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Which levers do pharma companies have to offset the pricing headwind? This consolidation has been going on for a while already and we have not seen such a big impact in the company's margins derived from this.

We don't see a big impact on margins, but one big part within the companion market, you'll see with these products in that market, there is a lot of rebate programs. There'll be prices that are charged through the vet clinic, and then there'll be a rebate that comes back to the consumer. In that way, there's some play that pharma companies have within pricing in these rebate programs with consumers so that they could offer a better rebate, or if a consumer buys multiple different products, they'll be able to get a larger rebate. In reality, you'll also have a relatively consolidated market from a pharma perspective. The vet clinics know there are certain products that are very trusted and are also maybe not priced so high, like you see in the human pharmaceuticals, where the consumer is still not as price sensitive. I think part of their lever is that they have really strong brand loyalty. If you've looked at the human space, there's definitely more sensitivity to price whenever a generic enters, whereas with the animal pharma, there just hasn't been as much price sensitivity with generics. There's definitely a market share loss but they're still consumers and vets see value and a lot of the branded products that are in the market so that brand loyalty comes into play.

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Moving back to the customer, what do you think are the threats and opportunities for pharma companies related to the increasing relevance of alternative channels such as big box retailers and ecommerce?

Let’s touch on big box retailers first. I think one of the challenges there is on price, but the opportunity is around private label products, as well as maybe co-marketing type relationships whereby you can almost shift some of your marketing to that partner with the private label. In private label, what I'm thinking of there are products that are manufactured using the same formulation, but that are labelled for the specific big box retailer. If we think of a Banfield-type of retailer, they may have private label branded products that fit specifically for their brand and their store. Oftentimes, you'll offer that with a price concession along with it, so if there is a Next Guard type product that is private labelled for that business, then potentially you would give up some price for that product, but the opportunity there is that you have a more of an exclusive relationship with them, and there's a motivation for Banfield or a big box retailer to market that product, as well.

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