Pharmaceuticals: A doggone shame

Vets have effectively cornered the retail market for pet drugs.

After 16 years of loyal patronage, we — and our arthritic dog — were kicked to the curb.

Last August, my wife took our standard poodle to our longtime veterinarian in Richmond, B.C. She prescribed a trial supply of six 25-milligram tablets of Deramaxx, an anti-inflammatory specially formulated for dogs. My wife paid $51 for the examination and $23.86 for the pills (including a $14.81 dispensing fee) for a total of $78.60, including tax.

Realizing this was a chronic condition, I asked the vet for a copy of the prescription so I could look for generic alternatives or other sources of supply, such as online pharmacies. She refused. When I advised her that according to the British Columbia Veterinary Medical Association (BCVMA), the self-regulatory body for vets in the province, she is obliged to provide it, she summarily dismissed us as clients. Her stated objection was that we were intending to take the prescription to an online pharmacy, which she distrusts.

Of course, we had the audacity to ask for our prescription. Most clients stand by passively while their veterinarians prescribe and dispense their own drugs, an obvious conflict of interest that is expressly prohibited, except in limited circumstances, in the world of human medicine. It is one of the many ways that vets — while professing to protect the public interest — have stifled price competition and effectively cornered the retail market for pet drugs.

Consider the case of CBC Marketplace host Erica Johnson, who reported in November 2007 that she took her cat to five vet clinics in Vancouver and was quoted $6 to $22 for a 2.5-millilitre vial of insulin called Caninsulin, manufactured by Intervet. According to the Associated Veterinary Purchasing Co. Ltd. (AVP), a drug distributor, that same product cost the vet $4.16 at the time of the program. (It now costs $4.50.) So the markup ranged from 44% to 429%.

This shows how important it is to shop around, but pet owners cannot take advantage of these price differences unless they have a prescription, and most don’t know enough to ask. The veterinarian self-regulatory bodies haven’t exactly pounded home the message. It wasn’t until last fall that the BCVMA posted a notice on its website advising pet owners that they are entitled to written prescriptions upon request. The Ontario college, which has 4,249 licensed vets, more than any other province, has issued no such public notice. Neither requires its members to post a notice in their clinics advising clients they can obtain prescriptions upon request.

But even if they get the prescriptions, pet owners cannot shop them to other vets. Because veterinary clinics are not licensed under provincial pharmacy legislation, both the B.C. and Ontario colleges prohibit vets from filling prescriptions issued by other vets, except in specific extenuating circumstances. This eliminates a major potential source of competition.

Marketplace also noted that some pet drugs are identical to human ones; only the dosages and packaging are different. The drugs for people are usually much cheaper. However, vets have no obligation to inform their clients of these less expensive alternatives. Furthermore, with vets running their own pharmacies, they have no incentive to do so. That inherent conflict is exacerbated in B.C. and Ontario by the existence of vet-owned buying groups. About two-thirds of the 350 or so vets who own and operate clinics in B.C. are shareholders of AVP. (The Ontario version is called Veterinary Purchasing Co. Ltd.)

AVP buys drugs in bulk, adds a markup and resells the drugs at set prices. Although veterinarians are free to buy from any drug company, some major suppliers, such as Novapharm, sell their pet drugs only through AVP. As a result, AVP effectively controls the market for many brand-name pet drugs. Furthermore, members get cash rebates amounting to 2%–3% of the gross value of their purchases. With annual sales of about $70 million, AVP returns about $1.75 million to its members every year. That provides them with added incentive to prescribe and dispense their own drugs, and a disincentive to direct clients to cheaper alternatives.

Then there are the online pharmacies. Last October, our Richmond vet was charging $2.35 for each Deramaxx pill. DoctorSolve Healthcare Solutions Inc., an online pharmacy based in Surrey, B.C., was selling the same pills for $1.87 each (after factoring in the U.S. exchange rate difference and shipping charges). That worked out to a 20% saving. DoctorSolve is legal, too. Its dispensing pharmacy is Coastal Canada Pharmacy, which is fully licensed with the B.C. College of Pharmacists. Communications director Lori DeCou says the college uses the same licensing criteria and auditing procedures for Internetpharmacies as storefront pharmacies. Accordingly, she adds, consumers can deal with online and storefront pharmacies with the same confidence, as long as they are licensed.

Online pet drug pharmacies are clearly a growing business. PetMed Express Inc. (Nasdaq: PETS) advertises itself as “America’s largest pet pharmacy.” During the nine months ending Dec. 31, it sold US$171.3 million worth of pet drugs, a 16% increase over the same period the previous year. The company states on its website that all its products are approved by the U.S. Food and Drug Administration. The company is not licensed in Canada, but a customer rep said it would still ship drugs here. Apparently, it’s not illegal to do so.

“If an individual chooses to buy something over the Internet from outside the province, we have no jurisdiction over that,” says Suzanne Solven, deputy registrar of the B.C. College of Pharmacists. “We only have jurisdiction over pharmacies that operate in B.C.” Solven warns that such cross-border transactions fall into the category of “buyer beware.” The products could be counterfeit or expired. “You just don’t know what you’re getting,” she says. She also notes that shipping drugs over the border could violate the Food and Drugs Act and its regulations — and they could be seized.

Although there are many reputable online distributors, vets — because they run their own pharmacies and in many cases are members of buying groups — have no incentive to recommend them. On the contrary, they tend to discourage them. The BCVMA’s home page includes a notice titled “The risk of unregulated Internet pharmacies,” but does not have an equivalent release listing their potential benefits.

The bottom line is that vets have, by and large, managed to keep the pet-drug business an in-house affair. Dr. David Kirby, a former president of the BCVMA and a director of AVP, thinks that vets, like car mechanics, should be able to charge whatever they want for parts and service. But this ignores several obvious differences. First, medicine is not like car repair. Patients trust their doctors to a degree that mechanics can only dream of. Second, medical care — whether for humans or animals — is so vital that most clients are loath to question their doctors lest they upset the relationship. Third, vets have been given the right to self-regulation.

The quid pro quo is that vets must act in the public interest. That’s reflected in BCVMA bylaws, which state that members should not view the practice of veterinary medicine as “purely a business concern.” They must be “forthright, objective and impartial in serving their clients,” “refrain from imposing fees that are excessive in relation to the nature and quality of the services provided,” and provide enough information and advice “to enable the client to make informed choices.”

Piqued by media reports that the public interest is being trumped by self-interest, the BCVMA’s governing body placed a new topic for discussion on the agenda for an upcoming meeting: the creation of a drug committee whose mandate would be to “consider and develop policy regarding drug handling, recording, prescribing and dispensing issues.” Consumers can only hope that will lead to more choices and better prices.

David Baines is a business columnist with The Vancouver Sun.