The US healthcare system is not known for its convenience, and its veterinary counterpart somehow manages to be worse. When your doctor writes a script, it is either ready the same day at your pharmacy of choice, or you can order it online and have it delivered to your door. When vets write a script, they politely tell you about their in-house pharmacy, emphasizing that it is the most convenient option. But after a quick search, you find much cheaper options online, so you place the order there. A few days later the online pharmacy tells you your vet would not authorize the transfer, so you have to pick up a physical script and send it to them through snail mail. You will get a few refills before you have to start the process all over again, and eventually you relent and pay the higher price.
This system exists for a reason, though its utility is waning. Pet pharmaceuticals are a niche market, and until recently, most animal drugs were available only from a vet’s office. But vets often prescribe human drugs available at traditional pharmacies, and pharmacists unfamiliar with animals could make unsuitable substitutions or dispense the wrong dose. As a precaution, states require vets to authorize dispensing. As a result, medication sales became a major part of clinics’ business, comprising anywhere from 15% to 30% of total revenue. As a predominantly cash-pay market with few restrictions on pricing and point-of-sale markups, this has served as an exceedingly stable and lucrative business line with minimal competition.
That is, until the rise of e-commerce created an obvious opening for pet pharmacies such as Chewy in a cash-pay drug market with virtually no online presence. Online retailers can often leverage better bulk discounts to offer lower prices than most vets, even before clinic markups. Seeing their volume start to migrate to online retailers, clinics scrambled to set up in-house online pharmacies to offer mail-order services, then began leveraging authorization requirements to tighten their moat.
Initially, they did so by issuing non-transferable e-prescriptions or charging prescription fees. Nowadays, they limit direct phone or fax authorization, and a growing number of clinics have declared that they will no longer accept authorization requests from third parties, encouraging clients to use their in-house pharmacy or pick up written prescriptions. But in doing so, clinics have reinvigorated lawmakers’ interest in the issue.
Pet prescription portability is not a new issue, but attempts to pass legislation have consistently failed to garner enough momentum. In 2011, the House introduced the Fairness to Pet Owners Act, which required vets to provide portable prescriptions automatically, curbing a clinic’s ability to keep prescriptions in-house. The American Veterinary Medical Association (AVMA) lobbied aggressively against the bill, citing safety concerns and redundancy (clients can already request written prescriptions) while also protecting clinics’ medication revenue from online competition.
Intense lobbying from vets and limited political upside for lawmakers historically have kept Congress from throwing its full weight behind the bill, despite bipartisan interest and repeated reintroductions. Even after the Federal Trade Commission weighed in, highlighting the need for greater portability, the AVMA managed to leverage lingering safety concerns to keep the issue securely on the legislative back burner for years.
Without federal action, the issue has fallen to the states, where progress has been more substantial. Most states already have some form of portability requirement, either in statute or general practice standards set by state boards of veterinary medicine. In theory, these standards give clients the right to take a prescription elsewhere, but in practice, many clients do not realize they can request a portable prescription, or they could be charged a moderate fee for doing so.
States are now working to enhance their existing standards. A handful of states passed laws requiring vets to provide prescriptions upon request or at least to inform clients that they can obtain prescriptions elsewhere. As drug prices rise and clinics are less willing to work with outside pharmacies, consumer frustration is fueling a fresh wave of state bills. This year alone, Hawaii and Florida both passed laws requiring vets to issue written prescriptions upon request, and Florida’s bill requires vets to obtain a written acknowledgement from clients certifying they were informed of their ability to fill prescriptions elsewhere.
As states chip away at clinics’ regulatory advantage, clients will migrate to other channels. Online retailers will see an influx of volume as it becomes easier for people to shop around for their pet’s prescriptions, while clinics should expect to see revenue erosion on medication sales. That said, change in the veterinary sector tends to be slow, giving clinics a multi-year runway to spin up alternate revenue streams and invest in online infrastructure to take advantage of sticky auto-ship functions. But that window is narrowing. As the market matures and safety concerns become less salient, clinics’ leverage is waning, and a broader shift in how regulators think about pet pharmaceuticals is on the horizon.
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