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SCIENCE & TECH: Chewy picks legal dogfight as it makes

SCIENCE & TECH: Chewy picks legal dogfight as it makes aggressive push into the pet meds market


Chewy is making an aggressive push into the multibillion-dollar market for pet meds — and it’s picking a high-stakes legal fight in the process that has left some vets barking mad. 

Jonathan Detweiler, who co-owns Telford Veterinary Hospital outside Philadelphia, says he is getting increasingly barraged with requests to write prescriptions for Florida-based Chewy, whose billionaire founder Ryan Cohen this year became a “meme stock” hero on Reddit as he attempts a turnaround at the video-game retailer GameStop.

If Chewy fills a script for one of his clients, Detweiler doesn’t get a cut. So when a request from Chewy comes in, Detweiler’s staff contacts the client and tries to talk them into buying it through his pharmacy instead.

But Chewy — which became a Wall Street favorite during the pandemic amid a wave of pet adoptions and surging demand for delivery services — counters that such calls amount to an illegal “diversion scheme,” according to a lawsuit the company filed in New York State earlier this year. 

Chewy has filed its suit against Covetrus — a $2.5 billion company that creates online storefronts for vets in exchange for a cut of revenue. Chewy is also suing Vetcove, a software startup. Chewy claims the two companies have “conspired” to redirect its prescription customers to vet-affiliated pharmacies run by Covetrus. The latter counts Detweiler as a client.

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

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

At the heart of the dispute are longstanding laws in New York and most other states that require vets to give written prescriptions when clients ask for them. The rules were designed to give clients more choice in an era when that meant they could go to other local small businesses.

“Many of these requirements have been in place for over a decade,” Dr. Jose Arce, president of the American Veterinary Medical Association, told The Post.

Indeed, Chewy gripes in its suit that the rules are “woefully outdated” and were enacted “well before the internet was widely available.” As a result, Chewy says, they require pharmacies to either get physical written prescriptions from pet doctors or to have them validated verbally or by fax “even though the entire transaction occurs online.”

Nevertheless, vets say that the right-to-choose rules, state by state, are ultimately giving the online mega pharmacy a leg up.

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

“It’s our clients’ right to get medication and food from whatever source they want, but it definitely hurts the business,” said Manhattan vet Dr. Katja Lang. “It’s impossible to compete with Chewy.”

So many of Lang’s clients are using Chewy that her clinic, Heart of Chelsea Veterinary Group, has a full-time employee whose sole job is to respond to Chewy requests — even though the clinic makes no money from writing prescriptions for Chewy and runs its own pharmacy. 

“Occasionally [we] have clients that get really upset, saying, ‘How dare you say we get it from your pharmacy?’” she said. “It’s hard.”

She said that Heart of Chelsea has already raised some prices for veterinary services in order to make up for revenue the company has lost to Chewy. 

Detweiler, meanwhile, says about 20 percent of the clinic’s business comes through pet prescriptions and food, and the phone calls have helped “stop the hemorrhage” of revenue to Chewy. If he were forced to stop his efforts to convert Chewy requests through his Covetrus-run shop, he estimates his practice would lose about $160,000 each year — 10 percent of all revenue. 

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

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

Not all vets are baring their teeth at Chewy. 

Dr. Eric Dougherty, medical director at a feline-only vet in Manhattan’s Flatiron District called The Cat Practice, said he recommends his clients buy from the company. 

“The first thing I tell them is, go to Chewy,” Dougherty told The Post. “We lose a bit on the bottom line, but the benefit, which completely outweighs the loss of income, is that Chewy allows people to get things at a cheaper price delivered to their house.”

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

Dougherty added that if other vets say they are going to be severely damaged by Chewy, he believes their business practices must not have been very stable in the first place.

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

“If you have to close your doors [because of Chewy], you’re either charging an insanely high price for prescriptions in order to keep the place open, or I can’t image that’s actually happening,” he said. 

Chewy’s lawsuit presents evidence including screenshots of texts and e-mails allegedly sent by the companies to clients on behalf of vets in an effort to convert Chewy requests to sales through the vet’s own platforms — the same tactic used by Detweiler’s practice. 

“The lawsuit is focused on the companies we believe are facilitating the diversion [of sales] through their software and services offerings, at times without the knowledge of veterinarians,” Chewy spokeswoman Diane Pelkey said in a statement to The Post. “Chewy is committed to supporting the veterinarian community.”

Alexander Kates, the CEO of Vetcove countered in an e-mail, “Chewy’s lawsuit is an example of an all-too-familiar story: a large public company wielding its power in a baseless attempt to push a smaller, competitive rival out of the marketplace.”

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 New York firm Abrams Fensterman, Chewy is probably going after Covetrus and Vetcove rather than individual vets like Detweiler because suing small businesses would be a bad look.

“I believe [not naming vets] was strategic in nature and designed to preserve the current established business relationships Chewy has with certain veterinary practices,” Soliman told The Post, adding that Chewy may be gunning for a pre-trial settlement with the companies.

Soliman also said that Chewy’s “bare bones complaint” struggles to clearly establish “the conspiracy between Vetcove and Covetrus.”

“Procedurally, Chewy does not have a strong case,” he said.

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



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