FTC eyes distribution of pet medications

Workshop discussion could encompass diversion

July 11, 2012 (published)
By Jennifer Fiala

Photo by Edie Lau
Wal-Mart is one of many national retail chains vying for a piece of the pet medications market.
A public workshop put on by the Federal Trade Commission (FTC) this fall will shine a spotlight on how pet medications are distributed in the United States and explore whether competition and consumer choice are being stifled by current business practices.  

The FTC, charged with identifying anti-competitive business practices, is holding the workshop on Oct. 2 at the agency's satellite conference center in Washington, DC, to consider the distribution landscape of pet medications. Panelists for the workshop have not been named; the FTC-stated goal is to bring together consumers, veterinarians and industry stakeholders. 

The workshop is free. Preregistration is not required.

In a news release, the FTC outlined plans to examine the topic through "practical, economic, and legal standpoints." Questions will include:

  • How are pet medications distributed to consumers?
  • What are the business rationales for various pet medication distribution practices?
  • How do these practices affect prices to consumers?
  • How do these practices affect product supply and quality?
  • How do these practices affect entry into the pet medications industry?
  • What product safety issues exist with respect to these practices?
  • Are there other factors that should be considered when analyzing the competition and consumer protection issues related to the distribution of pet medications?

Asked what sparked the FTC’s interest in the distribution and sale of pet medications, Stephanie Wilkinson, an attorney in the agency’s Office of Policy Planning, said that federal legislation pending in Congress played a role. 

HR 1406 — The Fairness to Pet Owners Act of 2011 — requires veterinarians to issue prescriptions to clients whether they request one or not, encouraging owners to bargain hunt outside of a veterinary practice's pharmacy for their pet medications.

Right now, HR 1406 awaits review in a House subcommittee. If passed as written, the FTC will be required to promulgate rules relating to veterinary prescriptions. 

“FTC staff learned about pending federal legislation that would address prescription portability issues in the pet medications industry,” Wilkinson said by email. “Our interest was piqued, especially once we realized more than half of all U.S. households own a pet, and pet owners in the United States spend nearly $7 billion annually on pet medications." 

She added: “As staff began to explore the issues, review public data and talk to numerous industry stakeholders, we identified both competition and consumer protection questions related to prescription portability and the distribution of pet medications." 
The notion that veterinarians prevent clients from shopping outside their practices for medications is a sore spot in the veterinary profession, which once counted on in-house pharmacies to heavily offset business expenses. Nowadays, it's common practice for a veterinarian to script out to owners who buy their pet medications online or in the pharmacies of retail stores and warehouse clubs.

Wal-Mart, seeking a larger share of the pet medications market, is pushing for the passage of HR 1406, which would guarantee more prescription writing that could translate to greater sales for the national chain. The American Veterinary Medical Association (AVMA) is lobbying on the other side, arguing against the bill's necessity.

The national association’s stance: Veterinarians already are ethically obligated to script out when asked, and regulations in many states require it. What’s more, HR 1406 inappropriately prohibits a business from charging for the delivery of a service such as writing a prescription.

Wilkinson shied away from the notion that HR 1406 is the main driver behind the FTC’s workshop. The agency did not confirm whether it will explore other issues pertaining to the distribution of pet medications, such as the policies of companion-animal health companies to exclusively sell some flea and tick control products through veterinary practices, but a July 9 notice of the workshop in the Federal Register hinted that the topic might be up for discussion:

"Although retailers may obtain some portion of their pet medication products directly from manufacturers or authorized distributors, they also rely heavily on secondary supply channels," the notice said. "Most manufacturers state that they restrict the distribution of their pet medications to the veterinary channel, and that they use well-established tracking procedures to ensure the safety and efficacy of their products.

"Certain veterinarians purchase pet medications from manufacturers or authorized distributors and then resell some portion of their purchase to secondary suppliers for a profit, a practice sometimes referred to as 'diversion,'" the notice continued.

Another topic tied to the ever-expanding availability of pet medications is the problem some veterinarians and pet owners reportedly encounter when pharmacists with inadequate knowledge of veterinary pharmacology incorrectly fill — and sometimes alter — prescriptions for animals.

Wilkinson said the goal of hosting the workshop is to educate. 

“The FTC will examine whether competition in this marketplace may be further developed in ways that benefit consumers, including lower prices, enhanced choice and improved product safety,” she said. “… We are excited about the workshop, and we look forward to hearing many different perspectives.”

The FTC invites public comment on the upcoming workshop, which can be submitted by mail or electronically through Sept. 14, 2012. Written comments should be mailed or delivered to the Federal Trade Commission, Office of the Secretary, Room H-113 (Annex X), 600 Pennsylvania Ave., NW, Washington, DC 20580.

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