IdexxHQ

Photo by John Ewing

Idexx is headquartered in Westbrook, Maine.

Idexx Laboratories Inc. is facing a lawsuit brought by disgruntled pet owners that could, if successful, erode its market share and change the way that many in-house diagnostic products are sold to veterinarians.

The class action, for which a complaint was filed last month at a federal district court in California, alleges Idexx's "anticompetitive behavior" causes pet owners to pay "artificially high" prices for point-of-care (POC) testing. Idexx has refuted the allegations.

The suit has materialized at a time when the veterinary profession is attracting heightened scrutiny from antitrust regulators, coming just weeks after the Federal Trade Commission ordered National Veterinary Associates to offload 11 speciality and emergency hospitals due to competition concerns.

The complaint against Idexx, filed in the U.S. District Court for the Northern District of California, names 22 pet-owner plaintiffs residing in 15 states. Although the pet owners don't buy POC products directly, they claim they are subject to "supracompetitive" pricing passed onto them by veterinarians who are Idexx clients.

The products in question include POC analyzers, which allow veterinarians to diagnose a range of conditions at their practices, saving them having to send samples offsite to a reference laboratory. Single-use rapid tests also are encompassed by the suit, as are "consumables," which are components used in tests such as reagents and slides.

Who started the class action, how they started it and how the pet owners' veterinary bills were directly affected by Idexx's behavior is not outlined in the 92-page complaint. None of the law firms representing the pet owners responded to requests from the VIN News Service to interview the plaintiffs or their attorneys.

Idexx has a greater-than-70% share of revenue in the United States POC diagnostics market, well ahead of closest rivals, Heska and Zoetis, the complaint contends. It alleges that Idexx attained such power by breaching federal and state antitrust and consumer-protection laws with long-term contracts that weld veterinarians to their products for years, effectively blocking out rivals.

Practice owners who might balk at the idea of paying up to $30,000 for in-house equipment often are offered multiyear contracts by diagnostics groups that give them the equipment for no initial cost or at a substantial discount. In return, the practices commit to buying a minimum amount of good or services from the company each month. If they fall short, the practices can face steep financial penalties.

Idexx has been reprimanded by antitrust regulators before. In 2013, the Federal Trade Commission stopped the company from entering into exclusive, long-term sales contracts with distributors of POC products, deeming the contracts to be anticompetitive. Soon afterward, Idexx started selling the products directly to veterinary practices.

On discussion boards of the Veterinary Information Network, an online community for the profession and parent of VIN News, practitioners give mixed accounts of their experiences with Idexx, Heska and Mars Inc.-owned Antech Laboratories (the latter of which predominately offers reference-laboratory services). Some express regret for committing to minimum sales targets they ultimately weren't able to achieve, a problem that has led in some instances to legal action. Others praise the quality of service they receive and contend that purchase requirements, at least in their own circumstances, are reasonably conservative.

More broadly, practitioners suggest being skeptical of promises made by low-ranking sales representatives, carefully studying the fine print of contracts for which terms may vary from practice to practice, and perhaps seeking legal advice before signing anything.

"I did my research and went into the contract with my eyes open," said Dr. Janelle Peccie-Brown, a practice owner in South Carolina. Three years into a seven-year contract with Idexx, Peccie-Brown said she's had no problem clearing sales hurdles, but added: "I worry that in a recession, those minimums may be harder to meet."

Assessing whether Idexx is leveraging its dominant market position to hike prices for veterinarians, and ultimately pet owners, is complicated by the fact that many companies are grappling with a high inflationary environment, whether they sell food, energy or health-care services.

Dr. Laurie Swanson, a practice owner in Illinois, said the prices she is charged by Idexx have gone up twice this year. "But so has everything else in the world," she said.

Moreover, Swanson noted that pet owners benefit from the use of in-house equipment because they get faster results. "Idexx has a large percentage of market because DVMs CHOOSE it," she wrote on a message board. "I don't see how pet owners can sue Idexx over it."

Still, not all arrangements between Idexx and veterinarians end well. The company has sued at least 12 practices since 2015 for breaching contract terms, court records show.

"Idexx uses its threats and lawsuits as leverage to extend its exclusive agreements with still more minimum spend requirements, thereby preventing the distressed practices from ever being able to buy from rivals," the class-action complaint alleges.

The pet owners also allege that Idexx's Cornerstone software, by being applicable only to Idexx POC products, makes it impractical for practices to install products from rival companies. Moreover, they allege that Idexx further ties veterinarians to its products by including reference laboratory services in sales quotas for POC products and/or compels practices to purchase 90% of their reference-laboratory services from Idexx.

(Antech similarly encourages veterinary practices to enter into long-term exclusive contracts for its laboratory services, contracts that typically involve minimum purchase obligations in return for favorable pricing or other financial perks. In 2020, a veterinarian who tried to cancel her contract after she lost confidence in the laboratory results sued Antech, alleging monopolistic behavior. The suit ended last year in a confidential settlement.)

Idexx provided this statement to VIN News about the pet owner class action: "We believe the claims are meritless and will vigorously defend against them. Since this is ongoing litigation, we are unable to provide further comment at this time."

The pet owners, who are demanding a jury trial, are seeking relief including financial damages, including legal costs, and an injunction preventing Idexx from "engaging in future anticompetitive conduct."