News
Are You Prepared for the Changes in Our Profession? Our industry is changing very rapidly and you better be paying attention.
by J.A. Keith, DVM, MBA, MEcon, CVJ
Make no mistake, the animal care world is chang- ing at light-speed. Our clients spent $66.75 billion in
2016 in the pet industry (1). Te forecast for 2017 is $69.36 billion (1). As pets assume “humanization” status in many homes, the spending will apparently continue. Historically, owners used discretionary income to keep their beloved companions healthy. Today, many own- ers will spend more than ever to keep their companion comfortable and extend their lives. Tough a ceiling for that amount likely exists for many clients, they are still spending more than ever. Animals have become a huge market, and do not think for a second that many outside our profession are passing on the potential windfall of fi- nancial gain.
For the past decade, the number of these companies has seemingly grown exponentially. We have seen the Inter- net become flooded with pet pharmacies and supply out- lets and human pharmacies are also wanting a piece of the pie. Food sales through the Internet are rising as well. Chiropractors, Physical Terapists, Groomers, and retail stores are also moving deeper in to our businesses – some legitimate, others not so much. Most well-managed offic- es use their pharmacy to offset the bargain that owners get with our other services. Tat number has generally been around 30% of all sales for healthy practices. In the last 5 years, I have seen this number fall to an average of 26% in most of the practices I consult with. A loss of 8.6% may not seem drastic, but in the practice that is doing $500,000, it is a loss of $58,000. Where are you going to make up that loss? Tat is money lost to pay salaries, buy equipment, and invest in the office. Te trend is going to continue and you better understand how this is going to affect YOUR office. We should not blame our clients. All of us desire to save money when and where we can. So, what can we expect and what can we do to remain solvent?
At a conference where I was speaking earlier this year, I had dinner with a senior-level executive of one of our top- five veterinary drug companies. To my shock, he confid- ed to me that his company, and likely all of the others, are positioning themselves to eventually deliver product directly to our clients. Teir R and D (Research and De- velopment) Departments are preparing for a major shift in our distribution model. He would not give me more specific information other than we will see big changes in
the coming 2-3 years. ‘Big Pharma’ has already shown
that they will sell us out in the flea and tick market (see: Frontline, Advantage, Seresto). Do you really believe there will not be more products moving to the OTC channel? Count on it. Te bottom line for pharmaceuti- cal companies is actually, Te Bottom Line. Tey answer to stockholders and focus on profits (regardless of what they like to tell us). Tey use the advantage of veterinar- ians to build sales, and as the market gets saturated, they move the products to OTC markets. What a great strat- egy! Te clients have trust in us and will readily take our advice. What better sales force could they have! Yes, we do profit initially from those sales, but long-term it is pyrite. If you rely on these and many other products to carry your office profits, you are going to be sadly awak- ened to reality sooner rather than later.
So, how do you combat the losses that are eventually coming? Since the pharmacy is such a large part of our income and this revenue is shrinking, we’ll look a little closer. Currently, my recommendation for prescription medication dispensed out of the office should have a $15.67 handling fee and at least a doubling of the med- ication cost added. Additionally, most practice software will allow you to set up a minimum cost for every dis- pensed item. Te handling fee accounts for the labor that orders, stocks, counts, logs and prepares the item. Keep in mind that as medications sit on the shelf, you are tying up money that could be otherwise invested. Also, there is the software, a printer, labels, DEA and Veterinary Li- censes that must be paid for.
Injections (aside from vac-
cines) should be no less than $27.16 each (high percep- tion of value by our clients). Lastly, clients are paying for your expertise! School was not free.
When it comes to shopped items (heartworm preventa- tives, flea and tick products, etc.), just stay competitive with the online pharmacies, but never be cheaper. Re- member, with you, the owner gets peace of mind and the manufacturer’s guarantee (just make sure to discuss that with all clients). You will not get all owners to purchase products from you. Be willing to allow them to use alter- native pharmacies to fill their needs. Legally, you cannot charge to write a prescription and it is foolish to do so. If the client becomes upset and alienated at a fee to write a script to be filled somewhere else,
Continued on pg. 6 Winter 2018 5
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