Tuesday, January 10, 2017

Candy Co. Invests $9 Billion in Veterinary Business

A few days ago, I posted about how the Mars candy and food company was now the largest owner of veterinary services in the U.S. (Is Your Vet Owned by a Candy Company?).

Today comes word that Mars (headquartered just two miles from my house) has expanded its entry into the veterinary care world, with the purchase of the second largest veterinary health service provider in the U.S. -- VCA -- for $9.1 billion. From the press release:

Mars, Incorporated and VCA Inc. (NASDAQ: WOOF) today announced that they have entered an agreement under which Mars will acquire all of the outstanding shares of VCA for $93 per share, or a total value of approximately $9.1 billion including $1.4 billion in outstanding debt. The transaction price represents a premium of approximately 41 percent over VCA's 30-day volume weighted average price on January 6, 2017, and a premium of approximately 31 percent over VCA's closing price on January 6, 2017. The agreement has been unanimously approved by the boards of directors of both companies.

VCA joins Mars Petcare, one of the world's leading pet care providers. Pet care has been an important part of Mars for over 80 years. The transaction reaffirms Mars' commitment to the pet care industry and the veterinary profession, and once completed will help drive Mars Petcare's purpose to create A Better World for Pets. Mars Petcare's portfolio of Veterinary Services businesses includes BANFIELD® Pet Hospital, BLUEPEARL® and PET PARTNERS™. Together with VCA, these businesses will provide an unprecedented level of access to high quality veterinary care for pets, from wellness and prevention to primary, emergency and specialty care. Mars Petcare is already an industry leader in pet nutrition with global brands that include ROYAL CANIN®, PEDIGREE® and WHISKAS®. Mars has a growing business in pet DNA testing through the WISDOM PANEL®, and in 2015 also acquired pet technology provider WHISTLE.

What's this mean for pet care? Consolidation in the health care arena always means more pressure to engage in fraud through upcoding, price-gouging, bill-padding, and medically unnecessary goods and services. The patient (human, canine, or feline), takes a back seat to the bottom line, and procedure manuals are written to maximize revenue by cutting actual services while increasing the costs and number of billed activities.

The pressure of Wall Street (NASDAQ: WOOF) will drive up prices across the veterinary sphere, while also lowering the confidence people will have about the quality of care and information they are getting from their own veterinarians.

The parallel here is with human health care, where the rise of industrialized medicine driven by doctor kickbacks, off-label marketing, bill-padding, upcoding, and price-gouging is king.  The difference; unlike in human health care, there are no federal rules prohibiting such activity for dogs and cats, and because the damages are small (because dogs and cats are simple property), there will be almost no legal representation for consumers given the hind leg.

1 comment:

Sarah Davis said...

As someone who spends a lot of time and money at the vet, and buys a lot of bagged/canned kibble in the low-middle price range, this subject is near to me. Seems anymore that just about anything Mars doesn't own, Nestle does. It's a strange world where "petcare" falls into the hands of junk food manufacturers. I've had cats fall ill, and had at least one die, eating tainted foods from brands owned by these companies.

Also, another problem with the VCA-style standardization. I keep snakes and the most affordable vets who'll see them are at a nearby VCA. Originally I had assumed that they accepted reptiles because they had a resident herp vet. Seems not. So far as I can tell, every vet at the clinic is required to treat reptiles and not one has specialized. I've had the ugly experience of under-qualified vets treating my animals more than once in the past. One managed to break a rat's jaw and stick her with a needle sized for an adult cat, all in one visit. That particular vet was just a fool; the fault was his own. But now corporations apparently are making the decision that vets in their franchise will treat small or exotic animals they may in no sense be equipped for.