Most ODs support new contact lens pricing strategies

A unilateral pricing policy for contact lenses that is becoming more popular among manufacturers and welcomed by most practitioners took the spotlight at a recent Senate hearing.

The Senate Committee on the Judiciary, Subcommittee on Antitrust, Competition Policy and Consumer Rights, led by Sen. Amy Klobuchar (D-Minn.), held a hearing July 30 to gather information on the unilateral pricing policies (UPPs) and how they would affect retail competition.

The pricing strategy garnered mixed support from participants at the hearing, but private practitioners seem to be embracing it.

A poll on Healio.com/Optometry posted after the hearing queried optometrists regarding the concept of such pricing policies and, of 204 respondents, 85% said they support it. More than half of respondents said it would motivate them to invest more time in contact lens education.

In an interview with Primary Care Optometry News,Kerry Giedd, OD, MS, FAAO, explained the implementation of these policies from an optometrist’s perspective.

“It is straightforward: as a vendor, you are contractually obligated to retail all UPP products at a set price or higher,” she said. “Manufacturers may terminate your account and you may no longer be able to buy and, thus, resell, their products as a penalty for noncompliance.

“Similar pricing policies exist for everything from sunglasses to iPads to appliances,” she added.

“Antitrust laws are meant to ensure competition in the marketplace, to ensure there is not a monopoly,” Giedd said. “If the consumer has ample choices within the market, as they do for sunglasses, e-readers, appliances and so on, setting a manufacturer’s suggested retail price (MSRP) for any given product has been accepted. Consumers can always choose another product if the MSRP of one product is above their personal price threshold. Perhaps contact lenses, as medical devices, are more closely scrutinized by government bodies with regard to antitrust violations than products in other industries. Or perhaps because there are fewer big players in the contact lens industry, and three of the four of them now are utilizing UPPs in some way, red flags were raised.”

Senate hearing

Participants at the senate hearing included R. Joe Zeidner, general counsel of 1-800 CONTACTS; George Slover, senior policy council with the Consumers Union; Millicent Knight, OD, CHC, FAARM, head of professional affairs with Johnson & Johnson Vision Care Inc. (JJVCI); and David Cockrell, OD, president of the American Optometric Association.

 

Alcon explained in a written statement that it adopted a UPP when it launched Dailies Total1 in 2013 and expanded the policy to include Dailies AquaComfort Plus Multifocal and Toric and Air Optix Colors contact lenses in 2014.

Bausch + Lomb announced a UPP for its Ultra lenses in February 2014, according to Zeidner at the hearing.

In June 2014, JJVCI announced in a letter to eye care professionals that a UPP would apply to Acuvue Oasys and 1-Day Acuvue Moist families of products as well as the 1-Day Acuvue TrueEye Brand Contact Lenses.

“Based on discussions with the manufacturers, we anticipate all future J&J [Vision Care], Alcon and B+L products will fall under their resale price maintenance (RPM) programs, and both Alcon and B+L are considering whether to further expand their resale price maintenances to cover long established products like J&J [Vision Care] has done,” Zeidner said. “CooperVision, the sole remaining manufacturer without an RPM program, may be forced to consider following suit.”

Bob Ferrigno, CooperVision president, North America, told Primary Care Optometry News that the company has no plans to apply a UPP to CooperVision-branded products. However, Sauflon, which CooperVision recently acquired, brought its Clariti family of daily disposable silicone hydrogels to market with UPP, and CooperVision will uphold that.

When contacted by PCON regarding the topic, Bausch + Lomb stated that it does not “make public statements regarding our pricing policies.”

Angel Alvarez, chief executive officer and founder of ABB Optical Group, issued a statement to PCON regarding the company’s stance on UPPs.

“ABB has been working closely with manufacturers to develop unilateral pricing policies, which we believe enable a better overall patient experience by supporting competitiveness of prescribing practitioners,” Alvarez said. “Contact lens fitters have always been and will always be a focus of our organization. We do everything possible to help them succeed.”

As part of the hearing, Alcon and JJVCI described their decisions to institute unilateral pricing policies.

Alcon explained in its written statement that its UPP was a “response to the concern that inadequate margins for ECPs would lead to inadequate education of patients about the Dailies Total1 treatment option, perhaps preventing Alcon from recouping its huge financial investment in this new product.”

The manufacturer also stated its belief that its UPP will help all or most of the players in the contact lens business.

“It helps patients who would benefit from this technology by ensuring that as many of them as possible learn about and, if medically appropriate, obtain the new lenses,” the company wrote. “It enhances Alcon’s prospects of recouping its investment in the development of Dailies Total1, and in doing so makes it economically viable for Alcon to invest in other technologies – which again benefits patients. It helps ECPs by enabling them to earn a reasonable profit on lenses they sell, if they so choose. And we believe that in the long run it helps online and mass merchandise sellers, because in the end they can only sell this new product when an ECP has prescribed it, and we believe that the UPP will increase patient awareness of an improved contact lens option.”

Knight, on behalf of JJVCI, noted at the hearing that the company aimed to create lower prices in establishing its UPP. She said the company estimates that approximately 66% of patients will pay a lower price, and another 17% will see little or no change to the price of their contact lenses.

JJVCI’s UPP was also designed to replace rebates with savings – as the company noted that only 6% to 8% of patients returned rebates – and create transparent pricing that would allow consumers “to make the best purchasing decision based on quality, clinical need and price,” she said.

“Drawing on my experience as a practicing optometrist and now in my role with JJCVI, I am confident our UPP provides transparency and simplicity in the value and costs associated with what patients trust their doctors to prescribe,” Knight said.

“Importantly, the UPP creates greater accessibility to lower prices for everyone, not just the few patients that remember to send in their rebates correctly,” she continued. “Lastly, by instituting a UPP, lowering our prices and by making the process by which our consumers can access these lower prices simpler and more convenient, we believe we can better compete with other manufacturers in the contact lens market.”

Knight also disclosed that new minimum prices are below the current national average selling price in most cases.

Opposing views

While the contact lens manufacturers have instituted UPPs in hopes of providing optometrists with more time for education and providing consumers with more transparent pricing, among other benefits, others are unhappy with these policies.

“Price matters in this market,” Sen. Michael S. Lee (R-Utah) said at the hearing. “I’ve heard that as prices go up, consumers may wear their lenses longer than they should, potentially doing damage to their eyes in an attempt to save money. So it’s important that we consider the effect of minimum pricing arrangements.”

Consumers Union’s Slover stated that “a policy like this makes sense for a manufacturer only if it can be confident that other manufacturers will be taking similar action and won’t be taking competitive advantage.”

However, “Whether the new practice constitutes an antitrust violation from a legal standpoint, from a practical standpoint it is anticompetitive to refuse to allow discounting,” he said. “Consumers are denied more affordable alternatives. They pay more than they need to, and sellers who would like to make those affordable alternatives available are denied the opportunity to do so. That’s not good for consumers, however you look at it.”

Zeidner also presented his arguments at the hearing, focusing on the gravity of the numbers.

He stated that nearly 39 million Americans wear contact lenses, spending $4.2 billion annually on them.

“In terms of revenue, J&J [Vision Care] has 35.3% of the market, Alcon 30.6%, CooperVision 23.9% and Bausch + Lomb, 7.2%,” he said. “This means these four manufacturers own 97% of the market.”

“RPM already covers 40% of the entire market and is rapidly expanding,” he continued. “We project that by the end of next year, 80% of the market could be subject to RPM. And keep in mind that contact lens wearers are not choosing their brands – their eye care providers choose – and they generally are not aware of alternatives.

“Consumers will have far fewer choices where they can purchase their lenses,” Zeidner said. “They will pay higher prices – especially as discounters drop out of the market and eye care providers gain more pricing power. And they will spend even more in time and transportation costs having to purchase refills from their eye care provider.”

Robert Atkinson, president and founder of the Information Technology and Innovation Foundation, “a nonpartisan think tank whose mission is to formulate and promote public policies to advance technological innovation and productivity,” also submitted testimony to the subcommittee.

He addressed why he believes unilateral pricing will hurt both consumers and competition.

“Optometrists will be more likely to sell UPP lenses because they will know that their customer cannot find a better price by going online or to a big box distributor,” Atkinson wrote. “By selling UPP lenses that virtually guarantee patient lock-in, contact lens producers know that optometrists are much more likely to prescribe their company’s lenses. Unfortunately, what makes economic sense for an individual company... produces a suboptimal result for both the entire industry and for consumers.”

Debunking arguments

Cockrell addressed several of these points in his testimony, stating that an optometrist’s profit margins are not the biggest concern.

“At the end of the day, the price of the lens or the possible profitability is really a very small factor, for two reasons,” he said. “First, keep in mind from the professional side we want to make sure that patient’s eye stays healthy. From the business side, we want that patient/consumer to come back and see us over the next 20 or 30 years. If we don’t take care of that patient and do a good job with their eye health and their vision, they’re really not likely to come back, so we keep both of those factors in mind.”

He also noted issues in the argument that optometrists control a patient’s prescription, as there are no generic prescription equivalents in the contact lens industry.

“There are so many different characteristics,” Cockrell explained. “If you leave those decisions up to the consumer to say, ‘I want to pick Brand A because it costs less,’ then we get back to the myriad of problems that result in bad health care for the patient. It’s no different than letting me pick out what orthopedic hip replacement I want. ‘I want that one because it costs less.’ It’s just faulty logic, to say the least.”

Additionally, in responses submitted to Klobuchar, Cockrell said that he is not aware of research that supports the conclusion that the increased price of contact lenses would lead to higher numbers of noncompliance.

“The bottom line is that any failure to comply with usage recommendations is dangerous and risks potential harm to the patient’s eyes,” he said. “Patients who push the boundaries of lens wear and safety are the patients who most need an eye care doctor to educate and counsel them. Having a good relationship and trust with the doctor is key.”

More perspectives

While the policies may be contentious, the majority of optometrists are reportedly in favor of the unilateral pricing policies.

Giedd and David L. Kading OD, FAAO, both told PCON that they support the policies.

“I think it is fantastic because it sets an even playing field and it also does not support companies who want to price cut their products in an effort to increase utilization,” Kading said. “As a doctor, it allows me to let patients know they won’t find the lenses cheaper anywhere else.”

“By removing price as a deciding factor, we, as eye care practitioners, can be more focused on ocular health and contact lens performance – what we should be focused on – and less on the business or financial aspects of the patient encounter,” Giedd explained. “We can spend more time communicating about compliance and lens care and wear behavior and less about pricing. When this happens, we are adding value to the patient experience in our practice and taking better care of our patients.

“Patients can ultimately ‘shop around’ if they wish, but assuming your (the ECP’s) office provides convenient purchasing and delivery options, there is absolutely no incentive for the patient to purchase elsewhere, and they are likely to purchase from you,” she continued. “The ECPs have the skill to fit the lenses and assess the ocular health and, by providing the recommended products to the patients, they fulfill the full scope of the patient’s needs. Since independent research confirms that patients who shop for contact lenses online are at greater risk for adverse events and go longer between exams, patient safety is better when they turn to their doctors for both the service and the product purchases.

“I find most patients are loyal when it comes to purchasing their eye wear and contact lenses from your office when they perceive value in the experience you have provided them,” Giedd said. “UPP definitely helps further solidify that relationship and loyalty when even the price-shopping patients find that your price matches an online or big box retailer and they are highly likely to order from you.”

What’s next?

Though the Senate has held an exploratory hearing on the policies, it is not certain that they will take any additional steps.

“What we would anticipate is that all parties that are involved in the UPPs – the manufacturers and the people that are questioning it on the other side – will continue to do the research and decide whether or not to proceed,” Cockrell said in an interview with PCON. “We can’t predict what the senate committee might do.

“As I understand it,” he continued, “if the Senate committee should decide to take it further, the committee certainly has the option of continuing its investigation to determine if some type of legislation needs to be proposed to resolve any concerns. I believe it will be some time before this issue is resolved.”

For optometrists, Giedd acknowledged that it is still early to judge how the implementation of UPPs will affect profits.

“The vast majority of patients purchase contact lenses through us – over 90% – but we have honestly not tracked a measurable change since UPP has been in effect,” she said. “Most practices still have a minority of contact lens patients who have been affected by UPP, but this will continue to grow. It is important to recognize, though, that non-UPP lens options will continue to exist, and not every patient will need or want a premium lens.” – by Chelsea Frajerman