A gray market exists when products from a manufacturer are sold outside the intended or manufacturer-approved channels. The products are diverted from the intended channel to gray channels. For pet medications, it’s big business. A $10 billion business.
Certain pet medications are labeled to be sold as prescriptions by veterinarians only. We buy our medications directly from pharmaceutical companies. Then we prescribe and sell them to you.
When these pet medications are sold outside the veterinary channel and end up in big-box stores or online, they are diverted products sold by unauthorized dealers and are part of the gray market. When you find Heartgard online, for example, it is a diverted product in a very gray zone of integrity.
People who are in business for the sole purpose of procuring pet medications through gray channels are called product aggregators. These aggregators contact veterinary offices and offer to pay money to have the veterinarian buy and divert products to them. A bad-acting veterinarian will buy a large amount of products and resell to an unauthorized online or big-box seller.
The veterinarian, who is using their veterinary license unethically, gets a fee, a.k.a. a kickback. Why is it unethical? Veterinarians are supposed to buy medications and prescribe them to their patients only. There must be a veterinary-client-patient relationship in order for such a transaction to be considered good practice.
Although unethical veterinarians are definitely a big part of the problem here, the gray market is so huge that these products find their way to online pharmacies and retail stores in other ways. Veterinary distributors are supposed to sell only to veterinarians, but diversion has occurred. Manufacturers like Merial and Bayer (manufacturers of Frontline and Advantage) have been accused of diverting their own products. International and counterfeit products have found their way to the gray market.
Product aggregators will get their products wherever they can. Whoever thought meat-flavored tablets packaged in appealing boxes with swimming dogs and playful puppies were liquid-gold contraband?
The Legality of the Gray Market
While this practice may be unethical or unscrupulous, and while the pharmaceutical companies don’t approve or verify their products when found on the gray market, the gray market is not illegal.
In my opinion, the gray market will turn into a black-and-white market where products are not diverted but safely appear online and in retailers. The pet medications will be supplied by the manufacturer with quality controls in place, properly stored and delivered to these outlets, and overseen by regulating and enforcement agencies.
But this is not happening yet.
You will probably get an authentic product if you buy from a reputable online pharmacy. The manufacturer will not, however, ensure the product is authentic and will not guarantee its safety or efficacy.
At least, that’s what the major pharmaceutical companies profess. Take Zoetis, for example, the maker of Rimadyl (an NSAID), Clavamox (an antibiotic) and Revolution (a heartworm preventative). Their policy on diversion is clear on their website: “Zoetis does not sell prescription medications for dogs and cats to retail outlets, pet supply stores, internet sites or any other distribution facility where a direct veterinary-client-patient relationship does not exist — nor do we support in any way secondary supply to these businesses.”
Diverted Products Carry Risks
- Proper handling: Has the product been handled properly since it was picked up from the diverter, or was it housed in a boiling-hot warehouse in Florida, Phoenix or China?
- Product safety: Has the product been tampered with or have expiration dates changed? You are already dealing with shady characters who want to turn a profit. These people are in business to make money, not care about pets. Since it’s a gray business, we are definitely dealing with shady business practices.
- Product guarantee: The pharmaceutical manufacturers claim they will not stand behind a product not obtained through a veterinarian.
To this last point, this is what Zoetis has to say: “Since we cannot be certain how our products reach unauthorized aggregators, we cannot ensure product authenticity from these unauthorized aggregators nor can we ensure that proper storage and handling occurred. Therefore we reserve the right to refuse to honor associated product guarantees for product purchased from unauthorized distributors.”
TV Commercials Representing the Gray Market
Know that those well-known companies with splashy websites or advertising on TV are not getting their products through veterinary channels.
As Zoetis states, “Many of these unauthorized dealers advertise products on their website or on television commercials that they do not have in stock and cannot readily obtain. Moreover, even in situations where such advertisements show a picture of the product, it does not mean they have the product in stock…In all cases these organizations are also using pictures of Zoetis products without our prior knowledge or consent.”
Notice that even a big company like Zoetis is not mentioning any names. That’s because the gray market online companies and big-box retailers are huge and have a lot of lawyers working for them. When I wrote about this topic in 2012 and mentioned a company by name that was under investigation, I received a threatening letter from their corporate attorneys saying they would go after me personally.
Why Buy Diverted Products on the Gray Market
I would venture a guess that most of you who buy online or in big retail stores are doing it to save money first and for convenience second. I get it — your life arrives in a box, and you think you’re getting a bargain in that box. Well, think again.
See if your veterinarian will match your online price for your important pet medications. You might be happily surprised. And another thing: Be honest with yourself about your purchasing practices. Did you buy anything in addition to your pet medicine when you were on an online website or in Target? Did you ultimately spend more money, not less?
A Personal Perspective
I’m over the gray market thing. I write a prescription for anyone who wants one, give them the best guidance I can about drug safety and try to be fair in drug pricing.
When the writing on the wall was clear 20 years ago — that the pet medication market was getting competitive — I was very proactive in my own little hospital when internet pharmacies were still in their infancy. I priced my prescription medications competitively with the internet and told my treasured clients about the potential risks and unethical practices of the gray market. This policy has worked well.
Second, I developed a hospital model that is not dependent on selling medications to thrive. I’m a doctor, not a retailer. If my clients trust me and my recommendations and see that they are not being financially abused, they are going to probably buy their medicine from me.
If I can’t meet a price, usually of a rarely used or very expensive medication and they can get it cheaper, I write a prescription and try to direct them to a reliable source. I want to help my clients get the right medication for their pets at a good price.
How the Gray Market Affects You
When you see the feathers on your veterinarian ruffle at the very mention of the gray market, think about these facts:
- Compliance goes down when clients shop for their own medications. It’s a fact. People often don’t buy enough heartworm preventative for a year, for example, when shopping on their own, or they don’t buy it at all.
- People buy the wrong thing. You might plan to purchase the recommended flea and tick medication at Target, but when you see a cheaper product, you buy that instead. The quality, safety and efficacy of these products is very different. Left to your own devices, you might be wasting your money entirely on a useless, possibly toxic, product or a product that doesn’t check all the boxes your veterinarian outlined for you.
- Human pharmacists and online pharmacies can give you wrong or misleading information. This is a real problem because no veterinarian-client-patient relationship exists when you buy from a third party. You cannot always trust the information you get from a non-veterinarian.
Many products are diverted, from athletic wear and luxury goods to electronics and bike racks. But 2 commodities stand out: pet medications and hair products. The Redken hair products on your box store shelves are as gray market as the heartworm preventatives in the next aisle.
This fact just blows my mind. While people might take their hair very seriously, expired or bogus shampoo is simply not as worrisome as ineffective heartworm preventative. I don’t know what it says about our culture that the quality of our pets’ medications is treated with the same cost-cutting mind-set as hair gel.
It’s time to wash away this gray market — our pets need safe medications, consumers need fair pricing and we need to get some integrity back into this marketplace.
This pet health content was written by a veterinarian, Dr. Debora Lichtenberg, VMD. It was last reviewed May 9, 2018.