Almost 66% of British households have a pet with the number having increased substantially during and since Covid. In parallel, the cost of owning a cat or dog or indeed a rabbit has been rising sharply. UK veterinary services are worth £2 billion.
According to the UK’s Office for National Statistics, the cost of veterinary services and other pet services has increased by 12.5% in September compared to September of the previous year. This is almost double the rate of inflation when comparing it to the wider consumer prices index. It is also significantly higher than the equivalent rise of 2.2% seven years ago.
The Competition and Markets Authority (CMA) is reviewing veterinary services because there are suspicions that the above-mentioned price rises are due to the fact that large corporations have taken over many independent veterinarians over the past couple of years.
The number of independent practices fell from 89% of the industry about 10 years ago to 45% in 2021. The watchdog is looking into the acquisitions of independent practices. There have been takeovers by CVS, VetPartners, IVC Evidensia, and Medivet. Takeovers by these large corporations have all been investigated.
The chief executive of the CMA, Sarah Cardell said: “Caring for an ill pet can create real financial pressure, particularly alongside other cost of living concerns. When a pet is unwell, they often need urgent treatment, which means that owners may not shop around for the best deal, like they do with other services. This means they may not have the relevant information to make informed decisions at what can be a distressing time.”
There is concern that pet owning clients are struggling to find easy access to information on price and treatment options. They might also be unaware that their once independent veterinary practice is now part of a big corporation selling additional services and treatments. Cardell added, “This could affect pet owners’ choices and reduce the incentives of local vet practices to compete.”
Personal comment: these big private equity businesses have purchased independent veterinary practices because they saw a means to make a lot of money quite quickly. They felt that veterinarians who owned their own practice (independent practices) are not commercially-minded enough. Arguably these independents are more concerned about serving their client and improving the health of their patients than making a lot of money. That would be my main argument as to why they have piled in and bought up so many independent practices.
The counter argument from the big corporations is that they have modernised a “cottage industry”. They have invested in technology and treatments and improved pay. They’ve improved benefits and training in the profession which is suffering a shortage of vets.
But critics would argue that they have reduced competition within the business. The spokesperson for the Federation of Independent Veterinary Practices, Rita Dingwall, said: “This can be detrimental to local independent practices, already facing financial challenges with increased costs, as buying pharmaceuticals in volume drive the corporate purchase price down [to levels] that independents, unless part of a buying group, cannot possibly achieve.”
What she’s saying is that the independent vets can longer compete with these big corporations owning hundreds of veterinary practices because they don’t have the buying power.
It appears that these corporations are setting aggressive financial targets on their veterinary practices which leads to increased costs for the end consumer.
The CMA closed its six-week call for information last week and plans to update the market early next year. There is speculation as to what they might conclude in their investigation. It has, according to The Times “set tongues wagging over vets’ future”.
Why have large corporations brought up independent veterinary practices in the UK?
Here’s a bit more information about the acquisition of independent veterinary practices by large corporations. Various factors are involved.
Economies of scale. I’ve mentioned this above. Large corporations can achieve economies of scale by consolidating multiple veterinary practices. This helps to centralise administrative functions and supplies can be bought in bulk. Operations can be streamlined. There is increased efficiency. Big corporations can negotiate better deals with suppliers and pass on those reduced prices to consumers.
Financial incentives. This is the main reason as far as I’m concerned. Independent veterinarians were not making enough money out of their businesses. It was a market ripe for takeover. Veterinary services are in high demand in the UK and there’s been steady growth. Big corporations can tap into what is a profitable marketplace.
Enhanced service offerings. Big corporations can, as mentioned, invest in advanced diagnostic equipment and technology and thereby provide a better service. But this too puts up the price. And in response that clients might take out health insurance but the premiums for this insurance will go up. It’s becoming more expensive to look after a cat or dog.
Quality control and standardisation. Big corporations can enforce, across the board, standardisation and quality control ensuring consistency of services and patient care.
The big potential negative is that the big corporations become greedy a provide a service which is out of reach to many pet owners. The corporations tend to prioritise profit margins over patient care.
