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 Americans spent $72.56 billion last year on their pets, according to
American Pet Products Association. Prescription drugs were expected
to account for over $10 billion, according to an estimate
https://www.ftc.gov/system/files/
documents/reports/competition-pet-medications-industry-prescription-portability-distribution-practices/150526-pet-meds-report.pdf
from the Federal Trade Commission, and overall pet product sales are
expected to keep growing by 4% a year. (Graphic:https://tmsnrt.rs/2KfxTvy)
With deep discounts and online convenience, Walmart Inc, soon-to-be
listed Chewy.com and Amazon.com Inc's Wag brand have effectively
conquered the market for pet food, care products and other supplies,
but until now veterinary practices, which both prescribe and sell
drugs, have been a major source of prescription medication.
While Amazon so far has shown no interest in that market, Chewy's
and Walmart's forays into the online pet pharmacy business threaten
to change that, prompting veterinary clinics to seek help in
defending their turf. Enter Covetrus Inc, Vet Source, which partners
with Patterson Companies Inc, and others that offer tools to help
vets manage their practices and give customers the convenience they
have come to expect from online shopping.
"We started to realize this is what our clients want," said
Stephanie Foster, practice manager at Kings Veterinary Hospital in
Loveland, Ohio. "They want to be able to order things at 11 o' clock
at night. They're used to the Amazon mentality."
Foster says she began using Covetrus to order drugs and supplies for
the practice after it began losing sales of pet food and other
products to online retailers. Now, her hospital has a website run by
Covetrus under the practice's name that effectively acts as its
online pharmacy.
With that comes software that helps the clinic manage its inventory
and track prescriptions, so Foster knows when clients need a refill
and for those Covetrus collects a service fee that is a percentage
of sales.
Foster said partnering with Covetrus has helped boost overall sales
by half over the past three years because it gives clients online
convenience, timely reminders and, despite the fees, competitive
prices.
"Covetrus now has more leverage with the manufacturers than I will
ever have as a small business," she said. "They're able to get the
manufacturers to agree to instant rebates and they can do flash
sales on products and things that we just can't compete with."
The company, formed by the combination of medical supply firm Henry
Schein's animal health unit and Vet's First Choice and listed in
February, represents some 100,000 veterinary practices globally. In
the United States, 27,000 use some form of its services with over
8,000 - about a quarter of the market - signed up for prescription
management, Covetrus says.
HOME TURF ADVANTAGE
PetSmart Inc-backed Chewy.com, whose sales soared from $26 million
to $3.5 billion between 2012 and 2018, said in a filing ahead of its
New York Stock Exchange debut this month it planned to expand its
online pharmacy business launched last year.
The company has yet to update on the pharmacy's performance and it
would not comment for this article, citing the silent period ahead
of its stock exchange debut.
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Walmart joined the fray last month when it launched its online pet
pharmacy WalmartPetRx.com and said it aimed to operate 100 in-store
animal clinics by the end of the year.
Analysts say, however, the prescription pet medicine business could
prove more challenging than other pet products.
Those who want to buy medication online still need a prescription
from a vet and must either email or upload a copy or have the online
retailer contact the practice first.
That, analysts say, offers the practices a chance to sell the first
batch on site and then direct customers to their own online service.
Kristen Cook, a practice manager at the Belton Veterinary Clinic in
Belton, Texas, says their doctors have no obligation to write a
prescription for those shopping elsewhere and the clinic's policy is
to handle prescriptions internally.
"It's not something like I am handing them a piece of paper to take
it wherever they want to take it," Cook said.
The stakes are high.
Cook said that at least half of the clinic's revenue comes from
prescription drug sales.
Nationally, pharmacy sales on average make up about a third of a
practice's revenue, according to Gary Glassman, partner at
accounting and financial services firm Burzenski & Company, which
serves veterinary practices across the country.
The American Veterinary Medical Association says
https://urldefense.
proofpoint.com/v2/url?u=https-3A__www.avma.org_Advocacy_
StateAndLocal_Pages_veterinary-2Dprescription-2Dorders.aspx&d=
DwIFAw&c=4ZIZThykDLcoWk-GVjSLmy8-1Cr1I4FWIvbLFebwKgY&r=8jyBHTp-ftbYVmyI068K1Q8yRVK2gfu
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sYY0hDRvfIMSZVaQNL1Edm9Pc&s
=PfO34q_x6QpWzO-T3CgPMN-qmVyZ5H2ziNmFNqzgr40&e, however, that 40
states have already adopted laws, regulations or guidelines that
specifically or implicitly require veterinarians to provide a
written prescription upon request in some circumstances. This means
pet owners could fill those prescriptions with Chewy or other online
providers, and the market is just too attractive to e-commerce
players for the vets and their partners to get complacent, analysts
say.
According to a 2018 TD Ameritrade online survey of U.S. millennial
pet owners, they were willing to spend up to $2,000 on average if
their pet got sick, with dog owners prepared to spend more on their
pets than what they expected to spend on their own healthcare.
"People are treating their pets more like people," William Blair
analyst John Kreger said. "Historically ... you'd frankly euthanize
the pet when they started to have some of these chronic conditions.
That's just not happening now."
(Reporting by Tamara Mathias and Manas Mishra in Bengaluru, Writing
by Patrick Graham; Editing by Tomasz Janowski)
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