Internet pharmacies are making veterinary care more expensive – not less.

In the “go-go” days of veterinary medicine, veterinarians generated revenues from charging for office visits, diagnostic procedures, and marking up medications and other items such as dog food.  The “go-go” days of veterinary medicine came to an end* when internet pharmacies promised pet owners that they could save big by purchasing medications online rather from their veterinarian. The problem with this promise was that it was wrong. Internet pharmacies* ultimately raise the cost of veterinary care.

To understand why buying medications online increases the cost of veterinary care rather than decreasing the cost requires the pet owner to realize that running a veterinary hospital is a business. Before the advent of the Internet pharmacy, the average veterinarian followed a business model that went something like this:

  • Step 1: get as many pet owners in the door as possible. Charge a minimal fee for an office visit to keeping the barrier to entry (and access to veterinary care) low.
  • Step 2: if an animal needed diagnostics or procedures to work-up a problem, procedures and diagnostics were performed and pet owners with sick animals were charged accordingly.
  • Step 3: If medications were needed, they were marked up, dispensed and sold to the pet owner.

The most important point to note about this business model is that it incentivized veterinarians to keep gateway costs down (remember they want as many people coming through the door as possible to ensure a vibrant practice) and also incentivized pet owners to come to the vet for minor problems that may or may not be an issue because they would only incur significant expense if it was determined that their pet had a significant problem that warranted medications and diagnostics.

In this scenario, only pet owners with animals who needed medications would make it to step 3. The markup on the medications was necessary to pay for expertise of the veterinarian to know which medications to prescribe AND for the veterinarian’s time because the pet owner did not (significantly) pay when they walked in the door of the vets office.

That was all good and well until the Internet pharmacies* essentially eliminated step 3 from the revenue stream of the veterinarian. Without the ability to generate revenues from medications*, veterinarians are being forced to develop a new business model that would replace the revenues from step 3.

The new model of veterinary practice that is developing goes something like this:

  • Step 1: If a pet owner brings their pet to the vet, they are charged a significant fee for an office visit.
  • Step 2A: If an animal is sick and requires procedures and diagnostics they are performed. More veterinarians are offering and recommending more (expensive) diagnostics than ever before.
  • Step 2B:  If an animal is healthy, procedures, diagnostics, and preventative care are recommended under the guise of “preventative medicine” or  “wellness.” In much the same way that dentists recommend coming in twice yearly for a cleaning to prevent cavities, new wellness recommendations are being implemented by veterinarians. **
  • Step 3: If an animal needs medications, the veterinarian faxes a form to an online pharmacy and they fill a script. This costs the owner nothing***.
  • Step 4: The pet owner goes to the pharmacy to buy medications.

The important point to note in this scenario is that every pet owner will be charged significantly every time they walk in the vets office.  Without the potential revenue stream from marking up medications veterinarians are incentivized to “preemptively strike” all pet owners to guarantee that they will have enough revenues to stay in business.

Moreover, this scenario dis-incentivizes pet owners from coming to the vet practice for small issues that may be nothing, because it is now expensive to find out if a little issue is significant****.

The big joke with all of this is that the pet owner still needs to pay for the medications at the pharmacy. The cost of medications does not go to zero. It is just a little less than it was at the vets office. Based on our analysis*****, the cost of the office visit over the life of the pet (and across the entire population of pet owners) will be more than the savings generated by using an online pharmacy.

The bottom line with all of this is that using an online pharmacy will save a few dollars in the short term but will ultimately raise the cost of veterinary care in the long term. The tipping point has occurred and there is no going back. When all is said and done, we may all be longing for the good old days when walking in the door of the vet office was cheap and we only really got charged significantly for veterinary care when our pet was sick.

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*Actually there were many reasons why the “go-go” days of veterinary medicine are gone gone and Internet pharmacies cannot be blamed for all of the problems that  plague the veterinary profession. Other factors that have ushered in the change in the veterinary business model include changes in vaccine recommendations which eliminated yearly vaccination revenues; and drug companies selling directly to pet owners rather than through veterinarians (this is why you see flea medications like Frontline at Costco.)

**Wellness recommendations are new. I have opined about the pitfalls and dangers of wellness gone wild elsewhere.

***Some vets have tried to charge a fee to fax a script to an online pharmacy. This generally outrages pet owners and apparently the US congress as there is a bill circulating that would require veterinarians to script out to online pharmacies.

****It is possible that an unintended consequence of all of this is that because it now costs more to walk in the vets office, pet owners will be reluctant to come to the vet, and small problems are allowed to become big problems that cost more to fix in the long run.

*****Pathetically unscientific analysis lacking controls or valid statistics but whose results are overwhelmingly obvious when we talk with vets and pet owners

……People often ask me if I think that internet pharmacies are “bad” or if they should be “outlawed” or if what they are doing is “wrong.” My answer is none of the above. Internet pharmacies are companies and they saw an opening to make a profit and they took it. Good for them. If they are successful it is because they are filling a niche and veterinarians were either not able to demonstrate their value to the pet owner or the pet owner was too ignorant or blind to the fact that saving a few bucks on medications will cost them more in the long run. I do not fault the internet pharmacies any more than I fault Craigslist for eliminating the newspaper classifieds. It just is what it is. Zen out.