Vet bills are soaring – and big business is to blame

How much is that doggy in the window? And, more to the point, how much will it cost if he gets sick, injures himself or has to be put down?

As anyone with a pet will know, vet bills are at an all-time high. A report last year revealed that the cost of treating sick animals had increased by more than 50pc since 2015 and that customers were struggling to get basic information like price lists and prescription costs that would allow them to shop around.

The reason, observers believe, is the takeover of the former cottage industry by private equity firms. A decade ago, roughly nine in every 10 vet practices across the UK were independent. However, by 2021 less than half remained so as private equity and corporate consolidators like Mars snapped up independent practices in order to build huge conglomerates.

The UK company CVS Group operates around 500 practices, employs 2,400 veterinary surgeons and has a market capitalisation of over £1bn. IVC Evidensia, which is the UK’s biggest vet group and is backed by EQT Private Equity, manages 2,900 locations in 20 countries and was valued at over £10bn in 2021.

‘The single-man practice vanished’

Now, the Competition & Markets Authority (CMA) is launching an investigation into the ramifications of the trend and asking whether the rise of profit-hungry mega chains is behind the sharp increases in pet care bills. “We are concerned about weak competition in some areas, driven in part by sector consolidation, and the incentives for large corporate groups to act in ways which may reduce competition and choice,” chief executive Sarah Cardell said yesterday.

Ken Tyrell, a retired vet from Shrewsbury, in Shropshire, says there is no doubt in his mind that big business is to blame. “The main reason why veterinary surgeons’ charges are now so astronomical is that single-man [practices] have vanished [and been] replaced by multiple groups of 200 practices and more whose one aim and object is profit,” he says.

CVS says it has “engaged constructively” with the CMA and that it has put forward remedies that could be adopted industrywide. IVC says its “decentralised model promotes innovation and clinical independence”.

But UK regulators are not the only ones worried by the trend. The US has also issued a warning. Irish politicians have brought forward a bill to prevent companies from owning veterinary practices. France’s highest administrative court made a similar ruling last July.

Private equity firms have been dubbed “buyout barons”. Set up with the express intention of identifying businesses that can be bought up at a bargain price, improved and then sold for a profit, they own some of the best-known brands in the UK, including the supermarket chain Asda and the AA. But the firms have long been criticised for ignoring the long-term health of the companies they buy and, instead, stripping them of their assets, making a slew of redundancies and then selling them for a vast profit.

Private equity firms are constantly on the lookout for industries in which there are lots of small, relatively cheap businesses which they can roll into large firms before listing them on the stock market or selling them to even larger companies for a tidy sum. The tactic is called buy-and-build and vet practices - which produce steady earnings and are recession proof (because pets still get ill in a downturn) - are perfect candidates.

The returns from private equity-backed buy-and-builds can in theory be increased by making the conglomerates more efficient (bigger firms can, for example, negotiate better deals with suppliers) and taking on a certain amount of debt.

These businesses have become even more attractive since the pandemic. Many of those working from home and starved of contact with other humans for weeks at a time decided the time was right to get a furry friend. The percentage of households in the UK with a pet shot up from 41 per cent in 2019 to 62 per cent in 2022, according to the data company Statista.

Even the Skeldale veterinary practice in Yorkshire, once run by vet-turned-author James Herriot, has sold out to Medivet, a chain of practices backed by private equity.

And it is not just vets who are profiting from Britons’ love for animals. Companies like Pets at Home have enjoyed record sales thanks to the the growth in what the industry rather painfully calls the “humanisation” of pets. In 2021, Pets at Home’s full-year retail sales topped £1bn for the first time. The company’s chief executive Peter Pritchard said at the time that it was now becoming more commonplace for people to buy coats for their dogs in the winter and paddling pools to cool them down in the summer.

The latest annual report of Medivet spells out exactly where pets rank in the household hierarchy: “Spending on pets is generally the penultimate item people cut, second only to baby food.”

And Robert Strong*, a vet with 15 years experience of working as a locum for both independent practices and some of the larger companies, says it is this attachment to animals and willingness to give them medical care on a par with that offered to humans that accounts for the veterinary price increases.

“When I first started working as a vet most practices were equipped with a second-hand NHS x-ray machine and an ultrasound,” he says. “Now they have MRIs and CT scanners. Of course there are likely to be bad actors who are price gouging, as there are in any industry. But, on the whole, you are paying more for a better level of care.”

What’s more, pets, like their human owners, are now living longer thanks to medical advances and new surgical techniques like those being pioneered by so-called “Supervet” Noel Fitzpatrick.

Of course, this too comes at an added cost. An increasing number of owners are therefore taking out pet insurance. This in turn makes a growing segment of the market relatively “price insensitive” because someone else is picking up the tab (although this trend is in turn leading to ever-higher premiums).

Pet care companies also argue that their costs are climbing thanks to a global shortage in staff, which has been exacerbated in the UK by Brexit.

However, the assumption that pet owners will pay whatever it takes to fix Tiddles or Fido is looking increasingly unrealistic, says Strong. “In recent months, some of these companies have seen their profits start to fall and have jacked up prices in order to make up for the lost income,” says Strong. “That’s pretty shortsighted in my opinion because it could lead to a vicious cycle.”

With interest rates now rising, there’s a worry that private equity-backed firms will have to raise their bills yet further in order to service their debt. A lack of competition and opaque pricing could provide the necessary cover.

There’s also a question about how the big conglomerates will keep increasing their profitability in the medium to long term. As one vet recently explained to The Economist: “It’s not that easy to make money out of emptying anal glands.”

But, anal glands aside, one other thing that is not in doubt is the damage private equity has done to the old career path for vets - where they would buy into a practice, try to grow, then sell on retirement. Job satisfaction has plummeted and suicide rates have soared. (Figures show that male vets are twice as likely to take their own life than the general population; female vets are four times more likely.)

“When I graduated, the average vet remained in practice for 10 years,” says Strong. “Now it’s closer to three years. There are exceptions, but on the whole these corporations seem to view vets as cannon fodder.”

* Name has been changed