Costs of veterinary medicines

Re: Costs of veterinary medicines

Peter Ding — Tue, 20 Jul 2010 18:08:44 GMT

Drugs subsidising fees? Is that not a false premise these days. One that perhaps applied when mark-ups of 200% were common and drugs accounted for majority of income but those days are long gone in small animal practice

If you cost every aspect of running a small pharmacy, from employee time, to out of date medicines, returns etc IMHO you need a margin of something around 30% in order for it to be self funding.

In our veterinary work we aim to make around 20% gross profit,,so in order to be equitable in our margins we charge an average of around 50% markup on POM's

Internet suppliers often work on margins of 9 or 10%.

Neither a smaller stand-alone retailer nor a veterinary practice can operate on such margins.

Re: Costs of veterinary medicines

Colin Cameron — Tue, 20 Jul 2010 17:33:11 GMT

A simple solution would be to ban all discounts on drugs whether from manufacturer or wholesaler. Then the only difference in retail prices would be the markup put on by the retailer. A level playing field should then be in place. Is this too simple?

Re: Costs of veterinary medicines

Peter Ding — Tue, 20 Jul 2010 17:25:54 GMT

A lot of interesting points.

One perpetual bee in my bonnet to add...

The totally illogical system we have with veterinary medicine discounts enables large users to get a larger discount for bulk buying from a veterinary wholesaler but also a larger discount/rebate from the drug manufacturer even though all the drugs still go via a wholesaler. A double bite of the discounted price cake. Why? To me this is just unfair as there is no extra saving to the drug manufacturer at all.

It is in effect allowing larger users to be subsidised by smaller ones. Whilst that system remains there will always be an uneven playing field and internet pharmacies and corporate practices will gradually increase market share. It exaggerates economies of scale.

Re: Costs of veterinary medicines

Bob Russell — Tue, 20 Jul 2010 14:38:46 GMT

Internet pharmacies are unlikely to save the British pet owning public money. In practice it is introducing another 'mouth to feed'. Some reduction in price will happen as a result of competition but as a practice owner/jack of all trades I know that profit margins are already tight and reductions in income to the practice must be balanced by savings or increases in costs for other services.

I do not feel that a degree of 'cross-subsidy' is such a bad thing - it has worked well for many years.It has allowed a 'smoothing effect' for fees and provided us with the ability to do things that otherwise would not necessarily be affordable for all clients.

Whatever we do and however we charge for our services there will be winners and losers. I just prefer a model that has worked adequately for over 50 years rather than one that has been forced on us by the internet and the dubious skills of the Competitions Committee!

Re: Costs of veterinary medicines

Hannah Wynne Richards — Tue, 20 Jul 2010 10:25:02 GMT

Many of the comments on this thread regarding charging properly for veterinary expertise, instead of relying on drug mark-ups could have been taken straight from the Steele-Bodger report on practioce economics (I believe 1962 ), and nearly 50 years later, many of the profession are still undercharging for their knowledge, and using drug mark-ups to subsidise otherwise unprofitable businesses, which is how the internet pharmacies saw an opening

Wynne

Re: Costs of veterinary medicines

Martin Atkinson — Tue, 20 Jul 2010 09:36:46 GMT

I have very very few clients who demand prescriptions and those that do are usually placated when I explain the jist of the arguments above. But I did pre-empt this problem somewhat by reducing the markup on POMs from 100% to 50% if clients buy 3 months supply (in effect 3 months for the cost of 2) but in return they MUST come in for a check up every 3 months which usually involves a blood test and this rule is applied rigidly. Net result: better control over the welfare of my patients and actually increased profit. If they still insist on a written prescription I charge £15 but they still have to come back every 3 months or they don't get a repeat and they see that there will be very little financial incentive to go to an internet pharmacy. The odd person who has declined either of these offers has gone elsewhere and usually good riddance because they are always poor value clients who are lot of aggravation.

Re: Costs of veterinary medicines

Rob Loxley — Tue, 20 Jul 2010 08:43:19 GMT

[quote user="Colin Cameron"]It should be illegal to supply prescription only products as loss leaders[/quote]

Why so?

Also, many veterinary practices out there are doing neutering and vaccination effectively as loss leaders I'd suggest.

Re: Costs of veterinary medicines

Colin Cameron — Tue, 20 Jul 2010 00:15:37 GMT

A few points for discussion gleaned from colleagues over the last few months or so and are not necessarily my own opinions.

1. When are some internet pharmacies going to stop lying to the public about savings? One quotes a saving of 70% of the vets bill ( no mention of just drugs), which could be one hell of a saving!!!.

2. They should only be allowed to dispense against the original signed prescription and not a copy or a faxed one. Otherwise a single prescription could be used at any number of internet pharmacies on the same day, couldn't it?

3. What is being done about those pharmacies who are prepared to supply POM VET products without a prescription? One such pharmacy has a .co.uk web address, a Surrey postal address and UK phone number but the drugs come from Bermuda ( or some other far off place). Apparently they are doing nothing illegal, and are virtually untouchable, but if a client dares to buy a POM VET drug from this site in genuine belief that it is all above board then they get done for it. I noted Advocate being supplied without prescription as an example.

4. All this tends to make a mockery of any attempts to control veterinary medicines in the UK.

5. It should be illegal to supply prescription only products as loss leaders.

6. Does anybody care anymore about ethics and moral fortitude?

7. Why do the internet pharmacies pretend to be interested in animal welfare when they relentlessly attack the very people who keep them in business by doing the actual diagnosing and prescribing.

8. Why do some rather misguided Vets give wholehearted support to these pharmacies by giving their time for free writing prescriptions at no charge and hence maximising the price differential ? Perhaps they place no value on their professional time.

9. Very many of these internet pharmacies still propound the myth that it is only since 2005 that pharmacies were allowed to dispense veterinary medicines. They always could but chose not to, I suspect because it meant stocking branded licensed veterinary medicines rather than just human generic ones (which would be one product for both markets).

10. Why can't the powers that be leave us alone?

11. What the hell is happening to this profession?

12. Any other thoughts from anyone out there?

13. We will keep you posted if we think of anything else to grumble on about.

14. Nil illegitimi carborundum !

Re: Costs of veterinary medicines

Martin Jones — Mon, 19 Jul 2010 22:46:26 GMT

[quote user="Kate Richardson"]

Ok I'm trying to learn about economics- what's a loss leader?

[/quote]

Say it costs T***o 50p to produce a loaf of bread; they then sell it at 40p. So they make a loss of 10p per loaf. But, because they push it quite hard to the public, people come in and stock up on bread...... and milk ...... and booze ........ and fruit and veg ......... all of which are sold at a profit. The 10p loss gets turned into a few quid of profit. As a bonus, the smaller retailer who relied on bread sales goes out of business. At some point, T***o can then charge twelve quid for a loaf of bread, safe in the knowledge that you can't shop anywhere else; and at the same time pay the bread supplier less, because they can't offload their bread anywhere else.

The irony is that if the internet pharmacies, with their loss leaders, put vets out of business, then they, erm, have no more business as there's nobody left to write prescriptions. We just do it to ourselves.

Re: Costs of veterinary medicines

Michael Woodhouse — Mon, 19 Jul 2010 22:28:26 GMT

[quote user="Rob Smith"]Ah - but the rep says that to you...NOT the internet pharmacy!! The vet pharmaceutical companies don't want to drive down practices so don't support the pharmacies! Also they don't want to be unpopular with practices...see recent VetPlus ads! It's just other companies don't brag so much about it. [/quote]

I imagine they will still get discounts and rebates. Many of the internet pharmacies are started by Vets and some are related to practices.

Re: Costs of veterinary medicines

Kate Richardson — Mon, 19 Jul 2010 22:08:59 GMT

[quote user="Rob Smith"]No, they buy from the same wholesalers, at the same price. Where they charge less than practices can buy a product for, it's usually a loss leader. [/quote]

Ok I'm trying to learn about economics- what's a loss leader?

Re: Costs of veterinary medicines

Rob Smith — Mon, 19 Jul 2010 21:57:36 GMT

[quote user="Michael Woodhouse"]

[quote user="Rob Smith"]The vast majority (all?) of the drug companies do NOT do cheap deals for internet pharmacies![/quote]

No - but how often has a rep said if you buy X amount now or if you commit to buy more than last year we will give you an extra X% etc?

[/quote]

Ah - but the rep says that to you...NOT the internet pharmacy!! The vet pharmaceutical companies don't want to drive down practices so don't support the pharmacies! Also they don't want to be unpopular with practices...see recent VetPlus ads! It's just other companies don't brag so much about it.

Re: Costs of veterinary medicines

Rob Smith — Mon, 19 Jul 2010 21:55:47 GMT

[quote user="Gillian Mostyn"]

No - but aren't they buying direct at the same price as our wholesalers? Therefore they don't have the wholesaler's mark-up to cover!

[/quote]

No, they buy from the same wholesalers, at the same price. Where they charge less than practices can buy a product for, it's usually a loss leader.

Re: Costs of veterinary medicines

Michael Woodhouse — Mon, 19 Jul 2010 21:20:54 GMT

[quote user="Rob Smith"]The vast majority (all?) of the drug companies do NOT do cheap deals for internet pharmacies![/quote]

No - but how often has a rep said if you buy X amount now or if you commit to buy more than last year we will give you an extra X% etc?

[quote user="robloxley"]But then you're struggling to compete with the local practice charging 2/3 of your cost for an initial consultation, and people shop round on headline service fees, not your Synulox markup.[/quote]

That was partly my point, if we ALL reduced drug mark up and increased fees then we'd force out the internet pharmacies. It's one of the huge problems we have - we don't all stand together. The teachers or GP's stand together and get a better deal for all.

[quote user="Kate Richardson"]I've never really understood this- why are things cheaper if you buy in bulk?[/quote]

Because I can deliver one place 1200 bottles of Penicillin much cheaper than I can deliver 100 places 12 bottles. I only have one client to look after, to buy lunch for. I only have one invoice to raise. I've sold all my allocation as a rep so I get my bonus etc etc.You look after big customers better; we do certain offers to big clients who spend a lot (eg buy 11 sprays get one free)

A daily delivery from the wholesaler is a terribly wasteful thing. The cost of driving the van around must be high. Internet sellers and agricultural merchants buy in big single deliveries. I was once at a merchant and they were unloading a curtain sided lorry with a pallet of Fasinex, a pallet of Dectomax and a pallet of Swish. Hugely more efficient. This was just a branch, not the head office. We order might have a few litres of Fasinex in, but usually get these things to order. The merchant was selling Closamectin Pour On at list price, before wholesaler discount.

Re: Costs of veterinary medicines

Gillian Mostyn — Mon, 19 Jul 2010 21:15:55 GMT

No - but aren't they buying direct at the same price as our wholesalers? Therefore they don't have the wholesaler's mark-up to cover!

Re: Costs of veterinary medicines

Rob Smith — Mon, 19 Jul 2010 21:03:02 GMT

The vast majority (all?) of the drug companies do NOT do cheap deals for internet pharmacies!

Re: Costs of veterinary medicines

Rob Loxley — Mon, 19 Jul 2010 20:01:00 GMT

[quote user="Kate Richardson"]How can we as a profession deal with the problem of the medications we use in our patients being available through internet pharmacies at prices we can't compete with because they are able to buy them at much lower prices than we can? [/quote]

Don't compete?: Sell drugs at a markup which makes it profitable to sell them at, for the clients who want to buy them from you, and charge for your time to write prescriptions to the others. I often find myself explaining to clients that the internet prices for, say, Frontline and Cosequin, are less it costs us to buy them in, so we'd have to reduce our margin to zero just to match the online price which is not a viable business proposition. Consider if you cut your markup % how much extra you'd have to sell just to stand still, profitability-wise.

Set up your own internet pharmacy?
Push suppliers for better deals? Maybe join a purchasing group?
Push the convenience of a one-stop-shop to the clients?
Shift to making more from your time and less from the bits you sell? But then you're struggling to compete with the local practice charging 2/3 of your cost for an initial consultation, and people shop round on headline service fees, not your Synulox markup.

[quote user="Kate Richardson"]And should we be legally allowed to prescribe cheaper non-veterinary licenced generics where a licensed product is available, when it means that an animal won't receive the treatment it needs because it is not affordable? [/quote]

How you set a limit on "not affordable" is the problem. If you allowed this there'd be no incentive for drugs companies to develop new drugs. On which point it would be good to see more novel drugs, or if licensing an existing human drug then adding something in the process (e.g. carbimazole TID became Vidalta slow-release for SID dosing). Also it'd be good if the drug companies listened to what we want - e.g. smaller vials or longer in-use life rather than 100mls to throw out after 28 days.

[quote user="Michael Woodhouse"]Maybe we should all reduce our drug mark up and reduce drug prices. That would force the internet pharmacies out of business.[/quote]

What % of your practice profit comes from drug/food sales? I'd suggest trying to compete like this will hit you harder, long before the internet pharmacies go out of business.

Will be interesting to see what movement there is from the VMD on control of internet pharmacies. The fact many will dispense on a faxed prescription leaves the whole system open to manipulation.

Re: Costs of veterinary medicines

Kate Richardson — Mon, 19 Jul 2010 18:49:29 GMT

[quote user="Michael Woodhouse"]That said - if the internet pharmacy buys more than we do don't they deserve a better price? Basic economics.[/quote]

I've never really understood this- why are things cheaper if you buy in bulk? Is it that you don't have to pay storage costs once you have sold it and shipped it off, or is it a case of only 1 lot of postage/delivery to be paid? Although, surely delivery of a large volume is more expensive than delivery of a small amount? Or do the drug company simply accept a reduced profit per unit on a larger sale? I would have thought their total sales per year would still be the same, whether they sell to in bulk to an internet pharmacy or to individual practices, as it is us that dictates their total sales surely. So in my mind does it not follow then that they would make more profit selling all their product at a higher price to individual practices?You'll have to excuse me, I am not very knowledgable on economics!

[quote user="Michael Woodhouse"]I don't think this is what most of our clients want! Most people are quite happy with a one stop shop.[/quote]

I would agree, but where people are looking at their pennies very carefully these days, they simply aren't as happy to pay 'our' prices . We don't have a large number of internet buyers, but it is increasing, simply because it is cheaper for them.

Re: Costs of veterinary medicines

Michael Woodhouse — Mon, 19 Jul 2010 18:17:55 GMT

I think often we could sell at the same price, we'd just make less. Certainly if you take wholesaler discount and any rebate into account.

That said - if the internet pharmacy buys more than we do don't they deserve a better price? Basic economics.

[quote user="Kate Richardson"]Should we make a move to providing prescriptions for all our patients, like GPs, with a standard (or not) prescription fee, and only stock injectables or medications that we may need to use immediately?[/quote]

I don't think this is what most of our clients want! Most people are quite happy with a one stop shop.

[quote user="Kate Richardson"]Does it follow that our service fees would then need to increase to enable the business to still be profitable?[/quote]

Obviously - if you want the same amount of money at the end of the day. Vets are really cheap.

No - the company should have it's 10 year protection on new product then it should be a free for all. Amoxycillin or Frusemide generics should be encouraged. That is surly the intensive for the drug companies to get off their backside and come up with some new products! I can't believe the system where you can licence something that has been around forever and then force people to use it.

We are lucky that very few people want prescriptions. Maybe we should all reduce our drug mark up and reduce drug prices. That would force the internet pharmacies out of business.

With the large animal [old] PML products we are selling some at list price with pay on collection just to annoy some of the local trade. The farmers don't mind, it's still a few quid going through the till that otherwise wouldn't be. The agricultural merchants must make good money on the wellies!