Final CMA report into veterinary pricing: What it means for you and your vet practice

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This morning, the Competition and Markets Authority finally released their long-awaited final remedies for the UK veterinary sector. This has been going on for three years now, and while at time of writing the full report is not yet available, the final decisions the CMA have made are set out. So, what has the CMA done, and why?

Profits, prices, or competition?

While it was widely reported that the CMA was investigating veterinary pricing, this isn’t really where their investigation has gone. Veterinary prices have increased faster than inflation, but by and large, there doesn’t seem to be a smoking gun for extortionate profits being made. While it is true that four of the “large veterinary groups” (the “corporates” – CVS, IVC, Linneaus, Medivet, Pets at Home, and Vet Partners) have made higher profits than the cost of capital, and that some independent practices have relatively large profit margins, the CMA have decided that the evidence isn’t sufficient for price caps or profitability controls. Instead, they conclude that the very uneven profitability between practices is instead a marker of poor competition in the market.

This is not going to please those voices who have been (and doubtless continue to be) convinced that all vet practices make vast profits. Equally, it won’t reassure those who work in practices with wafer thin profit margins or outright losses, because of increased costs. However, it is notable how the CMA’s emphasis has moved away from profitability and towards competition as the investigation has gone on

What do they mean by competition?

The CMA do acknowledge that true competition (customers constantly moving from supplier to supplier without any hindrance) probably isn’t possible in the veterinary world, because there are other considerations, including (I would say primarily!) animal welfare and the best interests of the pet.

However, they do argue that customers need to know more about the practices so they can make an educated decision – customers need to know who owns the practice (so they aren’t comparing different branches of the same company), and what sort of prices they charge.

They also want to encourage competition not just betwen vet practices but between vet practices and online dispensaries, by encouraging the use of written prescriptions for ongoing medication.

So what are the new rules the regulator is imposing?

There are in fact 18 new rules, some of which will be very obvious, others are more subtle.

1: Ownership information

Every veterinary practice must state who owns them, on their website and at the building level. In addition, any crematorium, online pharmacy, lab, emergency, hospital or referral centre, owned by a company that also owns a vet practice, must state who owns them.

2a: Service information

Key information about the services offered by the practice, the staff’s qualifications, and any accreditations or awards, must be published. To be honest, the vast majority of practices already do this!

2b: Standard price lists

A list of 36 standard prices need to be included on the practice website, covering consultations, common surgery, prescription fees, diagnostic tests, and end of life costs, for cats and a range of different dog sizes. These will need to be updated in real time – something rather more complicated than it sounds like on the surface!

2c: A limited anti-parasitic medicine price list

The most commonly used flea, tick and worm treatment prices need to be listed.

2d: Pet healthcare plan information

If the practice runs a pet healthcare plan or club, the details need to be published fully transparently, including the real-world savings that might be made compared to the standalone prices.

3: A UK-wide price comparison site

The RCVS (the veterinary regulator) will have to host a price comparison site for veterinary practices.

4a: Vets to provide written estimates

Vets are already obliged to provide estimates (it is actually a breach of the binding statutory Code of Professional Conduct not to); however, for conditions where treatment is expected to cost over £500, these must now be written; and if the price changes significantly, a new written estimate must be prepared.

4b: Vets to provide itemised bills

Once again, this is already mandatory for vets and nurses to do – however, the businesses that employ them are NOT regulated or bound by the Code of Professional Conduct, so the CMA is imposing this duty at business level.

5: A new rule to ensure that vets have clinical freedom

This is a really good thing – while vets and nurses have professional responsibilities regarding animal welfare and clinical care, there is always the risk that they will be pressured by their employers. This requirement will hopefully minimise this risk.

6: Measures to encourage the use of written prescriptions to buy medicines online

Practices will be required in a range of ways to communicate the availability of written prescriptions, including verbally in a consultation. In addition,

7: Speeding up prescription provision

If the animal owner asks for a written prescription, a hard copy (if provided) must be available at the end of the consultation; or a digital copy within 48 hours. If there is a risk of prescription fraud, the practice will be allowed to send the digital copy directly to the pharmacy or dispensary of the client’s choice.

8: Making it easier to compare the price of own-brand medicines

Any practice selling their own-brand of medication must tell animal owners what the equivalent branded product is so that they can order it elsewhere if they choose.

9: Encouraging owners buying ongoing long-term medicines to shop around

Various measures to help make pet owners purchasing long-term meds more aware of online and alternative retailers.

10: A cap on prescription fees

Originally, the plan was to cap prescription fees at £16 for as many items as necessary. The CMA argued that this was the average cost of prescriptions at independent practices – however, our data showed it was between £20 and £21 – and after our submission to the CMA, they have raised the cap to £21 for the first item. They have also said that additional items may be charged at a maximum of £12.50.

However, they are also requiring practices to put in place measures (which we’re wholly in favour of!) to ensure that the duration of a prescription issued in written form is no less than the duration if you choose to purchase the product from the practice.

11: Changes to the way that emergency clinic and first opinion practice contracts work

Essentially, these measures are intended to allow first opinion practices to renegotiate their emergency provider contracts more easily, so as to get better deals.

12: More transparent cremation options and fees

As well as the basic fees (as set out in the main pricing part of the website), there must be more transparency on other options; in addition, all practices MUST offer communal as well as individual cremation for pets, and make it more clear that pet owners can arrange their own cremation, or bury pets at home (other legislation permitting).

13: More detailed complaints policies

The CMA has set out specific (and actually, quite low bar) requirements for vet practices’ complaints procedures, which must be published and adhered to.

14: Encouraging the use of veterinary practice / client mediation services

Vet practices will be required to engage in good faith with alternative dispute resolution mediation services. The CMA say that the VCMS is likely to be most widely used.

Is that all?

Pretty much, yes. The CMA to be fair do note the problems with the Cascade (meaning that it’s illegal to prescribe a human medicine if there’s an animal one, and a criminal offence even to recommend using one), and say that the government and the VMD (the medicine regulator) should do something about it. Bearing in mind, though, that the Cascade is EU legislation written across into UK law, and the government is currently trying to negotiate closer alignment with the EU on veterinary and food safety laws, it seems very unlikely this is going to go anywhere.

So no price caps or reductions in price?

Probably not. In fact, all these changes are going to be complex – especially for smaller practices – to put into place. The RCVS is going to be charging an annual fee in the region of £500 per practice to run their comparison site. And more written prescriptions means less medicine sales, so many practices (especially the less profitable independents, but possibly some corporates as well) will have to put their service prices (e.g. consultation fees) up – especially with energy prices likely to spiral in the near future.

So will this reduce prices???

Probably not – in fact, I suspect it will result in an increase in fees.

Because all this extra work isn’t free. And the CMA have decided that at worst (and I suspect this is an overestimate!) the veterinary sector is overcharging on average by 5%.*

If all of the problems the CMA identified disappeared, vet bills would only drop by about 5%.

So if your bill was £100, you save £6 (including VAT).

But the increased costs in smaller practices might well push their overheads up by more than that.

Nonetheless, many of these new rules are a really good idea.

We really do believe animal owners should be able to see what their vets charge AND what level of care their pets will receive, so they can make an informed decision. Even if there isn’t rampant profiteering, more information for animal owners can only be a good thing. While I think the impact on pricing is likely to be minimal, I am optimistic that this will increase trust between the animal owners and their vets – and that trust is essential in ensuring that animals get the best possible healthcare, which is what we’re all interested in.