Chewy fights legal battle as it makes aggressive push into pet med market

Chewy is making an aggressive push into the multibillion-dollar market for pet meds—and it’s raising a high-stakes legal battle in the process that has driven some veterinarians crazy.

Jonathan Detweiler, who co-owns Telford Veterinary Hospital outside Philadelphia, says he is increasingly being interrupted with requests to write prescriptions for Florida-based Chevy, whose billionaire founder Ryan Cohen took to Reddit this year. “Meme Stock” became a hero as he tried. Turnaround at video-game retailer GameStop.

If Chewy fills out the script for one of its clients, Detweiler receives no cut. So when Chewy’s request comes in, Detweiler employees contact the client and try to get them to purchase it through their pharmacy.

But Chevy — which became a Wall Street favorite during the pandemic amid rising demand for pet adoption and delivery services — counters that such calls amount to an illegal “diversion scheme,” according to a lawsuit the company has filed earlier in New York state. was filed this year.

Chewy has filed its lawsuit against Covetrus—a $2.5 billion company that builds online storefronts for veterinarians in exchange for a cut in revenue. Chewy is also suing Vetcove, a software startup. Chewy claims that the two companies “conspired” to redirect their prescription customers to pharmacies affiliated with the vet operated by Covetrus. The latter counts datewheeler as a client.

Jonathan Detweiler (first row, at left) tries to convert Chevy prescription requests into sales through his pharmacy—a practice Chevy is trying to fight.

The outcome of the suit could help decide the future of the lucrative and rapidly growing US pet prescription market, which was valued at $10.8 billion in 2020. Some veterinarians say it can also determine whether pet owners have to shell out more money for services.

New York and most other states at the center of the controversy have long had laws that require customers to give written prescriptions when they ask for them. The rules were designed to give customers more choices in an era when it meant they could move to other local small businesses.

American Veterinary Medical Association President Dr. “Many of these requirements have been around for more than a decade,” Jose Arce told The Post.

Indeed, Chevy said in its lawsuit that the rules are “too old” and were enacted “before the Internet became widely available.” As a result, Chevy says, they require pharmacies to obtain physical written prescriptions from pet doctors or to verify orally or by fax “even if the entire transaction happens online.”

Still, veterinarians say that right of choice rules, state by state, are finally giving the online mega pharmacies a leg up.

“It’s impossible to compete with Chevy,” said Dr. Katja Lang of the Heart of Chelsea Veterinary Group.

“It’s our clients’ right to get medicine and food from any source they want, but it certainly hurts business,” Manhattan veterinarian Dr. Katja Lang said. “It’s impossible to compete with Chevy.”

Many of Lang’s clients are using Chevy that her clinic, the Heart of Chelsea Veterinary Group, has a full-time employee whose sole job is to respond to Chevy’s requests – even though the clinic doesn’t make any money from writing prescriptions for Chevy. and runs his own pharmacy.

“Sometimes [we] There are customers who get really upset when they say, ‘How dare we get this from your pharmacy?'” he said. “It’s hard.”

She said that Heart of Chelsea has already raised some prices for veterinary services to help the company lose out to Chevy for revenue.

Meanwhile, Detweiler says that about 20 percent of the clinic’s business comes through pet prescriptions and food, and phone calls have helped Chevy “stop the bleeding” of revenue. Had he been forced to halt his efforts to convert Chevy requests through a shop operated by Covetrus, he estimates his practice would result in a loss of about $160,000 each year—10 percent of all revenue.

Detweiler said this would force the hit clinic to lay off at least one of its 17 employees and raise prices for veterinary services.

The US market for pet meds was valued at $10.8 billion in 2020.
Getty Images/iStockPhoto

Not all vets at Chevy are baring their teeth.

Eric Dougherty, medical director of a feline veterinarian called The Cat Practice in Manhattan’s Flatiron District, said he recommends his clients buy from the company.

“The first thing I tell them is, go to Chevy,” Dougherty told The Post. “We lose a little bit on the bottom line, but the advantage, which outweighs the loss of income as a whole, is that Chevy allows people to get things at their home at an affordable price.”

He said he knows some other veterinarians in New York City refuse to write prescriptions for Chevy, but says he considers that tactic “unethical” and “not great medicine.”

Dougherty said that if other vets say they are going to be seriously damaged by a Chevy, they believe their business practices shouldn’t be too stable in the first place.

Dr. Eric Dougherty of The Cat Practice recommends Chevy to his clients.

“If You Have to Shut Your Doors” [because of Chewy]’You’re either charging too high a price for prescriptions to keep the place open, or I can’t figure out what’s really going on,’ he said.

Chewy’s lawsuit presents evidence that includes screenshots of texts and e-mails allegedly sent by companies to customers in an effort to convert Chewy requests into sales through the vet’s own platforms — The same strategy is used by Detweiler’s practice.

“The lawsuit focuses on the companies we believe are facilitating the diversion” [of sales] Through its software and services offerings, sometimes without the knowledge of veterinarians,” Chevy spokeswoman Diane Pelke said in a statement to The Post. “Chewy is committed to supporting the vet community.”

Vetcove CEO Alexander Cates countered in an e-mail, “Chevy’s lawsuit is an example of an all-too-familiar story: A large public company wields its power in a baseless attempt to oust a smaller, competing rival. . Market. ”

Covetrus, which, like Vetcove, has yet to respond to Chewy’s allegations in court, declined to comment, citing pending litigation.

According to Ayman Soliman, a health care law attorney at the New York firm Abrams Fensterman, Chevy is probably going after Covetrus and Vetcove rather than individual vets like Detweiler because suing small businesses would be a bad approach.

“I believe [not naming vets] was strategic in nature and designed to preserve the existing established business relationship Chevy has with some veterinary practices,” Soliman told The Post, adding that Chevy had pre-trial settlements with the companies. Can fire a gun for.

Soliman also said that Chevy’s “bare-bones complaint” clearly struggles to establish a “conspiracy between Vetkov and Covetras.”

“Procedurally, Chevy doesn’t have a strong case,” he said.

Chewy, which went public in 2019, became an investor favorite during the pandemic.
AP

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