Diversion: Wholesaler's financial woes draw lawsuits by veterinarians - DVM
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Diversion: Wholesaler's financial woes draw lawsuits by veterinarians
Some DVMs claim they are out thousands of dollars after diverting products outside of traditional veterinary channels


It's not black-and-white on the gray market

McIntyre estimates that by the time his son Lane was 2 years old, his medical bills already totaled $1 million. Born with a 2 percent chance of survival, the now 4-year-old suffers from kidney failure, hypertension, autism and Celiac's disease.

Last summer, McIntyre and his wife, a teacher, were looking forward to the birth of a new baby. Their daughter, Kayla, was born in May 2010 with congenital adrenal hyperplasia. Kayla lacks an enzyme needed by the adrenal gland to make cortisol and aldosterone.

McIntyre's wife quit her job to care for the children, who require at least 14 medical appointments each week, plus 100- to 200-mile trips to see their doctors. McIntyre was already borrowing against his family's calf stock and South Dakota ranch when he began diverting veterinary flea product to WTF Wholesale last summer. He says he was solicited for months with promises of 3 percent profit over his order total. He had the products shipped to his parents' South Dakota ranch, where they affixed shipping labels and sent them along to the wholesaler.

"I know a lot of vets aren't happy about diversion," McIntyre says. "But there are reasons as to why something happens—it's not just black and white."

Over the next year, McIntyre shipped the company close to $100,000 in product, and he says the extra income was helping. WTF even sent cards to the McIntyre family whenever Lane had surgery. But all that ended when McIntyre claims he never got paid nearly $26,000 for his fifth shipment in February.

Since then, his calls have gone unanswered and, with two sick children, he has had little time to press the issue further. Then he realized he wasn't alone.

After searching on the Internet for WTF Wholesale, he found Costello. She was working with her supplier to mitigate her own debt of $25,832 that she allegedly racked up over five orders for WTF.

Costello's experiences with diversion began about five years ago. As a relief veterinarian, she worked for a practice owner who was diverting.

"At that time, I thought it was a terrible thing to do," she says. "But I had breast cancer in 2007 and I wasn't able to work for a while because of that, and I didn't have enough in savings to support myself."

Now 52, Costello says she still has about $5,000 in student loans, lived alone and was barely getting by after being out of work for three months as she battled cancer.

Then, in 2009, her perceptions of diversion started to change.

"I finally decided, if PetSmart is selling it, I might as well utilize this as a way to make some revenue," Costello says.

In May 2009, she sold a $5,000 order of veterinary flea product to WTF. She placed the order under her name, and the wholesaler sent her shipping labels. She would then forward the product to Daytona Beach and wait for payment, which usually came two or three months later. In June 2009, she alleges she shipped WTF a $15,798 order, followed by a $21,147 order in July 2009, a $22,257 order in September 2009 and a final $26,557 order in July 2010.

She used the money to pay extra bills and says it did help, but her total earnings for diverting the flea product totaled only about $2,700. But something happened in fall 2010, and WTF allegedly stopped paying her.

"[Product diversion] is actually a very common practice, and practice owners do it just as much as the drug representatives and the relief veterinarians," she says.

"I think the thing that impacted me the most is when one veterinarian said to me, 'I'm sorry about what happened to you, but basically you're stealing from me.' I think, in a way, she's right. Anyone who supplies third parties, we're taking away from private practice veterinarians," she says. "But there are many of us who will probably have to declare bankruptcy if the company doesn't pay."


Source: DVM360 MAGAZINE,
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