my practice size) and wouldn’t give it to me,” Meeks said. She noted that the order was large, but smaller than her Frontline orders.
Meek said the same thing happened with Elanco when she tried to order Comfortis, a prescription tablet for dogs to control fleas. (Meeks said she did not mean to divert prescription drugs, but did not realize that Comfortis requires a prescription.)
Notably, Bayer is the only major veterinary pharmaceutical company that doesn’t have a policy of selling product only to veterinarians. The company abandoned the policy in March 2010, drawing praise from some in the profession who perceived the move as honest and condemnation from others who viewed it as disloyal to veterinarians.
Elanco, for its part, touts its use of “track and trace” technology to monitor distribution of its products to counter diversion.
Told of Meeks’ experience, Schwartz at Merial said the amount of Frontline the veterinarian reported ordering was “not a gigantic order” that would necessarily raise red flags.
Merial’s Mills said the company doesn’t wish to subject every practitioner to heavy scrutiny. “There are 28,000 clinics that we have in the United States and I cannot, and I am not going to be, the police,” he said. “Veterinarians don’t want us to go into the clinic, stalking them and being the police force.”
At the same time, Mills said, he has denied sales agents commissions on suspicious transactions.
In another instance, a veterinarian was questioned by a Merial representative about his large purchases of Frontline Plus. However, when the doctor admitted reselling the parasiticide, the company continued to fill his orders.
The veterinarian, Dr. Robert Ketter, is 80 years old and has been retired from full-time practice since 1995. Ketter began ordering product for resale to WTF about three years ago. Prior to that, he said, he would order about $2,000 worth of Frontline Plus at a time to sell at immunization clinics he holds periodically at a local Petco store.
Once Ketter began supplying Frontline Plus to WTF, he began ordering $20,000 to $30,000 worth of product at a time. After the second or third such order, Ketter said, a representative from Merial paid a visit to his home in Iowa, where the shipments were delivered.
Ketter said he doesn’t remember the representative’s name, but he does remember the conversation.
“He wanted to know what I’m doing with it,” Ketter recounted. “I said, ‘I’m selling it to pet stores,’ which is what I was doing. He said, ‘Well, I don’t know if they’ll sell it to you any more.’ I said, ‘Fine, I won’t buy it any more.’
“But that same year, and I don’t remember what year it was,” Ketter continued, “I ordered some more and I shipped it (to WTF).”
In other words, although the Merial representative told Ketter that he might be cut off, he was not. Ketter was not surprised.
“You’ve got to remember, these corporations are in business to sell product,” he said. “They really don’t give a damn who buys it.”
Mills said he did not know the specifics of the case but surmised that the sales representative may have thought that because Ketter said he would not buy any more Frontline, the problem was solved, so the agent opted not to report the incident.
An experience by another veterinarian indicates that players in the so-called gray market for pet products may be well known by the companies that purport to protect the veterinary sales channel.
Dr. Robert Irelan, a clinic owner in Florida, said that when he contemplated last year whether to say yes to a solicitation from WTF to resell Frontline, he asked for advice from two people he knew in the pet products business: One was a Merial salesman who no longer works in his territory and whose name he said he’s forgotten. The other was Chris Kwilecki, a salesman from Webster Veterinary, a national product distribution company based in Massachusetts.
Irelan said his concern about doing business with WTF wasn’t whether it was ethically sound but whether he could trust the company to pay him as promised. That’s what he asked the representatives from Merial and Webster, and Irelan recalls both offering opinions that the deal was safe. He said that they commented: “I’ve never heard of anybody not getting paid,” or words to that effect.
Responding to an inquiry from the VIN News Service, Kwilecki said he recalled the conversation but that Irelan’s account left “some gaps.”
“I do remember him calling me and asking me had I ever heard of WTF, and my response to him was ‘No, I have no knowledge of them,’ Kwilecki said. “... I had never heard of them prior to Dr. Irelan calling me. He asked me, ‘Do you think I should do it?’ My response was, ‘I can’t answer that for you.’ I said that Webster (and) I don’t condone diversion. I’ve never dealt with diversion.”
Kwilecki said the doctor asked if he knew of other veterinarians who’d done business with WTF and whether they’d gotten paid.
“I said I knew of no veterinarians who’d done it and I knew of no veterinarians who have never gotten paid if they did do it,” Kwilecki said.
He told the VIN News Service that his employer, Webster, stands firmly against diversion. “If someone made an order that is outlandish or a little bit suspicious, it would not be something that I could do,” Kwilecki said. “It would not go unnoticed.”
As for the Merial representative who Irelan said appeared to be familiar with WTF, Mills said that if the salesperson isn’t in the territory any more, he likely no longer works for the company.
The most blatant example of Merial employees supporting diversion was reported by a veterinarian who, over the course of four to five years, placed orders for $30,000 to $40,000 worth of Frontline Plus about every six months. The veterinarian said a Merial sales agent at one point requested another such hefty order. Reportedly, the agent’s manager had said: “Could you get this veterinarian to order some more?”
From conversations with the representative, the veterinarian gathered that other agents and managers throughout the company were reaping lucrative commissions and earning bonuses for facilitating orders to diverters.
“They would go to these conferences and (hear about) how these (other) reps would be getting all these trips to Hawaii because they had huge bonuses, they had huge sales, and these sales were to people who were selling to Wal-Mart, Drs. Foster & Smith, (1-800) PetMeds, you name it, they were selling it,” the veterinarian said.
The veterinarian said the agent and the manager “were upset because they weren’t getting the huge bonuses that the other reps were.”
The veterinarian asked not to be named in order to protect the identity of the sales representative, a personal friend. The Merial salesperson declined to speak to the VIN News Service.
At the time the veterinarian began diverting, the veterinarian did not own a clinic, so the veterinarian set up an account with Merial and had shipments delivered at home. The action attracted Merial’s notice; the representative asked the veterinarian the reason for the bulk orders.
“That was when I said, ‘Yes, OK, I’m doing it,’ ” the veterinarian recounted. “I could have lied and said, ‘I’m going to start my own clinic’ but I just told them the truth.”
The agent’s response was, “Keep it quiet.”
Over time, the agent’s manager would convey cautions such as, “Let’s not go too far here. Remember, we could cut you off at any time,” the veterinarian said. Yet the orders continued to be filled.
“I can tell you absolutely for sure, they were explicitly complicit,” the veterinarian said.
Ironically, the last order that the veterinarian placed with WTF was the one that the agent and manager requested to boost their sales numbers. That’s the order that WTF did not pay for, prompting the veterinarian’s suit against the company.
Meanwhile, Merial is allowing this veterinarian, as it is allowing some other veterinarians ensnared in the legal battle with WTF, to pay the bill for the Frontline Plus over an extended period. “They know everything,” the veterinarian said. “They’ve known everything from the beginning.”
Responding to the veterinarian’s tale, Schwartz at Merial said, “It sounds like somebody did something wrong here. Somebody did something wrong and did not report something that they should have reported.”
Mills observed that if the sales agent and veterinarian are personal friends, the agent likely looked the other way to protect the veterinarian. Such behavior, he said, is “punishable by us if we see it.”
He reiterated: “Our methods are not perfect. We do not stalk vets. We do not use Google to watch people coming in and out of their homes.”
Merial has in the past sent letters to veterinarians with high-volume orders of Frontline and another parasiticide, Heartgard, questioning the nature of those orders. The VIN News Service obtained three such letters through a public records request to the Florida Attorney General’s office last year.
The letters were part of a package of material submitted in 2007 to the Attorney General’s Office by Alison Berges, general counsel for PetMed Express, Inc., in a request to investigate suspected antitrust practices in veterinary medicine. In a cover letter, Berges alleges that veterinarians and pharmaceutical companies are colluding to deny consumers the right to buy their pet medications from alternative sources.
In an interview with the VIN News Service in 2010, Schwartz and Mills said that Merial, while it disapproves of diversion, must be careful how it enforces its veterinarian-exclusive sales policy lest it run afoul of laws prohibiting anti-competitive business practices.
Although the documents obtained from the Florida Attorney General show that Merial contacted veterinarians about perceived excessive purchases of Frontline, whether the company actually limited all of the veterinarians’ purchases is unclear.
One of the veterinarians who was written a letter, Dr. Robert Stine of Florida, told the VIN News Service that he doesn’t recall receiving the letter, which was dated Sept. 18, 2006.
He did recall, however, that his clinic had a Merial sales representative who was “adamant about not letting you have too much of the stuff so that it wouldn’t go out (to retail channels). They were overboard with it,” he said. “I thought it was none of their damn business.”
According to the letter, Stine’s year-to-date purchases of Frontline totaled $110,623, compared with $2,811 for the same period the year before. Stine said his purchases rose because he’d formed a buyers’ group with veterinarians who had poor credit, and ordered product on their behalf.
He said Merial did not limit his purchases, but he eventually quit buying Frontline for other veterinarians.
Mills responded that any veterinarian who receives a limit letter is placed on a limit, but that if the veterinarian subsequently reduced his purchase volume, he may not have noticed.
Another veterinarian to whom a letter was written, Dr. Sadar Tariq of Pennsylvania, also told the VIN News Service that his purchases were not limited.
According to the letter, dated Sept. 15, 2006, Tariq purchased more than $230,000 worth of Frontline products in 2005 and $170,106 in 2006 year-to-date. Merial stated that it would expect a one-doctor practice like his to need only $65,760 worth of Frontline products annually.
In addition, Tariq purchased $47,658 worth of Heartgard, another Merial parasiticide, in 2006, in excess of the $29,644 to be expected from a practice of his size, the letter states.
Tariq said he was working with several other veterinarians at the time and purchased product on their behalf as well as his own. He noted that some of his clients are breeders who use flea-control product in quantity.
The third veterinarian Merial wrote to is Dr. Richard Wiley, a mixed-practice veterinarian in Wooster, Ohio. According to the letter, dated Aug. 30, 2006, Wiley purchased $221,163 in Frontline products in 2005 and $193,551 year-to-date in 2006, up significantly from his purchases in 2004, which totaled $11,209.
The letter states that Wiley would be placed on a purchase limit of $65,760 unless he added full-time companion animal veterinarians to his practice. Responding by email to an inquiry from the VIN News Service, Wiley said that the limit was imposed. He did not explain the reason for his attention-getting purchases.
The letters support what Merial executives have told the VIN News Service in the past: that the company monitors veterinarian purchases of its products in an attempt to guard against diversion.
However, the actions of company employees in other instances, as reported by veterinarians who divert, suggest otherwise.
An equine veterinarian in New York state told the VIN News Service that she placed five orders with Merial between February 2010 and June 2011. The first order was for about $10,000 worth of product, and the order sizes rose from there. The last order involved more than $50,000 in product.
The products are meant for use in cats and dogs, not horses, and the veterinarian said her Merial contacts knew she is chiefly an equine veterinarian, although she does have some small-animal patients. Her orders never were questioned.
Considering the difference between what the company says about its opposition to diversion and how it behaves at times in the face of apparent diversionary activities, the veterinarian observed: “It seems like they’re very ... inconsistent.”
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