May 22, 2012
Veterinarian opens up about going undercover
Flea-product diversion adventure twisted, turned
By: Peggy Guy
For The VIN News Service
Part 3 of 3: Veterinarian opens up about going undercover
Editor’s note: Under the auspices of the Veterinary Information Network (VIN), an online community for the profession, Dr. Peggy Guy resold the non-prescription flea and tick product Frontline Plus to a wholesaler to understand how supplies reach pet owners through unauthorized channels. The policy of Frontline manufacturer Merial is to sell product only to veterinarians who treat patients, yet Frontline is readily available from retail stores and online pharmacies. This account by Guy, a pseudonym, is the final installment of a three-part series.
A veterinarian working undercover purchased Frontline Plus and resold it on the gray market using her real name but she adopted a pseudonym for this series to avoid being lambasted by peers who frown upon diversion.
In October 2010, my assistant walked into my office with a fax from a company by the name of WTF Wholesale Supply Corp. She asked if I wanted to keep this fax about buying Frontline Plus from Merial and reselling the product in bulk quantities to WTF.
I thought about it for half a second and told her to toss it into recycling.
Then I sat back and thought about VIN News Service articles I’d read about diversion, and remembered Dr. Paul Pion, VIN’s president, saying he wished someone would just tell us how it is done. I pulled the fax back out of the recycle bin and called Paul to see what he had in mind. This was the beginning of my adventure into diversion.
From the beginning, the plan was to donate all of the profit from the sales of Frontline. I picked my own charities and kept a list detailing who, when and how much I donated. It was important that no one think this plan was conceived to make money; it was conceived only to gather information.
I called the WTF phone number and talked with someone named Tascha. I told her I would not sell anything illegally but was willing to sell Frontline since it does not have a prescription requirement.
I don’t live in heartworm or flea country, so my yearly purchases of Frontline Plus are small; I sell it only for tick prevention in the spring and to traveling pet owners. In fact, I always bemoaned the fact that I could not buy individual packages of Frontline but had to buy a pack of 10 for each dosage I needed. That is a lot of money tied up on my shelves.
After several phone and email conversations with Tascha, I placed my first order totaling slightly more than $10,000. I really and truly believed that Merial would notice that I had just placed an unusually large purchase; during each of the previous 16 years, my purchases from the company topped out at $800 a year. Tascha assured me that they would not notice until I broke the $100,000 mark. She was right: They did not notice my $10,000 purchase. She was wrong about the $100,000, however. Sadly, Merial did not question my orders even then.
One thing that stood out in these conversations was WTF’s eagerness to be secretive. WTF wanted to send product to my home and did not want to talk to my staff, as if our dealings were a big, horrible secret. It took several months for them to be willing to leave a message with my staff, and usually it was a terse message along the lines of, “This is Jamie at WTF. She knows me. Please have her call me back at … ”
With the first order, there was a discrepancy between the amount I was paid by WTF and what I was billed by Merial. The difference turned out to be sales tax. I had always paid sales tax to Merial although technically, I wasn’t required to. I called Merial to change my sales tax status with them, thinking as I did so that the change might raise red flags, but it did not. They just processed a credit for the sales tax on the $10,000 order.
WTF made the first couple of orders easy. They asked me how much I was willing to sell, I gave them a number, and they emailed me a purchase order for Frontline Plus. All I had to do was call Merial to place the order. I’d receive the order, fax packing slips to WTF, and WTF would deposit money directly into my bank account within 10 days.
Acting as a reseller of product in the flea and tick market sometimes meant dealing with boxes of unshipped product stacked around the clinic. The mailing labels in the image have been blurred deliberately.
The third purchase was another story. I placed an even larger order — exceeding $30,000 — and waited and waited and waited for the money to be transferred to my bank account. Boxes of product were in my way for weeks. I would move them from the hallway to my office so we could clean floors and then back to the hallway so I could use my office. It was inconvenient, and my staff and I grew tired of moving boxes.
WTF gave all sorts of excuses for the delay, from “the bank is allowed to process only so many ACH payments a week” to “we are just behind in processing all of our orders.” I suspected they were having cash-flow problems and wondered if I was going to get paid at all.
I considered returning the unopened shipment to Merial, wondering how Merial would react. But I did not have to find out. After four weeks, WTF finally paid for the order, and I shipped them the product.
Then this saga took a strange twist:
In June 2011, a veterinarian on VIN started a discussion on a message board asking if other veterinarians had been stiffed on sales to WTF. That discussion, plus another discussion she started on the same subject a short while later, made me sad. Several colleagues had responded to her admission and plea for help with viciousness. I hated seeing a colleague tarred and feathered — treated like a thief and scum of the earth.
I considered placing one last order for WTF, wait to be paid, then tell them I would not ship the order until they paid this veterinarian. When I realized doing so would be legally questionable, I reluctantly let the idea go.
Meanwhile, we had another goal to accomplish. One of the purposes of this scheme was to figure out where the product went after being delivered to WTF. We thought of slipping portable GPS devices in the packages, but we couldn’t find anything small enough with sufficient battery life.
We opted for a low-tech plan instead that was part message-in-a-bottle and part Willie Wonka. Inspired by the book and movie character who hides prizewinning golden tickets in bars of chocolate, VIN created golden tickets and sent them to me. People who found the tickets could call a toll-free number or go to a website to claim a $25 gift card. We asked the ticket-holders to let us know where they purchased the Frontline Plus.
With this plan in mind, I placed and received another order from Merial and faxed the packing slips to WTF. Money was deposited in my account rather quickly this time — it took only four days! A week later, I got a call from a Kay Carpenter stating that they (WTF) were changing their name to True Lines Distributing. They had new contact information but the same shipping information. She wanted to assure me that I was working with the same people I had always worked with and that the same purchasing plan would remain in effect. She assured me that this was a name change only. I wrote down the information and hung up. This call came right after several lawsuits were filed by veterinarians who had been stiffed by WTF. In my opinion, the name change was obviously a way to dodge paying these veterinarians.
There I sat with a huge amount of product — my largest order to date — paid for by WTF, a company that was no longer in business. At first I was OK with sending the product to True Lines, but the longer I thought about it, the more uncomfortable I became. I knew that WTF owed veterinarians lots of money, and here I had product belonging to WTF. I also did not have enough WTF pre-printed shipping labels to send the product to the WTF address, where Kay assured me that she would be picking up the shipment on behalf of True Lines Distributing. I also did not have a reseller’s tax certificate from True Lines, as I did for WTF. I certainly did not want to be in trouble for not having collected sales tax.
Once again, I was in the predicament of having to move boxes of Frontline Plus back and forth from the hallway to my office to accommodate cleaning schedules. I made many calls to True Lines asking for resale certificates and UPS labels addressed to WTF with their address on it. They, in turn, were calling me about once a week asking when I was going to ship the product. I was moved up the chain of command with every call, but every call failed to yield a reseller’s sales tax certificate. They kept telling me that the state of Florida was slow in creating them for new corporations.
It was an awkward situation. Remember the golden tickets? Well, we had carefully inserted them into packages of Frontline Plus without disturbing the original packaging and it would be impossible to remove the tickets without tearing the shrink wrap. So sending the product back to Merial was not an option.
I really did not want to send WTF product to True Lines because True Lines had not paid for it (even though they insisted they owned the product). After much discussion, True Lines agreed to let me send the order to the now-defunct WTF. They did not, however, provide fresh WTF labels. Instead, True Lines sent me a $150 American Express gift card to cover shipping charges to the WTF address.
It took more than three months, but I finally got the product out the door, delivered to the WTF address with golden tickets in some packages. Those golden tickets have since been redeemed by pet owners in cities all over the country who bought the product from retail chain stores.
At this point, I thought we were done with diverting, then realized we had one more question to answer. We wanted to know what an electronic bank payment would show when deposited by True Lines, as opposed to WTF. Would it still say WTF? The answer turned out to be no: The depositor was recorded as “True Lines DIRST.” (I don’t know what “DIRST” means; I think it must be a typo and is supposed to be DISTR, for Distributing.)
With that last order, placed in December 2011, came one more twist. I was told that True Lines was paying 2 percent commission. This was down quite a bit from the 10 percent commission on my first order. In fact, the commission decreased with almost every successive order. When I received order paperwork from True Lines, lo and behold, I discovered they had not given me any commission!
I called to ask why my 2 percent was missing. I was told they were not paying any commission because I placed the order during a Merial promotion and that I would make my money on a rebate from Merial. I told them it was not worth it and to cancel the order. Amazingly (insert sarcasm), they decided at that point to pay the 2 percent. It was the first time they had done a bait-and-switch with me. They were starting to show their true colors, removing any doubt from my mind whether there was basis for the lawsuits filed by the unpaid veterinarians against WTF.
True Lines has contacted my clinic weekly since then, asking me to sell them more Frontline Plus. I avoided them for a while. Finally I told them I was not interested because the commissions have just gotten smaller and smaller. Suddenly, the offered commissions started going up. The last offer, made via email, was 7 percent.
I am not going to take them up on it. I am out of the diversion business.
Reflecting on my adventure in veterinary-product diversion, I am amazed at how many twists, turns and pitfalls happened along the way. As a solo small-animal practitioner, I now understand the temptation to divert, especially for those colleagues struggling in these tough economic times.
Let me be perfectly clear: I do not agree with nor do I support product diversion. But our profession has invested for too many years a huge amount of emotional energy on a situation that I do not believe will resolve. Diversion is happening on a grand scale; I don’t see a way to undo it. The genie’s not going back into the bottle.
So how do we get past this? Veterinarians are much more than flea-control vendors. Think about the training, passion, knowledge and experience we share as clinicians. Before these products were invented, veterinarians made a living by providing service and expertise. Let’s put our focus back on medicine. That is a field where retail merchants cannot compete.
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