With Merial’s FRONTLINE available to more distributors, one expert discusses the potential impact for the industry

Merial’s decision to broaden distribution of its top-selling FRONTLINE flea and tick product line allowed some flexibility in how the product gets to the end user, but it also has the potential to shake up the industry. Exactly how, though? And who stands to benefit the most? Veterinary Advantage spoke with Ron Brakke, of Brakke Consulting, an industry veteran with over 40 years in the animal health, pet and veterinary business, to get his thoughts on the changing landscape, and both the immediate and future implications for both distributors and manufacturers.

New distributors, new playing field
With FRONTLINE available to more distributors, the playing field has changed in significant ways. First, more distributors may now have the advantage of offering one of the industry’s most popular product lines, says Brakke. He also sees the practitioner winning in this, because of the increased availability.
“Those new distributors that were recently appointed by Merial to handle its products are the first ones to benefit,” says Brakke. “The second beneficiary would be practitioners, because FRONTLINE will be more widely available. It may have been rare, but in some cases [practitioners may have been] buying FRONTLINE from a particular distributor because that was the only place they could get it in their area. They’ll really have a wider group of distributors they can purchase FRONTLINE from.”
The shift may also lead to more distributors becoming “one-stop shops” for their customers. Brakke’s consulting firm conducts an annual distributor effectiveness study, and each year, a high percentage of veterinarians said they preferred to buy all of their products from one distributor. In the past, a practitioner may not have been able to source all of the products they need from a single distributor because of exclusive distribution agreements with various manufacturers.
However, Brakke says distributors shouldn’t have been depending on these exclusive positions regardless.
“One of the things we’ve been suggesting to a number of distributors for years is they should build their core business not only around the larger, higher-volume manufacturers, but also the medium-sized and start-up companies that can benefit even more from the distributor’s sales force,” he says. “As a result, distributors broaden their value to customers and reduce their dependence on the big players, those big brands.”

The competition
Distributors who did not – and still do not – carry FRONTLINE may end up with more opportunities than they had before. If anything, they may now become more important to the other manufacturers selling flea and tick products, especially the distributors that sell one or two lines of flea and tick products. From a distributor point of view, they might be able to pick up some additional margin, Brakke says.
“[Merial] didn’t add all of the remaining distributors,” says Brakke. “I know there are a number of small distributors that would still like to have the line and Merial is not selling it to them as of yet.”
The marketplace will have a different look regardless of Merial’s decision. In September, it’s anticipated that at least the original FRONTLINE product will come off its patent. Overall, the competition could increase for the big brands with the introduction of generics to the market, Brakke says.
“At some point, you’re going to start having Advantage and FRONTLINE generics enter the market,” says Brakke. “That’s going to put pressure on branded companies. If they’re not selling to some distributors, then those distributors are probably going to pick up the generic version. Then the branded companies have to question ‘Do we make our product available to all distributors now?’ to block the generic entry or make it difficult.”

Questions remain
Merial’s decision to move away from exclusive distribution arrangements on FRONTLINE is just one of many changes in the industry. Brakke says the recent merger/acquisition activity forces everyone in the industry to take a closer look at how they run their respective businesses. And not just for what’s already happened, but what could happen. Brakke says he foresees Merial forming a joint venture with Intervet/Schering Plough. As a result, Merial would likely have to spin off selected products like Pfizer did in its purchase of Fort Dodge. But the increased workforce that would come as a result of the acquisition would also give the manufacturer new options, he says.
“If Merial completes this transaction, which I think there is 90 percent probability they will, they are going to be large enough that they could go direct on a number of products like Pfizer,” he says. “I don’t know if they will. Their history has been distributor-friendly, and I believe they would stay that way, at least in the short term. But they clearly would have that alternative. Merial already has 200 plus companion animal salespeople, and if you add another 100 from Schering/Intervet, that gives them a large sales force.”
Regardless of the changes, distributors can help themselves by trying to stay ahead of the trends. Brakke says the industry is anticipating an increase in veterinarians and more three- and four-doctor clinics, as well as new sales opportunities with other novel product lines, like disposables and equipment. In many cases change can be a good thing for distribution.