Debbie, from Salem, Oregon asks: Why are my vet bills so high and increasing every year even though I  just require basic care for my cat?

Admittedly veterinary cost are rising and like human medicine  it is rising faster than the rate of inflation. The reasons are numerous, many beyond the control of the practice owner and a few within her control.  We run a low cost practice in Oregon so keeping our prices affordable is of paramount importance to us and our clients. We purchased our first practice in September 1995, and back then general health exams were $9.50 and a cat neuter was only$19.95, clavamox drops cost us $2.50 a box . A few years later Advantage for cats came on the market and cost us approximately $16.50 for a 4 pack.  Fourteen years later the price of clavamox has increased more than 400% (yes I said 400%), in 10 years Advantage has increased 250%, our own health care costs have increased more than 300% yet the wages of newly graduated veterinarians have increased only 3% annually over the same period of time while their level of indebtedness, primarily due to enormous student loans, has more than doubled.  And that trend is continuing. This morning (11-16-09) on CNBC it was reported that drug prices have increased by 9.5% so far in 2009 – with inflation less than 3% the big pharmaceutical companies are right on tract for another 300% + increase this year. So we know that the  new, young veterinarians coming out of America’s vet schools aren’t driving the cost of vet medicine up -so what else is?

Part of the blame falls squarely on the shoulders of the pharmaceutical companies, whose costs have annually increased at rates 2 and 3 times that of inflation, even for drugs that no longer carry patents. While the price of many drugs has dropped thanks to generic manufacturers there is still very little competition in the “pet specific” drug market due to the  relatively small size of the veterinary market when compared to human medicine and the dominance of one or two giant multinational corporations. In addition, even some generic drugs can fluctuate greatly in price if one of the generic manufacturers drops a specific drug due to lower margins. A clear example is cephalexin, a commonly used drug for skin infections that has been off patents for more than 20 years.  This is a human medication widely used in veterinary medicine so the veterinary market has very little, if any influence over the price of the drug. In the late 1990′s there were commonly 2 or more suppliers of cephalexin so the price varied around $60.00 to $75.00 for a 500 count bottle of 500mg capsules. But when a new generic competitor entered the market the price quickly dropped to $49.95 for the same bottle. We were ecstatic but it didn’t last for long. One competitor dropped out of the market and the price suddenly jumped from $49.95 a bottle to $149.95. I couldn’t believe it! The sales reps cited supply and demand and lack of competition, thankfully, the price did drop back down but I knew from that point on that the actual “cost” of the drug had little if anything to do with the price the pharmaceutical companies sold the drugs to veterinarians or their small suppliers and distributors. The pharmaceutical companies ability to set prices rules the market place, not the true costs to develop and manufacture the drugs.

So if the price of drug treatment has gone up so much consumers could assume that veterinarians are making more on drugs now than they were in 1995. But they would be wrong – dead wrong. Higher drugs prices have caused most if not all veterinarians to lower their margins on all drugs sold to their clients to buffer them from “rampant pharmaceutical inflation.” In addition, web based pharmacies like 1-800-PetMeds has dealt a double blow to veterinarians. First margins on all products from pharmaceuticals to fleas control have dropped dramatically and many clients are now purchasing their medications online, further reducing  profits at all veterinary hospitals. The result was a major drop in an important profit center in most veterinary hospitals. Hospital owners had to do something to make up the difference. If veterinary hospital owners wanted to maintain their current profit levels they had only one option – raise the costs of the services they provided. And we did – but did we increase our profits? Sadly, no, we are just treading water. So in this case consumers are partly to blame for the increase in veterinary fees. Consumers have reduced the profits of their local veterinarians and given those profits to publicly traded companies that contribute nothing to their local community, unlike their local veterinarian. This situation is not unlike American manufacturing in general – we are complaining that jobs are leaving America but we all want the lower prices that cheap imported products provide.

Another major contributor to the escalating price syndrome is consumers and hospital owners addiction to new facilities and technologies. Veterinary hospitals are getting larger and stuffed with the latest in technology all in the pursuit of an every increasing “standard of care” that vet medicine is pushing. This push for improved “Standard of Care” is coming from two place: first from consumers, as we encourage them to view their pets as an integral part of the family, at least a segment of the pet-owning population expects far more from their veterinarian as they see advancement in human medicine with at least some of these clients willing and able to pay for these advanced procedures. The second push for improved medicine is coming from the Veterinary Medical Licensing Boards and veterinary accreditation bodies such as the American Animal Hospital Association (AAHA). Collectively they are mandating improved procedures, more equipment, upgrading of facilities, all sorts of changes, that really are good for the underlying quality of the service, the medical care we perform, but definitely contribute to escalating costs. Consumers like new facilities and technology and hospital owners feel they need to provide those facilities to keep or attract both clients and new graduates – but I firmly believe that this pursuit is not sustainable. While new digital x-ray technology is cool and does provide “somewhat” better diagnostic imagery most pet’s needs can be met by current technology. The result is that the cost of these new technologies must be spread over the entire client base to pay for these expensive new pieces of equipment. Despite the non-sustainability of this business model I cannot see vet medicine deviating from this path  for the foreseeable future unless the current recession we are in permanently changes the way consumers shop for veterinary services. As I look at the professional journals I see countless numbers of one man practices up for sale. Many of these practices cannot keep pace with the proliferation of new technology in these “mega” hospitals and probably have finally throw in the towel instead of finding a niche in which they can compete. This is so sad but I can easily envision a time when the number of small 1-2 vet practices in urban American areas will be almost zero. The small local vet is being replaced by the large corporately owned or managed multi-vet hospital just off the interstate. As a practice owner I welcome corporate competitors as I know I can always provide better, less expensive and more compassionate service but I worry for new graduates. Too much corporate ownership will eventually limit their choices upon graduation and fewer options will always lead to lower wages in the long run. While the opposite is true now with respect to wages as corporate practices have difficulty with retention, I also believe that this is changing given our current economic situation.

I also believe that the increase cost of veterinary medicine that we are discussing is causing a crisis in our client base. Two groups of clients (generally) have emerged in the last ten to fifteen years. One, the client that is highly devoted to their pet or pets, and, with encouragement from the media and the veterinary profession over the years, requests and expects a quality of care approaching that of human medicine; i.e. cancer treatments, tertiary care such as C.A.T. scans and MRI’s, and specialized veterinary medicine that encourages referral to the profileration of specialists in medicine, surgery, opthalmology, oncology, etc. we see today. The second group, a larger and every expanding group, either value their pets but simply do not have the disposable income to spend much, if any, money on their care, OR, they continue to behave much like 20 years ago when the “value” of our pets was generally lower, so they were considered a more “disposable” asset. The veterinary profession really doesn’t want to talk about this group nor does it have any plan or strategy to deal with this group’s almost complete inability to obtain quality, affordable veterinary care for their pets. Instead, the profession focuses like a laser beam on the top 5-10% of the veterinary purchasing public and caters its prices, services, buildings, equipment and technology on that group and that group alone. This is NOT a sustainable strategy. We are squeezing out the average American that wants routine care such as vaccinations, sterilizations and  annual examinations at a price that the average household can afford. Recent data is showing us that while the feline pet population is increasing the frequency of visits to the veterinarian is dropping. I don’t know if this is a seminal moment in veterinary medicine, but I do know that it is a trend that should cause all veterinarians pause. We cannot turn our backs on the majority of Americans that now use our services but will soon be squeezed out because of increasing costs due to the relentless elevation of  standard of care. Veterinarians must not focus solely on the elite client and their demands with new fangled gadgets, technology and speciality equipment  while leaving the “average” client behind. As an industry we must stay grounded in reality, know who our clients are, and what level of care they demand. I’m NOT advocating a decrease in the standard of care, but I am advocating a baseline of care that most Americans can afford and then a holding of that standard for a period of time. If others, as we have now in the profession, practice a higher level of care then clients are free to seek more advanced procedures at those facilities and pay the commensurate higher price for those services. I contend, that we must work hard to preserve general practice and cultivate veterinarians with an expertise at the general practice level that makes providing veterinary medicine with a high standard still possible at a reasonable cost. We cannot continue to atrophy the scope of services the general practice provides by citing the “Standard of Care” doctrine and moving those procedures within the purview of the specialist. I believe this philosophy has already hurt general practices and continuation down this path can only hurt the general practitioner and their dwindling client base.

I welcome your comments and hope that both pet owners and veterinarians will join the discussion on this topic as it is certainly something that we as a industry must address within the next 10 years.

One last little bit of trivia. Percorten-V is a drug used in the treatment of Addison’s disease. It costs $122.70 for a 4ml vial; or $30.675 per ml; $14,509.275 per pint; $116,074.20 per gallon; or $4,875,116.40 per barrel (42 US Gallons). Yes almost $5 million dollars a barrel even more than a barrel of HP ink! Incredible don’t you think.

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