Comments on the Modernization of the Regulation of the Veterinary Profession

May 30, 2023

Thank you for the invitation to comment on the Ontario Ministry of Agriculture, Food and Rural Affairs’ (“OMAFRA”) consultation^{Footnote 1} on the modernization of the Veterinarians Act of Ontario.^{Footnote 2} The Competition Bureau (“Bureau”) is an independent law enforcement agency that ensures that Canadian businesses and consumers prosper in a competitive and innovative marketplace. As part of its mandate, the Bureau protects and promotes competition for the benefit of Canadian consumers and businesses.^{Footnote 3} The Bureau encourages OMAFRA and the College of Veterinarians of Ontario (“CVO”) to use this opportunity to consider regulatory reforms to enhance prescription portability, helping to give consumers more competitive choices for their pet’s medication.

Why competition matters

OMAFRA’s mandate includes not just growing Ontario’s agri-food sector, but helping to grow its economy.^{Footnote 4} One part of that economy is the growing market for pets.^{Footnote 5} The cost of pet ownership and their care, including veterinary bills and pet medication, can be expensive as reflected by the significant growth in the market for pet insurance.^{Footnote 6} Increased competition in these markets could benefit consumers through more choice, improved quality,^{Footnote 7} and stimulate economic growth by encouraging the efficient use of resources, innovation, and allowing more productive businesses to thrive.

The Bureau was encouraged to see that regulations under the Veterinarians Act codify the choice of pet owners to shop around for their pet’s medication. Unfortunately, certain features of the regulation and the industry itself may keep them from doing so. Regulatory changes that enhance prescription portability, like automatic prescription release, and prohibiting behaviours that restrict it, can make that choice and the competition it brings more meaningful.

Exclusive Distribution and Prohibition on Secondary Markets

As described in recent news articles,^{Footnote 8} the Competition Bureau recently received a complaint alleging that manufacturers and distributors of pet-specific medication refused to supply an online pharmacy. While both veterinarians and pharmacists are legally allowed to dispense pet medication, the Bureau has confirmed there is currently a widespread business practice in Ontario of “exclusive distribution.” Exclusive distribution refers to the practice of manufacturers and distributors of pet-specific medication choosing to supply only veterinarians (and not pharmacies). Further, the CVO has a regulation prohibiting veterinarians from reselling pet medication to pharmacists except in limited circumstances.^{Footnote 9} As a result, pet owners may not be able to get their pet-specific medicine prescriptions filled anywhere but their veterinarian’s office.

This lack of choice for consumers may be made worse by a potential conflict of interest in veterinary medicine that is specifically addressed in the CVO’s regulations. As the CVO states in their Guide to the Professional Practice Standard, “The potential for a conflict of interest in veterinary medicine may arise because a veterinarian is in a position to derive financial benefit from dispensing the medications that they prescribe.”^{Footnote 10} To address this conflict, when a veterinarian in Ontario determines that a drug should be prescribed, they are required to give the client a prescription that can be filled elsewhere if it is requested (the “By-Request Rule”).^{Footnote 11} As noted on the CVO’s Frequently Asked Questions web page, “Once a client is provided with a prescription then it is left to them to decide where they will have the prescription filled.”^{Footnote 12} This option to obtain a “portable prescription” from a veterinarian that can be taken elsewhere has the potential to offer consumers a choice that encourages competition.

Whereas, in some jurisdictions portable prescriptions are only included in codes of ethics or best practice guidelines, the CVO has taken the admirable step of codifying this into law with the By-Request Rule. The CVO makes clear its intention that “the client’s choice to have a prescription filled wherever they choose [be] respected.”^{Footnote 13} Unfortunately, there are features of the By-Request Rule itself, as well as the pet-specific medication market, that frustrate that intention and the competition it could bring. As we discuss further below, targeted regulatory reform may be able to overcome these barriers to prescription portability and give consumers more competitive choice for their pet’s medication.

Barriers to Prescription Portability and Alternatives

A consumer’s ability to choose the best offer and switch providers where necessary is at the heart of the competitive process. When consumers can switch between competing businesses easily, businesses are more likely to keep prices low or maintain value for their customers in other ways. If not, they risk losing customers to their competitors. Barriers to switching between competitors (or switching costs) can lead to less competitive markets where incumbents "lock-in" their customers and new competitors struggle or are unable to grow their business. Prescription portability can offer choice for pet owners, but certain regulatory and market features act as barriers to exercising that choice.

The first hurdle to prescription portability and the choice it can offer consumers is that the current By-Request Rule is only by-request. It requires not only that the pet owner be aware of this rule, but also that they be comfortable asking for a prescription that they can fill elsewhere. A lack of awareness of this regulatory requirement may act as a barrier to consumers switching simply because they don’t know it’s an option. Those that are aware may face an additional barrier to the extent they fear that asking for a portable prescription could have a negative impact on their future client service.

To eliminate both these barriers to switching veterinarians could be required by regulation to automatically provide all clients with a portable prescription. Existing technology used by physicians to create prescriptions could be adapted to limit any administrative burden on veterinarians. A lesser alternative that would still reduce these barriers would simply be to require that veterinarians offer portable prescriptions, or at a minimum provide notice of their availability. While some pet owners will not be interested in trying to shop for their pet’s medication, such reforms would at least make consumers aware of their options and be in line with OMAFRA’s goal of achieving greater transparency. There are a variety of ways to make these changes that can be tailored to the needs of Ontario’s veterinarians.^{Footnote 14}

A second set of barriers may arise from veterinarians' ability to derive financial benefit from dispensing medication. While the Competition Bureau does not allege that veterinarians in Ontario are intentionally deterring switching, they may have an incentive to try to prevent customers from shopping elsewhere for products and services that they themselves offer. Such switching barriers could include charging unreasonably high fees to write a portable prescription, and/or requiring unnecessary tests or waivers to write a portable prescription. It may be useful to proactively prohibit behaviours that could act as barriers to prescription portability through policy or regulation.

A third challenge is that, even if pet owners obtain a portable prescription, they may not be able to have it filled at a pharmacy. The practice of exclusive distribution by manufacturers and distributors currently means that pharmacies in Ontario are unable to stock pet-specific medication (even if requested). A subset of pharmacists may also feel they need greater training specifically related to veterinary medicine to safely dispense such medication. As described below though, regulatory changes that increase prescription portability are also likely to create economic incentives to resolve these issues. At the very least, it can immediately benefit owners whose pet’s medication has an equivalent and appropriate product indicated for human use, since these drugs are already widely available to pharmacists. For example, hyperthyroidism, a common endocrine condition in senior cats, may be treated with medication that has a human equivalent and is widely available in pharmacies today.

Competitive Benefits of Prescription Portability

Prescription portability allows choice for consumers and choice gives rise to competition. The benefits of competition for pet medication could include more affordable prices and convenience for pet owners (e.g., getting a prescription refilled closer to home). While pricing information for pet medication is difficult to collect due to the typical business model of veterinarians, anecdotal reports of pharmacies offering lower prices for medication that has a human equivalent are common.^{Footnote 15} Though lower prices may initially seem to harm a veterinarian’s bottom line, this may be offset by a greater overall demand for veterinary services in the long run. Lower costs for pet medication (and therefore ownership costs) should increase overall pet ownership, as well as the likelihood of owner’s seeking veterinary care. More pets and greater access to care stands to benefit both animals and veterinarians.

Moreover, regulatory changes to increase prescription portability can also help reduce or remove non-regulatory barriers to the same issue. If more pet owners want their pet’s medicine dispensed by pharmacists, manufacturers and distributors will be more incentivized to supply pharmacists that choose to provide these specialized services and they, in turn, will be more incentivized to obtain any necessary training. As there are a limited number of manufacturers and distributors of pet-specific medication serving all of Ontario, a single major player choosing to supply pharmacies could have a significant impact.

Though prescription portability is already the policy of the CVO, we understand that its increased use may create concerns for some of its members. Fortunately, in 2015 the United States Federal Trade Commission released a thorough report on Competition in the Pet Medications Industry following significant study and consultation.^{Footnote 16} The market examined in that report shares key features with that of the Ontario market (e.g., exclusive distribution and prohibition against resale) and addresses many potential concerns. For these reasons it may be of assistance to OMAFRA and the CVO in their decision making.

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Comments on the Modernization of the Regulation of the Veterinary Profession

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Why competition matters

Exclusive Distribution and Prohibition on Secondary Markets

Barriers to Prescription Portability and Alternatives

Competitive Benefits of Prescription Portability

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