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Companion 2012 September/October Vol: 4 Issue: 5

Winning the Pharmacy Wars

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Your customers face fierce competition from the big-box stores, but they enjoy many advantages too. And reps can help tap into those.

Pricing matters.

Product selection too.

And don’t forget convenience.

 

But more than anything, for veterinary practices, maintaining an edge in pharmacy sales over the big-box retailers requires an effective patient-owner-doctor-staff connection. And that’s where sales reps are uniquely suited to lend a hand.

Veterinary practices can hold their own in the battle, according to those with whom Vet-Advantage spoke. But they have to fight intelligently. They’re dealing with an educated, knowledgeable client base, and they must treat them accordingly. Furthermore, they must use all the tools they have at their disposal, such as online ordering systems, the distributor rep’s expertise, and all the resources that manufacturers offer to help practices promote their products to pet owners. Again, it’s the distributor rep who can bring all these things to the practice. “He’s the professional concierge,” says Fred Windhorst, former vice president, veterinary sales, Chuck Latham Associates.

 

The situation

Veterinarians face more competition than ever for pharmacy business. PetMed Express, the largest Internet pharmacy, continues to grow. For the year ended March 2012, net sales were $238.3 million, compared to $231.6 million for the year before, an increase of 3 percent. But it’s not just PetMed Express that’s encroaching on the veterinarian’s turf. Consider:

• In May 2012, Kmart announced a new pet medication program that, it said, provides customers convenient access and savings for prescription brand name and generic pet medications. “Kmart understands that a pet is a member of the family too, and by offering affordable pet prescriptions instore, the retailer is helping customers save and making shopping for the entire family more convenient than ever,” said the company in a press release.

• Target makes it easy for pet owners to fill pet prescriptions at its stores. In fact, pet prescriptions are eligible for Target Pharmacy Rewards. The company (www.target.com/PetRx) also markets $4 generics.

• Jacksonville, Fla.-based Winn-Dixie was reported to be one of the latest grocery store chains to offer pet prescription services. The company, which has close to 500 stores in the South and Southeast, reportedly signed an agreement with Center Pet Pharmacies to offer prescriptions to its customers. (Attempts to contact Winn-Dixie by Vet-Advantage were unsuccessful.)

• Walmart offers pet prescription service as well. In March 2012, the Bentonville, Ark.-based retailer began offering PetTrust™Plus, the generic prescription heartworm preventive from FidoPharm.

 

“The product landscape has changed dramatically,” says Karen Felsted, Felsted Veterinary Consultants, Dallas, Texas. “That genie isn’t going back in the bottle. I feel strongly that we need to intelligently fight to keep product sales in our practices. Some people say, in five years, [product sales] will be gone. I’m not that pessimistic. But it will continue to change.

“Originally, what was most available through these alternative channels were human generics used for pets,” she says. “Now you’re seeing veterinary-labeled products out there, and that’s probably only going to increase.”

 

Pricing

Going up against the likes of Walmart, Winn-Dixie and Kmart is daunting, but veterinarians enjoy advantages of their own. They just have to be wise in when and how to use them.

“The veterinarian is one of the most influential people in the community; they can draw people in; and while they’re there, there’s no reason why they shouldn’t be marketing or merchandising,” says Windhorst. “Manufacturers have laid out tools for the veterinarian to use to go head to head with big box stores,” he points out. Furthermore, veterinarians can implement online ordering systems, such as MyVetDirect, to keep their clients close to them. “[Online ordering systems] step it up a notch for the veterinarian.”

Some doctors have elected to restrict themselves to selling vet-exclusive products, points out John Goeckner, outside sales rep, Midwest Veterinary Supply. But they don’t have to. “Most clients aren’t asking for $4 prescriptions,” he says. The convenience of buying a prescription product at the veterinarian’s office often outweighs the lower cost offered by a big-box store. Furthermore, many products – antibiotics, for example – are short-term, so the savings offered by a big-box store don’t amount to much for many pet owners.

Often, the retailer or big-box store can’t offer any savings to the pet owner at all, adds Goeckner, who calls predominantly on small-animal clinics in central Illinois. “A lot of customers assume [prescription products] are cheaper on the Internet.” Sometimes, that is indeed the case. “But for the majority [of products], the practice can match or beat the [big-box] price, at least in my territory.” Some clinics check and verify prices in the market. Proactive ones get on the phone and let clients know that the clinic can match the retailers’ prices, and offer manufacturer rebates as well.

 

Loyalty only goes so far

It’s true that pet owners may prefer to support their local veterinarian by buying prescription products from the practice rather than a big-box store, says Felsted. But veterinarians should be careful about relying too much on loyalty. “Convenience matters. If you [that is, the pet owner] have to go to the grocery store twice a week anyway, and it’s closer to you than the veterinarian, it may be easier to buy your [pet products] there,” she says.

“We have to be careful,” adds Felsted, speaking of veterinary practices. “There’s a ton of value for the pet owner to visit the practice. But we also have to be realistic about the comments we make to the client about the extra value we add. We have to fight hard, but we have to also fight intelligently. We need to be careful about some of the things we do, either because we haven’t kept up with the market or, in our zeal, we say things that aren’t true. We don’t want to shoot ourselves in the foot.”

For example, while it may be true that certain Internet pharmacies sold products illegally years ago, that may no longer be the case, she says. “Yet there are still veterinary practices that say, ‘You don’t want to buy from online pharmacies, because you don’t know the source.’ That may be true for some Internet sites; there are an astounding number with questionable practices, and the owner can’t have confidence that what they sell is what they say it is. But if we’re going to name names, we need to be careful we know what those pharmacies are doing.”

And what about threat that the manufacturer won’t honor its guarantee if the pet owner buys a product on the Internet? “That may be technically true,” she says. “But some of the sites will say, ‘We meet or exceed all manufacturers’ guarantees.’ Pet owners don’t make a distinction between manufacturer and website guarantees. They just think the veterinarian is saying there is no guarantee unless it is purchased from the practice. What I’m saying is, we need to be accurate in what we’re saying. Otherwise, it looks like we’re lying to clients.”

Some practices will insist that if a client wants a prescription, he or she must drive to the clinic to pick it up. “Granted, if there’s a state law that prohibits mail prescriptions, fine,” she says. “But if you’re just doing it to prove a point, what are we winning? All we do is anger clients. Then they start questioning everything we do. So the big point is, fight hard, but fight intelligently.”

Some clinics try to reinforce their value over Internet or big-box retailers by asking the client, “What will happen if your pet gets sick from the product you buy online? [The retailer] won’t be there to take care of him.”

“Are you really saying you would refuse to see a pet if the owner got products from [an outside retailer]?” asks Felsted. “It sounds a bit like trying to threaten or guilt clients into purchasing from the practice.”

 

Shout it from the rooftops

Though the practice might charge a little bit more for comparable products, it has to stay competitive, she says. Today’s pet owners, more informed than ever, are looking at price. “Yes, I think they will pay a little bit more to buy [a prescription product] at the clinic. But what is a ‘little bit more?’”

In those instances where the veterinary practice is indeed competitive, it has to let its clients know it, both at the time of the visit as well as on the Internet or social media, adds Felsted. “There’s no point lowering your prices if you don’t tell people you’re doing it.”

The practice has to make some tactical decisions as they navigate through these pricing waters, she continues. If it truly can’t come close to matching the price on specific items, the practice should consider ceding that portion of the market to outside retailers. “I think you can win points with clients by saying, ‘The appropriate drug for your pet is X. I can’t buy it for that, so here’s a prescription.’” Clients appreciate it. But be careful, she says. Don’t whine. No “poor, poor pitiful me.”

If the practice finds that product sales have declined, it can’t just look at raising fees on other services as the only thing to do, she advises. “[Vets] can’t just essentially say to their clients, ‘You’re not buying drugs from me, so I have to raise my fees,’ because we are already getting pushback on fees. I’m not saying that fee increases can’t happen. They can, and they need to happen. But we won’t be able to use them quite as extensively as we did in the past.”

Instead, the team should work on increasing the productivity and efficiency of the practice, honing their marketing skills, and doing a better job of communicating value, so clients elect to purchase more services for their pets, she says.

 

Price-matching

Sidney Alvarez, director of marketing and public relations, PCI Animal Health, recommends that clinics emulate the big-box stores on some of their pricing practices, such as matching competitors’ prices. “Why should it be any different with the doctor?” he asks. If the client confronts the doctor with a big-box price, “the answer should be ‘Yes, we will match that price,’ because once they get the client into the office, they can win [him or her] over with the services and knowledge they offer.”

Practices should consider borrowing another marketing technique from conventional retailers, says Goeckner. “Clinics that do well with their No. 1 heartworm and flea recommendations have signage showing their pricing on a chalkboard or whiteboard. Don’t be ashamed of your prices. Show them off.”

Successful practices not only announce their prices, but they announce recommended dosages as well, he continues. This is particularly suitable for flea, tick and heartworm preventives. “For those products, they say, ‘We recommend you purchase a 12-month supply; here’s why, and here are the rebates you are eligible for.’” Buying a full year is better for the pet, not to mention the practice. “If you recommend one dose, the owner will take one dose, and might not come back for more,” he says. “But if you recommend 12, the worst they can say is ‘No, I can’t afford it.’ Then the practice can ask them what they can afford.”

 

How to wage the war

While veterinarians can overestimate how much extra pet owners are willing to pay for prescriptions at the practice, they need to continually reinforce their value to the pet owner, according to those with whom Vet-Advantage spoke.

“Competition is healthy, and veterinarians should compete with the big retailers,” says Alvarez. “But the selling point we advocate is that the veterinarian is the authority, the expert. What they offer vs. the cashier at [a big box store] is their knowledge, and when it comes to knowledge, there’s really no price tag you can put on that.”

Savvy consumers know what the giant retailers are charging for prescription products, he continues. “But as a practice, you don’t have to overthink these things.” The best response to competition might be simply to continue employing the strategies that have contributed to the practice’s success in the community for years. Among them are the “face-to-face conversations with clients, which allow you to offer personal knowledge, that bedside care, so to speak.

“The second thing I would advocate would be to really explore how to market the strength you currently have, that is, your knowledge.” This is a matter of public relations as much as marketing, he says. “Sometimes we have to explain the difference between the two.”

Third, practices need to keep up with technology in order to stay competitive, says Alvarez. “Information is instantaneous today. Many pet owners are younger, and really adept at technology. So I would ask any of our practices, ‘How are you communicating with them? Do you have any mobile applications? How is your website? How can you communicate with pet owners directly?’”

Keeping pet owners compliant with medication is an important key to staying competitive, says Clay Cass, executive vice president, PCI Animal Health. “And to do that, they have to know their patients. They have to be in touch with their clients on a monthly basis.”

Another option for the practice is to focus on vet-exclusive products, according to Cass and Alvarez. Doing so allows the doctor to once again build upon his or her expertise. “You’re the doctor, and you need to put that exclamation mark on it,” says Alvarez. “[On the human side], do you want to self-medicate with something you got on the Internet, or do you want the doctor’s expertise backing it up?”

“The first thing any veterinarian needs to consider about what drug to recommend is, ‘Is it medically appropriate?’” says Felsted. If an injectable is an appropriate medical alternative, the veterinarian may want to consider it. “We still fight for compliance, and using injectables helps with that compliance issue. We don’t have injectables for every drug we need, but it is a strategy, particularly if you think it’s medically appropriate.”

 

Online ordering

Online ordering options, such as Vetstreet, MyVetDirect, Proxy Rx, Midwest Veterinary Supply’s JAT Pharmacy, and others, can level the playing field for the veterinary practice by allowing clients to purchase products conveniently, 24 hours a day. “The doctor has an entire pharmacy at their disposal,” says Goeckner, speaking of JAT Pharmacy. “If it’s a product they don’t stock, they still have access to it.”

“It’s the way of the future,” says Alvarez. “It’s another tool to allow the veterinary practice to compete.” At press time, PCI was preparing to launch in early 2013 its own content management component, one aspect of which is online ordering. “You can call it a shopping cart, but it’s a way for the veterinarian to connect with the end user, his clients, to really follow and track what’s taking place with their patients.” The tool will help PCI’s customers respond to their clients’ expectations for instantaneous information.

Online ordering options are great, says Windhorst. But to get the most out of them, the practice needs to identify someone in-house to manage the system. “Veterinarians are doctors; retail is foreign to them. But there are plenty of people in the practice who have an interest in doing this.” For Windhorst, the opportunity is larger than capturing online orders, though that is an important piece. Rather, it’s client management.

Successful practices have someone – an office manager, a tech, or someone else – who can sell online programs to clients, he points out. That person also takes responsibility for managing the client base. “That’s a new position in the practice that could be exploited,” he says. “There needs to be some type of touch between the veterinary practice and pet owner on a regular basis. Whether by e-mail, Internet or a monthly newsletter, they need to keep in constant contact with that pet owner and provide information to them.” Good communication leads to more services. “And in the successful practices I’ve seen, there is a direct correlation between a rise in service revenues and the ability to offer retail products. If you can do both, and you have these types of communication vehicles in place, as well as home delivery [of products], you’re in a position to compete nicely with the big-box stores.”

 

Customer service

Hand in hand with good communication is outstanding customer service, says Alvarez. Together, they add up to increased sales. “It boils down to, ‘Why do you go to one veterinarian vs. another? Is price a deciding factor? Possibly. But the savvy customer knows, ‘I get better service when I go to Doctor A vs. Doctor B, vs. [one of the big box companies].’”

Successful practices get everyone on board. “They work as a team,” continues Alvarez. They know how to handle returns, phone calls, sales. “Everyone is on the same wave length. If a client comes in with a complaint, anyone on the staff knows how to acknowledge the complaint and turn it into a positive experience.”

Doctors need to give their clients consistent, clear messages, he adds. Some have an outstanding bedside manner, while others don’t. Some may break bad news slowly, while others will give it to the owner straight. “Each doctor works differently, but in the end, they find a good medium in which to communicate with their customers, to make sure they return. They find out what customers want, and then present it.”

 

Introducing new products

Doctors in successful practices also let pet owners know exactly what they believe is best for the pet, adds Felsted. Before prescribing a new product, the doctors need to spend time understanding how it will fit into the practice, and how it will benefit pets. The manufacturers and distributors selling that product need to make sure they’ve communicated all of that clearly. Once the doctors have concluded that the product is beneficial, they need to communicate that to everyone in the office. This way, the pet owners get a consistent message, regardless of who is delivering it.

“We’re not doing nearly as good a job as we could with the whole issue of communication,” says Felsted, speaking of veterinary practices. And the ramifications are large. Studies have shown, for example, that clients are far more likely to follow their veterinarian’s recommendations if it is delivered clearly and without ambiguity. “It’s a simple concept,” she says. “There’s a big difference between saying, ‘Your pet needs to have his teeth cleaned next month,’ and ‘You might want to think about having your pet’s teeth cleaned at some point.’” Doctors might think they’re giving a clear message, but studies have shown that pet owners often aren’t sure what their veterinarian thinks they should do.

The doctor needs to talk to his or her clients about the benefits of a treatment or prescription product, she continues. “Not just the medical benefits, but practical benefits as well.” So, the practice can tell the client, “Yes, we can treat heartworm, but preventing it is better. It’s reasonably priced, and you save yourself and your pet from having to go through the risk and expense of heartworm treatment.”

If practices can grow the market overall, that is, increase compliance to medical recommendations, to some extent, they will be less concerned about pet owners who choose to buy prescription products elsewhere, she says.

 

Distributor rep’s role

Distributor reps can help their customers improve compliance as well as in-office sales, according to those with whom Veterinary Advantage spoke.

“Be a cheerleader for your customers,” says Goeckner. “Make sure they’re making recommendations at the point of sale; give them reasons why they’re doing it.” The rep needs to reinforce the notion that the veterinarian isn’t doing his or her clients any favors by selling one dose of a flea-prevention product, for example. “It’s not going to work, no matter whose product you use,” he says. The rep needs to be clear in that message, so the veterinarian, in turn, can be clear when speaking to pet owners.

Manufacturers can be a huge resource to practices introducing a new product, says Windhorst. “Once the practice decides and understands the portfolio offerings, they need to lean on the manufacturer to provide the materials to introduce the product.”  Distributor reps are often the ones to make the veterinarian aware of the many resources that manufacturers can bring to the table. In fact, the distributor can be the practice’s “professional concierge” in this regard.

“If you’re going to differentiate yourself in your territory, you’ll be the facilitator of this information to make the clinic more valuable,” adds Windhorst, speaking to distributor reps. “And you don’t have to create it; it’s there. Manufacturer reps will bend over backwards to help you once they understand what the clinic wants.”

PCI has developed what Alvarez calls a “business solutions menu,” encompassing public relations, marketing and customer service, to guide its reps as they seek to help their customers improve their businesses. At times, the distributor may have to speak frankly. For example, if the practice’s signage is poorly designed, the distributor may have to bring it to the owner’s attention.

“The role of a PCI representative is really to offer his or her expertise as a business consultant,” he says. “They can enter a practice and say, literally, ‘What’s going on with your business? What do you need help with? How can we help you?’”

The practice owner might need help with signage, cabinetry or understanding social media. “It boils down to business solutions,” he says. And reps have them. 


 

Feds to examine pet prescription business

October workshop to examine the role of veterinarians, retail outlets and online sellers, and their impact on the consumer. 

Vet-Advantage readers and their customers aren’t the only ones interested in who’s selling pet medications. The federal government is too.

At press time, the Federal Trade Commission was preparing a workshop – to be held in Washington, D.C. on Oct. 2 – to examine competition and consumer protection issues in the pet medications industry.

The workshop was to consider how distribution and other business practices affect consumer choice and price competition for pet medications; the ability of consumers to obtain written, portable prescriptions that they can fill wherever they choose; and the ability of consumers to verify the safety and efficacy of pet medications that they purchase. The workshop was also intended to examine the extent to which recent changes to restricted distribution and prescription portability practices in the contact lens industry might yield lessons applicable to the pet medications industry.

 

$7 billion a year

In its Federal Register notice, the FTC estimates that Americans spend nearly $7 billion a year on prescription and OTC pet medications.

“Pet owners spend significantly more money on their pets than in past decades, and the market for pet medications has grown significantly in recent years,” wrote the Commission. “Manufacturers and veterinarians have introduced new and improved diagnostic and therapeutic treatments for pets; pet medications have become available at some online and brick-and-mortar retail outlets; and veterinarians and others have increasingly emphasized preventative pet care.

“In addition, market participants note, in recent years it has become easier to administer flea and tick control products and heartworm preventatives, and the products themselves have become more effective. These products comprise the bulk of chronic pet medications sold in the United States. Indeed, the sale of prescription and OTC flea, tick, and heartworm products totaled nearly $3.7 billion in 2011.

“Historically, veterinarians have been the principal dispensers of pet medications because of their unique role in the veterinarian-client-patient relationship, whereby a veterinarian examines, diagnoses, and treats the animal (patient), while also providing information to the animal’s owner (client),” the FTC points out in the notice. “Consumers still purchase most of their pet medications from the veterinarians who examine their pets, and most pet medication manufacturers choose to distribute their products exclusively through the veterinary channel.

“Nonetheless, pet medications are no longer sold exclusively by veterinarians. Over the last 10 years, brick-and-mortar and online retail and pharmacy entities also have begun selling pet medications, especially OTC medications. Some evidence suggests that these retailers may offer substantial pro-consumer benefits, such as increased convenience and lower prices.”

Issues of gray market and diversion have raised questions about product safety and authenticity, according to the FTC. The workshop will examine how competition in sales of pet medications to consumers has developed in light of these practices and how prices, product supply, and product quality may be affected.

 

Questions to explore

The key questions the FTC intends to explore in the coming months include:

• How are pet medications distributed to consumers?

• What are the business rationales for various pet medication distribution practices?

• How has competition to sell medications to pet owners evolved in light of these distribution practices?

• How do these practices affect prices to consumers?

• How do these practices affect product supply and quality?

• How do these practices affect consumer choice?

• How do these practices affect entry into the pet medications market?

• How do these practices affect innovation in the pet medications market?

• What efficiencies or inefficiencies are associated with these practices?

• What, if any, product safety or counterfeiting issues exist with respect to these practices? Have there been instances in which false or misleading information about product safety risks was disseminated to consumers?

• Are there other factors that should be considered when analyzing the competition and consumer protection issues related to the distribution of pet medications?

 

Who should dispense?

The FTC also intends to explore prescription portability for pet medications. “When a veterinarian writes a prescription for a medication to be dispensed and subsequently administered by a pet’s owner, the prescription must be filled with the correct medication and dosage, and the owner must have access to relevant information about the medication and proper administration techniques,” says the FTC.

“Some observers argue that veterinarians are in the best position to carry out these responsibilities; these observers believe, therefore, that veterinarians alone should dispense prescription pet medications to their clients. Others argue that licensed pharmacists are equally capable of dispensing pet medications to consumers, provided the pharmacists dispense the correct medication and dosage as prescribed by a veterinarian; these advocates point out that veterinarians can still provide relevant information and follow-up care to their clients even if they do not dispense the medication.”

In its Federal Register notice about the Oct. 2 workshop, the FTC acknowledges the American Veterinary Medical Association’s recommendation that veterinarians honor their clients’ requests for prescription. “This guidance is not mandatory, however,” writes the Commission. “State regulations vary as to whether veterinarians are legally required to provide written prescriptions to clients, and it is unclear to what extent such regulatory obligations may be actively enforced against veterinarians. It appears that, while many veterinarians provide written prescriptions to their clients when requested, some veterinarians have refused to provide prescriptions or otherwise have discouraged their clients from obtaining pet medications from retailers.”

The FTC references House Bill 1406, also known as the Fairness to Pet Owners Act, which would require veterinarians to provide clients with written prescriptions for all pet medications, regardless of whether requested, and to inform clients of their right to have pet medications dispensed elsewhere. (See November/December 2011 Vet- Advantage.)

 

Portability will be discussed

In the workshop, the Commission intended to “examine issues related to the portability of pet medication prescriptions from practical, economic, and legal perspectives.” Some questions the FTC posed were:

To what extent are consumers aware that they can request a portable prescription from their veterinarian and have the prescription dispensed elsewhere?

Which states require prescription portability for pet medications? Which do not? Are there states in which a proposal for prescription portability for pet medications was rejected by the legislature and, if so, why?

In states that do require prescription portability, what recourse do consumers have if a veterinarian refuses to provide a written, portable prescription?

What evidence exists to support a need for federal legislation requiring veterinarians to provide written prescriptions to their clients?

What price and non-price benefits can accrue to consumers from prescription portability for pet medications?

What risks or inefficiencies may be posed by prescription portability for pet medications?

To what extent do retailer prices for pet medications affect the prices of medications sold at veterinary practices, or other aspects of veterinary clinic operations?

To what extent would H.R. 1406 affect veterinarians’ sales of pet medications?

What compliance costs would veterinarians face if H.R. 1406 were enacted?

 

The FTC also intends to explore how the Fairness to Contact Lens Consumers Act, signed into law in December 2003, is applicable to pet medications. That Act requires that contact lens prescribers provide patients with a copy of their contact lens prescriptions after a contact lens fitting and verify those prescriptions to any third party designated by a patient, such as an online seller.

 


For further information on the FTC Workshop on Pet Medications Issues, contact Stephanie A. Wilkinson, 

attorney, Office of Policy Planning, Federal Trade Commission, 600 Pennsylvania Ave. NW,
Washington, D.C. 20580, 202–326–2084, petmedsworkshop@ftc.gov.

 

 

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