Pet owners paying for Advantage II and K9 Advantix II topical flea-and-tick treatments could have saved hundreds of dollars by now had they switched to the generic versions that first hit the market six years ago. But first, they would have had to find them.
As USA Today reports, cheaper equivalents for the blockbuster brands, which both kill and repel pests, have quietly eluded consumers for years. Even today, they’re nowhere to be found at many of the biggest pet specialty stores, like PetSmart or Petco. And they’re absent from popular online pet pharmacies like Chewy.com or PetMed Express.
According to a federal lawsuit filed by one of the generic’s manufacturers, their elusiveness is not by accident, but a scheme by the brand-name products’ company to block competition.
Filed in the U.S. District Court in Northern California, the lawsuit by Tevra Brands offers a rare behind-the-scenes glimpse of the multibillion-dollar pet medication market, where a few major companies have a stranglehold on pricing. Tevra’s suit claims it lost tens of millions of dollars because Bayer Animal Health, a former subsidiary of the German pharmaceutical giant, conspired to maintain its monopoly over the treatment it created.
Tevra sells its generic topical treatments for cats and dogs on its website, on Amazon and elsewhere, but the company argues that Bayer prevented it from reaching pet owners where they’re most likely to shop and depriving them of a better deal.
Its line includes TevraPet Activate II for dogs and ActiSpot II for cats, as well as Vetality Avantect II for dogs and Advotect II for cats. Its ActiSpot II 6-dose treatment for large cats cost $30 on Amazon.com, as of May 15. The brand-name equivalent, Advantage II for cats, cost more than twice as much – $64 – on Chewy.com.
Unlike the human pharmaceutical industry which abounds in cheap alternatives once brand-name patent protection expires, the pet med market offers relatively few choices. Just 14% of federally approved animal drugs have a generic version, according to the Generic Animal Drug Alliance. Meanwhile, generics in human health care last year accounted for 9 out of 10 filled prescriptions, according to the U.S. Food and Drug Administration.
Among the many reasons for the difference is that human health insurance requires generic drug substitution whenever possible, which has spurred the development and availability of low-cost alternatives. Pet insurance is nowhere near as widespread or influential. That allows pioneer drug companies – those that own the brand-name or patented versions – to dominate much of the pet medication market. And industry insiders have long decried their outsize leverage through exclusivity agreements.
Such agreements block vendors – including pet stores, online pharmacies and wholesale distributors that supply retailers and veterinarians – from selling products that directly compete with their brand-name goods. Tied to those deals are often lucrative financial incentives such as discounts and rebates that vendors can ill afford to turn down, especially if their rivals are taking advantage of them.
Exclusive dealing is a common and legal practice in many industries, according to the Federal Trade Commission, which enforces consumer protection laws. The practice can encourage distributors and retailers to specialize in specific products and offer consumers related services and amenities. When big companies use them to choke rivals out of the market, however, the deals become unlawful and the FTC can intervene.
The agency has known about the dubious use of exclusivity deals in the pet medication market since at least 2012; industry stakeholders complained about it during a public workshop the FTC hosted that year “to examine competition and consumer protection issues in the pet medications industry.” However, it appears that the FTC took no action; it deemed the evidence and effects of the agreements presented at the workshop contradictory, according to a staff summary report.
It’s “price-fixing in its purest form,” Tevra said in its complaint against Bayer, which it initially filed in 2019 and has amended twice. “The only losers in the deal were consumers who were forced to pay higher prices, generic manufacturers such as Tevra that were foreclosed from competition, and the rule of law as enshrined in the Sherman Act and the Clayton Act.”
The Sherman Act prohibits actual or attempted monopolization, as well as any contracts and conspiracies that result in the unreasonable restraint of trade. The Clayton Act bans certain discriminatory prices or services between merchants, as well as mergers and acquisitions that restrict competition.
While generics offer the best bang for the buck, exclusivity deals have interfered with their widespread availability. Even big pharmaceutical firms have been thwarted in efforts to get their generics to the masses.
Novartis, itself a major drug company, couldn’t overcome the exclusivity deals it blamed for dooming one of its generic pet medications, its then-Animal Health Division Vice President Clinton Vranian said at the 2012 FTC workshop. Vranian, who did not name the branded product or its generic equivalent, said the generic was more effective than the brand name version and well-received by veterinarians, but distributors wouldn’t touch it.
Tevra claimed in its lawsuit that Bayer’s scheme cost it more than $76 million in net profits that it would have earned on the sale of those products from 2017 through 2021. Bayer denied Tevra’s allegations in court filings. It said Tevra failed to make a case that Bayer intended to, or even succeeded in, blocking generics from the market. Bayer claimed that its agreements with distributors and retailers were legal and provided only “modest incentives” for exclusivity but did not require it.
The case, which has survived several motions to dismiss, is still in the discovery and deposition stages. It could go to trial as early as July 2024.
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