This is the first of two parts. Read part 2.

The voice on the telephone was a young woman’s, as warm and enthusiastic as a long-lost friend. But Dr. Cathy Ball realized quickly that she didn’t know this person and didn’t care to know her.

The caller wanted to buy Frontline. She knew Ball was a veterinarian and offered to pay $30,000 for $25,000 worth of the popular flea-prevention medication. The caller didn’t need to explain that she was a wholesaler who couldn’t buy it from the manufacturer due to Merial’s policy of selling product only through veterinarians. That part was understood.

Ball tried to decline politely by explaining that she’s an equine practitioner. She rarely buys Frontline, except occasionally for family pets or for farm clients’ barn dogs and cats. “I really don’t want to undercut my small-animal colleagues, and it would look funny if I bought that much,” Ball said.

The caller grew indignant. “Well, you do have a Merial account number, don’t you?” she pressed. “Many of your fellow veterinarians in the area are actually taking advantage of this unique financial opportunity.”

Ball responded with a retort her mother, a Brooklyn-born New Jerseyan, used when her daughter was young and wanted to do something other kids were doing: “If Susie Jones jumped off the Brooklyn Bridge, would you?”

The caller hung up.

Two years later, recalling that conversation makes Ball fume still. Her colleagues would understand. Like Ball, many have been similarly solicited, usually by fax. In the veterinary community, the fact that pet parasite prevention medications are being sold by anyone other than veterinarians is a long-festering irritant that, in the age of online retailing, may be coming to a head.

New outlets surface seemingly daily for flea, tick and heartworm prevention medications. Most vendors are online pharmacies but general retailers are participating, too. You can find Frontline at Costco.com, Target.com and the sporting goods store Cabelas.com. The feed store Blain’s Farm and Fleet carries Frontline, Advantage and K-9 Advantix. Amazon.com has those and more. The value of the market is an estimated $1 billion and growing. Everyone, it seems, wants a bite.

But most of the leading manufacturers have long-standing policies of selling their products only through licensed veterinarians, even for medications that don’t require a prescription. “We believe that the best medical advice is only available through veterinarians and their trained staff members,” said Dr. Zack Mills, vice president of pet sales for Merial U.S. “Supporting veterinary practices is the cornerstone of our business.”

He and his counterparts at other major drug companies, including Bayer, Novartis and Pfizer, insist that they diligently enforce their sales policies, but many veterinarians and even pharmaceutical industry insiders are skeptical.

“Is this a phenomenal coincidence that retailers across the United States are selling vet-only products?” Monique Schwartz, a 29-year veteran of the veterinary pharmaceutical business, asked rhetorically. “Companies need to take some responsibility for policing their products.”

Judging from fiery discussions that crop up repeatedly on Veterinary Information Network (VIN) online discussion boards, a prevailing sentiment is that manufacturers have used and betrayed veterinarians: used, by enlisting veterinarians to promote their products, promising them exclusive claim to the retail profits; and betrayed by not enforcing the policies once pet owners came to trust the brands.

To add perceived insult to injury, whenever talk turns to diversion, the finger of blame points to veterinarians. In a letter posted in January 2008 to VIN members who were discussing Frontline’s widening availability, Mills wrote:

“Frontline sold in pet stores is gray market, diverted product, usually purchased from ‘consolidators’ who have in turn obtained it from practitioners willing to sell to them.”

While no one doubts the existence of diverters among veterinarians, many wonder how so much product — enough to supply the Amazon.coms and 1-800-PetMeds of the world — could be diverted by clinicians alone.

By some estimates, one-fifth to one-quarter of sales are attributable to the so-called gray market, which amounts to hundreds of millions of dollars. Diversion may violate company sales policies, but it is not illegal per se.

“If Costco, Target or a Cabela’s store are selling it through their Internet sites, I think they would want a consistent supply,” reasoned Schwartz, whose career includes stints at Merck and Summit VetPharm, and who recently became vice president of marketing at Virbac.

“How they’re getting it, I don’t know that,” said Schwartz, who spoke to VIN News Service as an individual and not as a company representative. “If Costco is putting it online, one has to wonder how this could be an isolated case of a veterinarian selling it to them.”

The path of distribution is a tightly held secret. VIN News Service contacted Petco, Amazon.com, Costco, a Wisconsin-based feed store called Blain’s Farm and Fleet, 1-800-PetMeds and RxUSA to ask how they obtained their supplies. None would tell.

Most replied in variations of this response from Jesper Chou, pet buyer for Costco’s online operation: “We don’t disclose to the public who we buy products from.”

Asked if Frontline, which Costco has been carrying online since late 2008, was difficult to obtain, Chou answered, “Not by any means.”

1-800-PetMeds, which bills itself as “America's Largest Pet Pharmacy,” offered a little more information, but not much. In declining to identify its suppliers, Chief Financial Officer Bruce Rosenbloom said: “We don't necessarily want to teach anyone the business. It’s obviously a highly profitable business for us. ... If you can get ahold of the channels and talk to the right people, you're able to procure the product.”

Rosenbloom said his company has never purchased directly from “main core manufacturers” nor have the manufacturers asked his company to stop selling their products.

“We haven’t had any types of conversations with the manufacturers,” he said. “We may ask the manufacturers from time to time, ‘Will you sell to us?’ and they say no.”

VIN News Service also contacted major veterinary supply distributors and others with long experience in veterinary pharmaceutical manufacturing and sales. Underscoring the sensitivity of the topic, several spoke only on condition of anonymity, even though they shared no hard evidence, only gut suspicions.

For example, one source at a large distribution company said he suspects that the third-party companies obtain product from a combination of sources — from veterinarians as well as authorized distributors that are playing along.

“The distributor knows that ABC Veterinary Services is nothing more than a front for moving this stuff, as we call it, ‘sideways’ within the distribution chain,” he said. “They’re selling thousands or tens of thousands or hundreds of thousands of dollars’ (in product) to these fictitious accounts, and they know they’re doing it, but they have incentives. They hit a sales number.”

Another source posited that veterinarians in the Midwest whose patients are a mix of farm and companion animals would be in a good position to divert flea product without arousing suspicion, especially if they happen to be located near a large dog-breeding operation and can credibly claim, truthfully or not, that they have the breeder’s business.

The source said companies do investigate suspicious spikes in orders but push inquiries only so far. “The companies don’t go out and inspect all these puppy mills,” he said. “They don’t even want to be associated with them.”

The system certainly seems geared more toward rewarding sales than to policing a vet-only sales policy. As marketing executive Schwartz noted, “When sales reps blow out their goal year-in and year-out, they are rewarded.”

VIN News Service asked Merial, Bayer, Pfizer and Novartis how they track diversion, how often they find it and whether they provide incentives to sales agents to identify diverters. For the most part, the answers were not specific. None would say how often they find diversion.

Merial’s Mills replied: “We set strict purchasing limits for each veterinary practice based on the size of the practice, the location, past orders and anticipated growth. However, we recognize that despite our close monitoring, some of our products do find their way into the gray market. When this happens, we investigate the incident, and when we track the product back to a specific veterinary practice, we de-list that practice from our sales roster. Furthermore, our sales representatives are compensated based upon veterinary dispensing only, and therefore have no incentive to promote the sale of our products outside the requirement of our policy.”

Pfizer Director of Public Relations E.F. “Rick” Goulart responded: “We’re on the same side as veterinarians. We are unhappy with unauthorized distribution channels.... Pfizer is not in a position to publicly disclose how we take action or when we take action ... Just be assured that Pfizer is very much focused on this issue.”

Novartis Animal Health Vice President of Communications Mickey McDermott said he was “not at liberty to discuss specific actions we have taken in response to violations of our policy.” He noted that Novartis’s policy that it will “suspend sales to anyone who resells or dispenses our product in the absence of a professional veterinarian-client relationship” is included on the company’s credit application that veterinarians must sign to establish a Novartis account.

Bayer Healthcare LLC Animal Health Director of Communications Bob Walker said only: “We choose to sell only to licensed, practicing veterinarians.”

Asked whether Bayer is aware of diversion points other than veterinarians, Walker said, “We have a program in place to routinely monitor and address illegal and unregistered foreign product.” He did not respond to a request to elaborate.

One company hoping to channel veterinarians’ frustration with product diversion into good will for its product is Summit VetPharm, maker of the flea and tick killer Vectra 3D. Summit uses a barcoding tracking system that enables it to trace the sales path of each package of Vectra. Since Vectra went on the market in September 2007, the company said, it has identified and thwarted six cases of diversion.

Veterinarians were involved in all but one case, according to Joe Conti, Senior Director of Regulatory & Development at Summit VetPharm. The exception was “an elderly lady who had purchased product for her elderly dog who passed (not from our product) and was selling the remaining tubes on eBay,” he said. “Summit contacted her and reimbursed her for the entire purchase.”

In the other cases, “A cease-and-desist order was presented to offending veterinarians — who had signed the Summit anti-diversion agreement — product was recovered, and these doctors are no longer our clients,” Conti said.

Dr. Albert Ahn, who was the company’s senior director of veterinary services until he left last year to become president of AB Science, said tracking technology is inexpensive as well as effective. “We’re talking pennies per package,” Ahn said. “It’s very easy to implement.”

Ahn noted that there is an additional expense for scanning and computer database equipment, but said most experienced vendors have such equipment.

A recent Google search supported the company’s contention that Summit VetPharm manages its distribution tightly. The term “buy Vectra 3D” turned up product reviews, discussions and one veterinary hospital selling it online exclusively to clients.

Another company deploying tracking technology is Fort Dodge Animal Health on its flea and tick product ProMeris. Although ProMeris shows up for sale on Amazon.com (linked to the Web site http://www.entirelypets.com), Fort Dodge’s overall control of its sales earned this commentary from http://www.discountpetmedicines.com:

Fort Dodge has been very strong in their stance that ProMeris products should only be sold by veterinarians with a one-on-one relationship with their client and pet, in other words, sold only by veterinarians practicing in a walk in veterinary hospital where they can see the pet face to face. The expressed sentiment is that this is going to be one product that will not make it to availability in online stores, not even veterinarian managed online pharmacies. Fort Dodge has appeared to take several steps to make this happen, including sophisticated monitoring practices and warnings of potential legal actions against online providers who try to sell the product.

At DiscountPetMedicines.com we support the belief that consumers should always maintain an active face to face relationship with their pet’s veterinarian and that they should only buy products recommended or prescribed by that specific veterinarian for that specific pet's particular needs. However, once the pet owner has been told what meds to buy for their specific pet, we believe it should be possible to purchase the product from the qualified provider of the pet owner's choosing.

The site then goes on to offer three alternative products for sale: Frontline, Revolution and K-9 Advantix, made by Merial, Pfizer and Bayer, respectively.

Mills at Merial said that his company has tried tracking technology and was dissatisfied. “We believe ... that these systems do very little to actually prevent the sales into the gray market in the first place,” he said. “In fact, we pioneered the use of tracking codes on our Heartgard (anti-heartworm) products so we know that such systems only identify diversion after it has occurred.”

He suggested that the popularity of Frontline, which is the top-selling flea and tick medication in the world, helps account for its wide availability. “When demand is there, product will get out,” he said.

Dr. Wes Borgman, a veterinarian outside Orlando, Fla., had a different take on why the makers of ProMeris and Vectra 3D seem to control product distribution more vigorously than their competitors. The products are new, he observed. “The collective recommendation by veterinarians saves the companies millions of dollars over what it would otherwise cost to get consumers to try a product without a strong support of veterinarians.”

Part 2: An inside look at parasiticide product diversion