I have an uneasy feeling that I failed to communicate adequately on Thursday’s post why I’m so outraged by the behavior of Standard Process, along with that of Thorne Research and Designs for Health, in cutting off a Long Island wellness center from their products for re-sale. I’ve focused more on Standard Process because it appears to be carrying the “protect the channel” and anti-Internet banners the highest.

But I feel as if I’ve neglected the real message in this little spat. Without appreciating that, it’s easy, as Michael does in his comment, to suggest that manufacturers can protect the channel “through any legal means” as “their best (business) strategy”—no big deal, business is business.

But Michael in his aside about practitioners making money starts to touch on the real issue—of how selling supplements “has become a big part of many practitioners’ business model…” Linda Diane Feldt picks up the ball and runs with it in pointing out “the elephant in the living room” in the form of questionable ethics of practitioners selling supplements to patients. While ethics is an important issue here, my outrage has to do with these companies’ attitudes toward their ultimate customers–us patients–before fully addressing larger issues like ethics.

Some personal background may shed further light on why I find the heavy-handed approaches of Standard Process and the others so offensive. I learned a lot about the nutritional supplement business as practiced by manufacturers and practitioners because I spent much of 2005–the year prior to launching this blog–working with a startup company that was testing a unique business concept: providing an online system for health-care practitioners to sell their nutritional supplements to patients. The idea was that patients would be able to obtain refills of supplements originally recommended and sold by practitioners without having to come in to the practitioner’s office or phone in or, most important, without being tempted to order over the Internet from Internet Discounter Inc. There would also be lots of information available about all supplements being recommended, so patients would know more about the supplements they were taking.

Practitioners were encouraged to offer discounts of 10-20% over their office prices as a way to stimulate the online business. Whatever practitioners gave up in discounts, we thought, they would more than make up in increased volume from more loyal patients. We eventually tested the concept with four practitioners, and eventually had about 150 of their patients using the online system.

Most supplement manufacturers we discussed it with agreed at least not to fight us on it, since the online system was password-protected, meaning that only practitioner patients would have access to make purchases. We never discussed it directly with Standard Process executives for the simple reason that a Standard Process sales rep warned us it would never fly with the company. He said he liked the idea and would try to convince executives of its merit, but he warned that the odds were long. Practitioners who carried Standard Process products also told us they couldn’t imagine the company going along with such a system, since the company resisted all forms of discounting, and discounting was an inherent part of Internet commerce. Presumably, if practitioners discounted their prices to patients, the next step would be for practitioners to demand that Standard Process discount its prices to them.

Many practitioners resisted the discounting as well. They couldn’t get past the fact that they weren’t making as much on each order as when they sold directly from their offices. They had the same mindset as Standard Process, Thorne Research, and Designs for Health.

And what about the 150-plus patients who were using our system through the four practitioners testing our system? When we surveyed them, they were nearly unanimous in saying they loved being able to purchase their practitioners’ supplements online—for the convenience, the cost savings, and having their records easily available to them.

So when Michael says he is “agnostic” about the whole thing, I suspect he is looking at it as a practitioner, rather than as a patient. Patients are accustomed to buying pretty much everything at discount online.

It all comes back to what seems to be an outmoded idea in our health care system : the importance of providing for the patient’s interests first and foremost. It’s really not such a revolutionary idea, since businesses in nearly all industries other than health care successfully focus on “customer satisfaction” every day.

By November 2005, I pushed this startup venture to give up on its experiment. I thought it could succeed in spite of resistance from Standard Process and many practitioners, but I was more concerned about some internal problems in the venture, combined with higher-than-expected costs to finance a full rollout. When the venture discontinued operations at the end of that month, many patients were quite disappointed.

A month later, in December 2005, Standard Process came out with its written notice to all its practitioners prohibiting ALL online sales, even from password-protected systems, and threatened to terminate them as re-sellers if they were caught providing products over the Internet. I’ll never know if our little test venture prompted Standard Process to go public with its objections, but I suspect it played at least some role.

There are simple reasons why most things are cheaper online: it costs sellers much less to fill online orders than to fill orders from an office or store. You don’t need as much real estate, you don’t need sales people standing around, you don’t need cashiers, and it’s extremely easy to handle re-orders. So you pass on the savings to buyers. That is why so many of us order everything from books to shoes online.

The arguments about protecting patients from “self medicating,” and the supplement companies against liability suits, are empty arguments, rationalizations, as the argument of “protection” often is. The fact is that federal law classifies supplements as food products, separate from prescription drugs. (Standard Process plays up the fact that most of its products are made from real food.) If Standard Process and the others were really so concerned about patients injuring themselves from using the wrong supplements, then these companies would favor some of the legislative initiatives that come up periodically about making supplements available only by prescription. But no, they lobby against that. For a simple reason: They would lose their “channel,” since the supplements would then be available via Walgreens and online pharmacies in Canada, among other places. That would really cut into margins. Talk about playing both sides of the fence.

The real story is that Standard Process, Thorne Research, Designs for Health, and a few others don’t want to risk using the Internet to improve the patient experience because the patient isn’t a high priority to them. They only want to maximize profits for themselves and their “channel” by avoiding any and all discounting.  I can say this with confidence because no company in today’s highly competitive business environment takes the highly unusual step of arbitrarily cutting off lucrative long-term customers unless it is feeling terribly threatened or wants to set an example to the mass of other customers.

Standard Process, in particular, has managed to establish something approaching cult status with practitioners. They love the company’s products. And they love the money they make from its products. Standard Process is counting on this loyalty as it sacrifices colleagues it suspects of bucking the no-discount system.

Of course, the problem of serving one’s own financial interests at the expense of patients isn’t unique to practitioners who sell nutritional supplements. It’s part and parcel of the entire health care system, whether it’s insurance companies, Big Pharma, hospitals, or doctors. Health care is well over a $1 trillion annual business, so there’s a lot of money to divvy up. And I haven’t even begun to address the ethics issues Linda raises.

Patients? Who the hell are they?