Roker Park Vets Owner and Veterinary Surgeon, Rory Thomson BVMS MRCVS, shares his views on the recent CMA investigation announcement

On 23^rd May 2024, the Competition and Markets Authority (CMA) announced a full market investigation into the veterinary industry.  Most of the concerns being investigated relate to consolidation of the veterinary market as a small number of large corporate groups now own over 50% of the veterinary practices in the UK.

Specifically the CMA are investigating the following points:

1. Consumers are getting the information they need, at the right time, to make informed decisions

I hope our website is quite clear and transparent as to our independent ownership, the services we can provide and an idea as to the costs involved.  A lot of the corporately owned practices do not make it clear that they are part of a corporate chain.  Even practice websites do not clearly indicate which corporate group they are part of and there is no easy way to identify what the costs might be.  It is also not clear that some products and services provided through what appear to be third parties, are in fact part of the same corporate group, including laboratory fees, pet cremation services and even some prescription pharmaceutical products.

2. A limited choice of vet businesses in some local areas is impacting pet owners

We are quite lucky in the Sunderland area to have a good range of veterinary services available from various corporate and independent practices with easy access to a choice of different corporate referral centres as well as an independent one, so choice is not an issue in this area.  In some areas of the UK almost all of the veterinary practices are owned by the same large corporate group.

3. Profits earned are consistent with the levels expected in a competitive market

The majority of veterinary practices are businesses and need to make a profit to be viable.  Not only does this provide a reasonable remuneration for the owner of the practice for the work and risk they put into the practice but as medicine and surgery are advancing, that profit is needed to reinvest into the business to ensure the equipment and diagnostics are sufficient to meet the needs of the patient while also allowing for possible expansion of the practice if necessary.

The average manufacturing company has a profit margin of 9.4%, service firms are higher at 14.9%.  The industry standard for veterinary practices is between 10 and 25%, however given the increased cost of equipment and how quickly diagnostics are advancing, veterinary practices need to be achieving a profit margin at the top half of the current industry standard to be able to invest in the equipment necessary to maintain an adequate level of care for their patients. At Roker Park the pricing is structured for a 20% profit margin, however unexpected costs and unpredictable changes to overheads make this difficult to achieve and our pricing needs to be reviewed annually in an attempt to achieve this.

There are concerns that the pricing increases experienced by clients, particularly in some practices owned by larger corporate groups, are leading to profits in excess of those expected in a competitive market and the investigation is needed to ascertain if this is happening.

4. Vet businesses have the incentive and ability to limit consumer choice when providing treatments or recommending related services, particularly when they are part of large integrated groups

Not only do the large corporate groups own veterinary practices, they also own:

• Veterinary laboratories
• Pet cremation services
• Internet pharmacies
• Out of hours providers
• Referral centres

There is also more recently the ability to provide ‘own label’ pharmaceuticals through deals with pharmaceutical companies.  While this has the advantage of providing a ‘one stop shop’ for clients, which may be convenient, there is a concern that their focus is on providing more sophisticated, higher cost, treatment options in place of simpler, lower cost treatment options even if some clients would prefer the lower cost option.  Also the ‘self-preferencing’ of services and suppliers could mean that consumers have a reduced choice of which service provider they use, which could lead to higher prices or a worse quality service (for example, having to travel further or wait longer).

At Roker Park Vets, we are totally independent and have access to both corporate and non-corporate options when it comes to diagnostic testing, pet cremation and referral centres and we are able to discuss all the options available to you during your consultation.  We can negotiate better financial terms with some of these companies, which get passed on to our clients but ultimately the vets working here have a free choice as to which service provider they recommend for your pet with no incentives to justify one over another, meaning any recommendation made by us is what we believe to be in the best interests of you and your pet.

5. Pet owners might be overpaying for medicines or prescriptions

In general, a veterinary practice can make money in two ways… firstly through service fees, such as operations and consultations and secondly through drug sales.  Traditionally veterinary practices have undercharged for their professional time to enable as many animals as possible to be seen and advice given.  This is balanced with higher drug mark-ups to achieve a reasonable profit margin.  Changes to the regulatory framework have made this more difficult for veterinary practices to achieve and loss of drug sales to internet pharmacies has disproportionately increased service fees, making them less affordable to the uninsured.

The current consultation fee at Roker Park at the time of writing this is £43 for an initial 20 minute consultation.  As such the maximum hourly rate assuming no missed appointments is £129 per hour.  These fees have to cover all the overheads of a veterinary practice with a veterinary nurse on standby to help and a receptionist monitoring the phone and waiting room.  Compare this to the average solicitor charging £190-278 per hour or a human private consultant doctor charging £195 for a 45 minute appointment both with lower overheads and you can see how much the professional time is being subsidised.  Without this drug income, the consultation would have to be £60-70.

We have the ability to provide a written prescription to clients to purchase drugs online, in some cases for less than we can obtain through our veterinary wholesaler.  At Roker Park this prescription cost is £22, which is a reasonable professional charge for the time required for a veterinary professional to provide this.

Clients also need to bear in mind that some drugs that need to be stocked for emergency treatment may not get used very often and the shelf-life of some products mean that wastage levels can be high so a higher mark-up is needed on some drugs to cover this wastage and any loss made on these products needs to be recovered elsewhere.

We are looking to launch individually tailored treatment plans, which enable automatic home delivery of long-term medications through an internet-pharmacy based pricing structure, blended with prescription check appointments and routine monitoring testing through a simple monthly direct debit plan.  These plans should create a much fairer pricing structure for both the practice and the client while ensuring the pet gets the optimum level of care

6. the regulatory framework is preventing the market from functioning as well as it could

Suffice to say at this point that there is a lot of increasing red tape that veterinary surgeons have to comply with that did not exist 60 years go, which ultimately increases costs to owners and conflict for the individual veterinary surgeon.  I shall delve deeper into this in the next blog.

On the whole I welcome the CMA review into the veterinary industry as there are many issues that need to be addressed.  My only concern is that changes to the way in which veterinary practices charge for drugs and prescriptions could have a negative impact on the welfare of animals as the loss of practice income from drugs will lead to a potentially unaffordable increase in cost for professional time, so although the drugs would be more affordable, the cost for the correct advice and prescription will not be.