FTC staff has doggedly tracked down information about competition in the pet medications industry for the past several years. Why? Because it’s a large and growing consumer market. With 65 percent of American households owning a pet, and retail sales of prescription pet medications expected to top $10 billion by 2018, it is clearly a market where competition could benefit consumers. Most consumers pay for pet meds out-of-pocket and do not have pet health insurance that covers these expenses.
In our review of this industry, we’ve found while competition has increased, better access to “portable” prescriptions for consumers and less restrictive distribution practices might spur additional competition. We’ve outlined our findings in a new FTC staff report, Competition in the Pet Medications Industry: Prescription Portability and Distribution Practices.
Most pet meds prescriptions are written and filled by veterinarians. This is a safe and convenient option for pet owners and their furry family members. But, a growing number of other retailers – including local pharmacies, other brick-and-mortar stores, and online pharmacies – may also offer safety and convenience to consumers, as well as lower prices.
With information garnered during the FTC’s 2012 workshop on pet medications, the expertise of industry stakeholders, and over 700 written public comments, the staff report specifically analyzes two related issues that directly affect consumers’ access to competitively priced pet medications:
- What are the impediments to consumers obtaining a portable prescription for pet medications, which would allow them to comparison-shop the prices charged by their veterinarians and non-veterinarian retailers?
- To what extent is competition affected by manufacturer distribution practices, which may restrict access to pet meds by retailers other than veterinarians?
On the first point, staff concluded that consumers may not be aware of the option to obtain a portable prescription from their veterinarian, or may be uncomfortable asking for one. In addition, some veterinarians may be reluctant to provide one. We believe that improved consumer access to portable prescriptions likely would enhance competition in the pet meds industry because it would facilitate comparison-shopping. A related FTC consumer blog post provides advice for smart pet meds shopping.
On the second point, we learned that most pet meds manufacturers distribute their products exclusively through veterinary practices – which manufacturers and veterinarians alike argue is both efficient and safer than using non-veterinary retailers. Other industry stakeholders dispute these safety claims, and also note a potential conflict of interest because most veterinary practices earn significant income from the sale of pet meds.
It is clear that some pet medications reach non-veterinary retailers through a secondary distribution system, which has led to increased competition. However, non-veterinary retailers complain that it remains difficult to obtain adequate supplies, while manufacturers and veterinarians express concerns about supply chain integrity. In addition, exclusive dealing arrangements between branded manufacturers and distributors may contribute to the limited availability of generic pet meds – which, based on our experience in human drug markets, likely would drive down prices.
To the extent that greater prescription portability spurs competition and generates consumer demand for alternative retail options, manufacturers may decide to change their business practices to facilitate expanded distribution of pet meds outside veterinary channels, in response to evolving consumer preferences.
We hope our observations and recommendations will promote greater competition in this important industry – and, perhaps, teach pet owners some new tricks for saving money on pet meds.