Covetrus has acquired majority ownership of Veterinary Study Groups Inc. (VSG), a privately held corporation that brings together independent practice owners to share ideas and strategies to support their respective businesses. The purchase, which was completed Wednesday, extends the consolidation trend in veterinary medicine, as public companies and private equity firms absorb clinics and other businesses founded by veterinarians.

Covetrus is a publicly traded international animal health company providing product distribution, practice management software and online pharmacy services for veterinarians. The Portland, Maine-based company was created from a merger of Henry Schein Animal Health and Vets First Choice in early 2019.

Georgia-based VSG was started by veterinarians in 1984, and manages more than 50 management groups with more than 1,100 members in the United States and Canada. Each study group is comprised of 16 to 22 members who meet twice a year to "share information, data, management experiences, ideas, resources, problems, solutions, successes and failures" in order to provide "mutual support and motivational help," according to the organization's website. It is also known as Veterinary Management Groups, or VMG.

Financial terms of the sale to Covetrus were not disclosed.

“VSG is an iconic organization," Nicholas Jansen, vice president of investor relations for Covetrus told the VIN News Service during an interview with representatives from both entities today. He described the acquisition as part of a strategy to develop tighter relationships with veterinarians, who are their customers or prospective customers. “[H]aving greater relationships with 1,500 practices, 1,100 members, was something that was really exciting for us."

VSG vice president Dr. Mike Thomas, for his part, said becoming part of Covetrus "allows VSG to have more resources both financially and intellectually to improve the member experience." 

He added: "Usually when you sell something or buy something you go through some buyer's remorse or seller's remorse. I've not felt one bit of that."

Thomas owns 11 practices, mostly in Indiana, and has held leadership positions in a variety of professional organizations, including the Veterinary Information Network, for which he currently serves on the board of directors. VIN is the parent of VIN News.

Thomas and Jansen said VSG will operate as a standalone company inside Covetrus.

“We will continue to run as we have," Thomas said. "We don't anticipate any major change in what we do or how we do it or who we do it with."

Thomas and Jansen compare the arrangement to that of Professional Services for the Independent Veterinarian (PSIVet), a group purchasing organization with more than 5,000 members that Henry Schein Animal Health purchased in 2016.

Although VSG is not a traditional group purchasing organization, it does provide purchasing agreements with around 50 suppliers. In some cases, these agreements are with direct Covetrus competitors. Thomas said VSG retains full control over negotiating with"strategic partners."

For example, Thomas said, there were no plans to change VSG's arrangements with MWI Veterinary Supply, a distribution company that competes with Covetrus. The same holds true for Vetsource, a home delivery platform that competes with Covetrus (previously Vet First Choice).

In the past, Thomas criticized Vets First Choice for misuse of practice data and marketing practices, including sending promotional appeals to clinic clients without practice owner authorization.

“I'm much more comfortable than I was," he said. "There is totally new leadership at Covetrus." The most visible change came at the very top of the company in October 2019, when Ben Shaw resigned as CEO. Shaw had also been CEO of Vets First Choice.

Reaction from observers

When Ginni Hamele heard the news this morning, she said, she took a deep breath. She was surprised, she said, because"[VSG] was always so focused and proud of the fact they were founded by independent veterinarians."

Hamele is president of The Veterinary Cooperative, a member-owned group purchasing organization with more than 4,000 members.

“I have a lot of respect for VSG and admiration for the culture they were fostering," she said. While she understands how attractive the resources offered through ownership by a publicly traded company such as Covetrus can be, she said she thinks owners of independent hospitals should consider the bigger picture.

“When you look at who are the shareholders and stockholders, you have to ask, who is at the head of the line?" To Hamele, the answer should be veterinarians."We're passionate about independent hospitals and we want to keep them well and keep them in business."

Dr. Ernie Ward, executive director of Education at VerticalVet, expressed similar disappointment over the news.

"VMG was founded to help independent veterinary clinics share best practices and foster community," he said in an email. "This sudden shift away from helping small business owners in favor of boosting profits for billion dollar corporations is worrisome for the long term health and financial security of traditional veterinary clinics."

Started in 2018, VerticalVet offers peer-to-peer virtual study groups for practice managers and veterinary clinic owners.

Ward considers the Covetrus/VSG deal as a chipping away at the veterinary industry's independent foundation, and likened it to the way health maintenance organizations and private health-care groups have transformed human medicine. "The VMG acquisition by Covetrus is another step toward making veterinary medicine a profit center for billion dollar corporations," he said.

While some may lament the purchase as a regrettable sign of expanding consolidation, Dr. Jasen Trautwein, founder of the Austin, Texas-based Veterinary Growth Partners, said that's the wrong concern. Trautwein was an early member of VSG. In 2013, he started his own practice management service organization, which now provides more than 5,000 members with management and marketing tools.

"Consolidation in the market is inevitable," Trautwein said, maintaining that practices must find corporate partners or be part of a group to survive. In worrying about consolidation within the veterinary market, "we are throwing sticks at each other," he said, and missing the real threat to the profession.

To his mind, the real threat is posed by giant online and brick-and-mortar retailers. "They are gobbling up pet families," he said.

For the moment, they may be focused on pet products and food but Trautwein anticipates they aim to expand their reach. That's the kind of threat, he said, that veterinarians should prepare for.

This article has been changed from the original to provide more information about Thomas's professional background, including his current role at VIN, parent of the VIN News Service.