Data review and commentary is provided by Karen E. Felsted, CPA, MS, DVM, CVPM, CVA of PantheraT Veterinary Management Consulting, www.PantheraT.com - June 2020

Revenue GrowthCompanion animal practice revenue for the 644 VHMA practices included in this month’s study continued to decline this month; however by a much smaller percentage than in the previous month. Revenue was down on average by 1.6% from May, 2019 to May, 2020 with a median decline of 1.0%. This is obviously due to the COVID-19 pandemic which started to impact most practices in mid-March. Practice revenue changes ranged from -85.6% to 282.6%. There was one less workday (25) in May of 2020 compared to 2019 which accounts for some of the decline. (“Workdays” are defined as Mon-Sat less standard holidays. In May, the only holiday was Memorial Day.) Canine revenue declined by 1.6% and feline revenue declined by 1.5%. 2020 started out strongly with Jan-Feb growth of 7.6% but March-May declines bring year-to-date growth to a -1.3%.

Patient VisitsTotal unique patient visits for the same period, May, 2020 compared to May, 2019 also declined. Total visits dropped on average by 11.3% with canine visits down by 11.3% and feline visits down by 11.5%. The median change was -9.2% and the range was -87.1% to 214.8%. As noted above, May of 2020 had one less workday compared to May of 2019. Jan-Feb visit growth for 2020 started out well at 2.3% compared to a decline in 2019; however, the March-May decline has dropped year-to-date growth to -7.1%. (Note that the term “visits” is defined as unique purchases of either products or services for an individual pet.)

New Client GrowthFor the first time in several years, new client numbers in May, 2020 compared to May, 2019 actually increased by 4%. In spite of May’s growth year-to-date new client figures for 2020 have declined by 7.0%. The decline in new client numbers has been a discouraging trend (even pre-pandemic) as these numbers have declined almost every month of the last four years; it will be interesting to see if this turnaround holds.

Remember that the above figures represent averages across all the practices in the study; in order to understand what is going on in YOUR practice, you need to look not only at what your revenue growth was during these months (and going forward) but also at the drivers of growth in YOUR practice such as changes in invoices, visits, ATC, fee increases, new clients and client retention. This will give you the information to make intelligent decisions about where to focus your time and efforts to increase growth.

The Insider’s Insight Benchmark Report is published by the Veterinary Hospital Managers Association (VHMA) on a monthly basis. The report tracks several key economic indicators to determine how participating VHMA member practices are performing, as well as results from VHMA surveys on issues impacting the profession. There are 644 VHMA member practices who contributed to this month's key economic indicator data. Data is representative of companion animal practices only.

May, 2020 vs. May, 2019Page 1 of 6

Partnering with:

-2.0

-1.5

-1.0

-0.5

0.0

Revenue GrowthMay, 2020 compared to May, 2019

Total-1.6%

Canine-1.6%

Feline-1.5%

-12 -10 -8 -6 -4 -2 0

Patient VisitsMay, 2020 compared to May, 2019

Total-11.3%

Canine-11.3%

Feline-11.5%

-15 -12 -9 -6 -3 0 3 6

New Client GrowthMay, 2020 compared to May, 2019

January -8%February -5% March -15% April -11% May 4%

Page 2 of 6

Veterinary Practice Online Pharmaciesby Karen E. Felsted, CPA, MS, DVM, CVPM, CVA PantheraT Veterinary Management Consulting

continued on pg. 32

The number of practices with an in-house online pharmacy has been increasing over the last ten years but the pandemic has put a spotlight on usage of this tool to better serve clients. Since COVID-19 hit the U.S. badly and pet owners started hunkering down at home in March, many clients have not wanted to leave their houses to run basic errands and the interest in getting their pet’s food and medications delivered has increased. Obviously, it is better for practices if clients use the practice’s online pharmacy rather than an outside option. This month’s survey looks at how practices have integrated online pharmacies into their hospitals.

The first two questions ask about the usage of online pharmacies by practices: “Does your practice have an online pharmacy?” and “How long have you offered your online pharmacy?”

As can be seen here, the vast majority of practices responding have an online pharmacy. Only about 13% of practices don’t have one with a few of these interested in adding one. Almost all of the practices with a pharmacy had it in place before the pandemic struck.

This month’s Insiders’ Insights survey is again a lengthy one in order to cover as many aspects of this topic as possible and we’ve divided the questions into four groups—use of the online pharmacy technology in the practice, pricing, online pharmacy client usage and revenue and the sale of retail items in-house.

Use of the Online Pharmacy Technology in the Practice

This section looks at how online pharmacies are used in the responding practices. The first question asked: “Is your online pharmacy integrated with your Practice Information Management System (PIMS)?” Only about 58% of respondents said yes although the “other” comments were from practices with some degree of integration.

0

20

40

60

80

100

Does your practice have an online pharmacy?

%

Yes

Responses: 189

Responses: 165 15 4 5

87%

3%8%

2%

No Interested in adding one

Not interested in adding one

0

10

20

30

40

50%

less than 6 months

6 months to 1 year

1 to 2 years

How long have you o�ered your online pharmacy?

Responses: 167

Responses: 8 11 32 48 68

more than 5 years

5%7%

19%

29%

3 to 4 years

41%

58%

40%

Is your online pharmacy integrated with your Practice Information Management System (PIMS)?

� Yes 98� No 68

Responses: 170

3 continued on pg. 4

Page 3 of 6

The next question asked: “What third-party vendor do you use for your online pharmacy?” Only about 3% of the responding practices manage this entirely in house. Those in the “other” section listed other vendors or said they used more than one vendor.

The following question asked: “What products do you offer in your pharmacy (check all that apply)?”

Respondents were also asked: “How do you market your online pharmacy to your clients (check all that apply)?”

“Other” answers included: posting on website, word of mouth and mentioned at the bottom of the invoice. Most of the practices with an “other” answer said they only told clients about the pharmacy when they received a pharmacy request or the client asked specifically about an online pharmacy or the pet needed a product the practice doesn’t carry.

0

10

20

30

40

50

What third-party vendor do you use for your online pharmacy?

%

VetsFirstChoice

Responses: 166

Responses: 82 61 16 5

49%

3%

37%

10%

Vetsource My VetStore We do it in house

0

20

40

60

80

100%

What products do you o�er in your pharmacy (check all that apply)?

Responses: 168

Responses: 158 159 158 107 157 145 143 88 66

94% 95% 94%

64%

93%86% 85%

52%39%

Retail (pet supplies, i.e., leashes, beds,

toys, etc.)

Heartworm preventive

Flea/tick preventive

Prescription food

Non-prescrip-tion food

Prescription medications

Shampoos, conditioners, other similar

skin care items (non-prescrip-

tion)

Non-prescription vitamins and supplements

Medical supplies

0

10

20

30

40

50

60

70

80

How do you market your online pharmacy to your clients (check all that apply)?

%

at client visits

Responses: 164

Responses: 122 97 104 47

74%

29%

59%63%

email marketing to clients

through our social media outlets

client reminders and mailers

Page 4 of 6

4continued on pg.5

When asked: “How happy are you with your online pharmacy technology?”, only 24% said they were “very satisfied” but 78% are either “very” or “somewhat” satisfied.

0

10

20

30

40

50

60%

Very dissatis�ed

Somewhat dissatis�ed

Neither satis�ed nor dissatis�ed

How happy are you with your online pharmacy technology?

Responses: 162

Responses: 1 12 23 87 39

Very satis�ed

0.5%

7%

14%

54%

Somewhat satis�ed

24%The last two questions were open-ended with the first asking: “What do you love most about your online phar-macy technology?” The most common comments were:

n Practice can offer online options for clients that want them

n Availability of home shipping

n Integration with the PIMS

n Ability to offer products to clients that don’t have to be stocked in the practice

n Ease of usage

n Compounding option

n Auto ship and/or client reminders

n Vendor marketing efforts

The next open-ended question asked: “What are your biggest frustrations with your online pharmacy technology?”

n Sites/portals not user friendly from either pet owner or practice side

n Doesn’t integrate well with PIMS

n Time it takes practice team to keep up with pricing issues

n Shipping time

n Very low profit margins/high fees charged by vendors

n Vendors either don’t provide much marketing support or contact pet owners too frequently

n Poor client service from vendors/difficult to communicate with/vendors not very responsive

n Reports provided by vendors not very comprehensive or useful

n Time it takes for the practice team to encourage clients to use the practice online pharmacy

n Not able to price competitively with Chewy

0

10

20

30

40

50

60

70

80

Cost-based pricing (prices based on what

it costs your practice to

buy the product)

Pricing based on what 

pharmacy technology

provider suggests

%

Pricing based on the

manufacturer's suggested Minimum

Advertised Pricing (MAP)

Pricing based on what

other veterinary clinics are charging

Pricing based on what other non-clinic

companies are charging (pet store, online pharmacies,

brick and mortar pharmacies)

Pricing based on both what

other veterinary clinics and non-clinic

companies are charging

Value-based pricing

(prices based on how much you think the

pet owner values the product)

What pricing strategies do you employ to set your online pharmacy product fees (mark all that apply)?

Responses: 166

Responses: 45 126 53 9 48 18 11 7

27%

76%

32%

5%

29%

11%7%

No formal methodology

(pricing based on instinct and/or

experience)

4%

Pricing

Setting prices for the products sold in the online pharmacy can be challenging in order to balance a reasonable return to the practice with having prices that are competitive in the market. As noted above, this can be a time-consuming activity as well.

The first question asked: “What pricing strategies do you employ to set your online pharmacy product fees (mark all that apply)?” By far the most popular strategy is to use the pharmacy vendors’ suggested price.

5

Page 5 of 6

continued on pg. 6

0

10

20

30

40

50

We charge more for products sold in the

practice, compared to the same products in our

online pharmacy

We charge the same for products sold in the

practice, compared to the same products in our

online pharmacy

We charge less for products sold in the

practice, compared to the same products in our

online pharmacy

%

Do you charge more, the same or less for the products sold in the practice vs. those sold in your online pharmacy?

Responses: 167

Responses: 79 58 13

47%

35%

8%

The next question asked “Do you charge more, the same or less for the products sold in the practice vs. those sold in your online pharmacy?” Only about 1/3 of the responding practices set prices the same in their online pharmacy vs. in-house; most charge more for products sold in the practice. Most of the “other” answers said that what they charged depended on the product and some products could be higher while others were lower or the same.

The last question was open-ended and asked: “If you have a price differential on products sold in the practice vs. your online pharmacy, how do you justify or educate the client about those differences?” The most common explanations given to clients include the following:

n The online pharmacy company can buy in bulk and offer lower prices

n The overhead costs of the online pharmacy are lower because all they offer are pharmacy services—better efficiency (it costs the practice more to order and hold the product)

n Buying local sometimes costs more due to the above reasons but pet owner can get the product right now and the practice can more easily help if there is an issue

When prices are fairly competitive between in-house and the online pharmacy, the practice will emphasize the cost is the same or only slightly different. Several practices mentioned making clients aware of any rebates or coupons available for in-house purchases. One practice said they don’t compete against themselves and only offer products in the online pharmacy that they don’t carry in-house.

Online Pharmacy Client Usage and Revenue

Online pharmacy usage has definitely picked up since the pandemic as can be seen below.

0

10

20

30

40

50

1-3%

%

4-5% 6-10% 11-15% 16-20% 21-30%

What percent of your active client base used your online pharmacy pre COVID 19 and since March 2020?

Responses: 15948%

18% 18%

27%

16%

22%

6%

12%7% 6%

1%6%

Pre COVID Post COVID

4% 4%0% 2% 1% 2% 0% 1%

31-40% 41-50% 51-60% more than 60%

05

10152025303540

less than $500 monthly

%

$501 to $1,000 monthly

$1,001 to $3,000monthly

$3,001 to $5,000monthly

$5,001 to $10,000 monthly

more than $10,000 monthly

How much average net revenue did your online pharmacy generate pre COVID 19 and since March 2020?

Responses: 15935%

17%

30% 27%22%

27%

8%

16%

4%

9%

1% 3%

Pre COVID Post COVID

6

Page 6 of 6

Sale of Retail Items In-house

As noted in the first section, only about 1/3 of the practices sell retail items in their online pharmacy. These last three questions explore the sale of retail items in-house.

First practices were asked: “Do you currently offer retail products for sale at the practice (i.e., leashes, beds, toys)?” Fewer practices sell these items in-house than online.

28%

72%

Do you currently offer retail products for sale at the practice (i.e.,leashes, beds, toys)?

n Yes 50n No 126

Responses: 176

In-house retail sales have not changed significantly since the pandemic started as can be seen below.

01020304050607080

less than $500 monthly

%

$501 to $1,000 monthly

$1,001 to $3,000monthly

$3,001 to $5,000monthly

more than $5,000 monthly

How much average revenue is generated monthly from your inhouse retail store pre COVID 19 and since March 2020?

Responses: 12765% 69%

7% 9%13%

9% 5% 7% 10% 7%

Pre COVID Post COVID