LAST year was a nervous year for
the veterinary sector but 2010 offers
opportunities for those prepared to
grasp them.
As veterinary practices reflect on
2009, I sense a feeling of relief that
the year didn’t prove quite as tough as
many predicted. It
was challenging
certainly and it was
also evident that the
pace of consolidation
among practices – a
growing trend in
recent years – slowed,
probably because of
the uncertainty in
financial markets and
reduction in available
finance.
Yet, overall the
sector held up better
than expected in the
face of global
recession. The
majority of pet
owners still prioritised their pets’
welfare and, while industry chatter
suggests that there were some changes
in pet owner behaviour – for instance,
small reductions in elective surgery
and preventive healthcare – it appears
that the deficit was compensated for
by price increases and by treatment
for animals becoming sick – ironically
perhaps because their preventive
health regimes had lapsed.
Recent market data published by
DMR Kynetic and also the sales
survey conducted by member
companies of the National Office of
Animal Health (NOAH) showed that
the veterinary sector remained flat
during the year so, while there were
few signs of growth, there were no
signs of decline either.
The pharmaceutical companies
which supply the veterinary
community had a turbulent year,
exacerbated by the fall in the value of
Sterling which squeezed their margins, creating significant inflationary
pressure.
In the face of the global
uncertainty, they resorted to aggressive
overhead limitation programmes, price
increases and, of course, further
consolidation, the full impact of which for vet
practices will only
really become clear in
2010.
So, what will the
New Year bring for
the veterinary sector?
What internal and
external factors are
likely to wield the
most influence and
what steps should
you take to prepare?
Well, for a start,
let’s look at what’s
happening outside
the veterinary world.
2010 should be the year in which the
economy starts to emerge from recession. Combine this with the
forthcoming general election and the
country could be set for a “feel-good
factor” which could have a knock-on
effect for vets as pet owners may be
more willing to spend on discretionary
procedures, and finance may be more
readily available for those looking to
start up, expand or in other ways
invest in their practice. So far, so
good!
Perhaps a less welcome
development is the rise of the online
veterinary pharmacy spurred on by
our growing national addiction to
online shopping. A host of online
pharmacies for veterinary medicines
were set up in the mid-noughties but
2010 is likely to be the year in which
they become a force to be reckoned
with and take significant market share.
Many vets are uncomfortable
about their arrival but they’re here to
stay so your best policy is to accept them with good grace. Remember that
the majority of your products and
services are still available only in
practice.
Your focus should be on
highlighting the skills and expertise
you offer, not on chasing products
lost to an online customer – though
don’t forget that through offering an
attractive retail environment, you can
also reap the benefits of the
convenience to pet owners of buying
health and nutrition products and toys
during a visit to the practice.
Closer to home, the consolidation
of the pharmaceutical market will
start to make an impact as the dust
settles on the latest round of mergers
and takeovers. Twenty years ago, no
single company had more than 8% or
9% market share of the UK veterinary
pharmaceutical market.
Two giants
As we enter 2010, over
40% of the market is in
the hands of just two
pharmaceutical giants:
Merck, the new owner of
Intervet/Schering-Plough
(ISP) and Pfizer, which
has just completed the
acquisition of Fort
Dodge.
There is speculation
that Merck and Sanofi will try to
reform their joint venture by putting
together ISP with Merial. This
behemoth would itself command
more than 30% market share.
The good news is that this might
streamline your product purchasing,
saving valuable practice time. After all,
you’ll potentially be able to buy
everything you need from one
supplier. But this is only one side of
the story and what the consolidation
means for healthy competition in the
veterinary pharmaceutical sector is
another matter.
Many vets have quite justifiable
concerns and I believe we’ll see more
and more joining forces, if not as
members of a corporate group, then
in loose affiliations which will give
them more clout with the
pharmaceutical giants.
I also predict intense competition
from the second, third and fourth
tiers of medicines’ manufacturers and
an increase in the number of
veterinary generics hitting the market.
I’d counsel you to take a look at
the product development being
carried out by some of the smaller,
fast-growing niche players. I include
Genitrix in this category but also
companies such as Animalcare and
Alstoe.
Genitrix has grown by 25% in 2009 and a number of smaller players
grew by similar amounts. These
companies have been successful
because they have developed
innovative, cost-effective products for
their niche markets. There is choice
out there if you look for it.
Unlicensed products
Incidentally, while we’re talking about
products, I predict 2010 will be
characterised by the introduction of a
steady stream of unlicensed products.
Because of the huge costs of R&D
and the demands of the licensing
process, 2009 saw an increase in the
number of unlicensed products
coming onto the market.
This trend may well accelerate in
2010 and, while this market is where
many of the smaller companies began,
the big multinationals are now getting in on the act.
You need to evaluate these products and
determine whether they
fit into your clinical
regimes in a manner that
is good for your patients
and for your businesses.
Finally, I should
mention the significant
changes planned to the
European regulatory
environment for 2010.
Their exact nature is still sketchy but
there is certainly a planned change to
the EU directives relating to veterinary
medicines.
You can be sure that NOAH will
be working hard with the national and
European regulatory bodies, the VMD
and the EMEA, to ensure that any
regulation is fit for purpose in the UK.
There will be a number of
consultations with stakeholders in
2010.
This year will be a vital one for
many vet practices with some clear
challenges but opportunities out
there too. Standing by and doing
nothing is not an option. Instead,
embrace the changes and capitalise
on them while developing a strategy
to tackle the challenges. Write a plan,
stick to it and check progress
regularly.
There’s plenty of help and
business advice available, much of it
free, so take advantage of it and make
your business one of the winners in
2010.
- You may find the following useful:
Federation of Small Businesses:
www.fsb.org.uk
Institute of Directors: www.iod.com
Business Link:
www.businesslink.gov.uk
Chambers of Commerce:
www.britishchambers.org.uk
