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Mr. Chairman and Members of the
Subcommittee, my name is Joe Zeidner, General Counsel for 1-800 CONTACTS.
Our company sells replacement contact lenses to consumers through an Internet
web site and a toll-free telephone number. I appreciate the opportunity to
appear before the Subcommittee today.
I commend you, Mr. Chairman,
for holding this hearing to examine the impediments imposed by states on
e-commerce. When it comes to contact lenses, this issue impacts the pocket
books – and the ocular health – of a great many Americans.
Today, thirty-five (35) million Americans wear contact lenses. While
Americans of all ages wear contacts, our typical customer is female between the
ages of twenty-five (25) and forty-four (44). Americans spend more than
$3.5 billion every year on contact lenses.
In many instances, state laws
and regulations on contact lenses, while cloaked as health measures, work to:
(1) stifle competition -- the driving force for innovation, efficiency, and
customer service; (2) increase prices consumers pay for contact lenses; and (3)
actually compromise, rather than promote, the ocular health of contact lens
wearers.
Before providing the
Subcommittee with a more detailed analysis of these state laws and regulations,
please allow me to note some things for the record.
First, 1-800 CONTACTS respects
the important role that eye care professionals play in our health care system.
We are not a substitute for personal eye care. Each day, a growing number of eye
care providers work cooperatively with us. We are encouraged by our recent
experience in California where consumer groups and the California Optometric
Association worked to craft legislation (signed earlier this week by Governor
Davis) that protects the health of contact lens wearers, while allowing for fair
competition.
1-800 CONTACTS recognizes there
are risks inherent in wearing contact lenses and strongly supports the retention
of measures which legitimately protect consumer health.
However, these risks are not
related to where a consumer purchases replacement lenses. An investigation
conducted by state attorneys general examining the contact lens industry
concluded that,
“[P]urchasers from
alternative channels have had no greater ocular health problems than purchasers
from ECPs [eye care professionals]. Our multi-state investigation has
failed to reveal any study showing any correlation between compromised ocular
health and receipt of lenses through alternative channels.”
In addition, in settling
anti-trust claims brought by 32 state attorneys general, the American Optometric
Association specifically agreed that it
“shall not represent
directly or indirectly that the incidence or likelihood of eye health problems
arising from the use of replacement disposable contact lenses is affected by or
causally related to the channel of trade from which the buyer obtains such
lenses. Specifically, the AOA shall not represent directly or indirectly
that increased eye health risk is inherent in the distribution of replacement
disposable contact lenses by mail order or pharmacy or drug stores.”
Perhaps the greatest threat to
ocular health faced by contact lens wearers is caused by failing to dispose of
contact lenses frequently enough. Doctors have reported that frequent
replacement of lenses significantly reduces eye infections and inflammation
among disposable contact lens wearers.
The less expensive contact
lenses are and the easier they are to obtain, the more frequently wearers will
change their lenses. According to a McKinsey and Company survey,
fifty-seven (57) percent of consumers would replace their lenses more frequently
if lenses were cheaper. Thirty (30) percent of consumers listed cost
savings as a reason for over-wearing lenses. Moreover, twenty-two (22)
percent of consumers stated they wear lenses longer than they should because
“purchasing them is inconvenient.”
Finally, while too many states
have protectionist laws shielding vested interests from competition, a few
states have adopted laws that should help their residents benefit from
e-commerce. Some of these states, for example, have laws expressly
authorizing the online purchase of contact lenses.
Why would states want to impose
barriers to e-commerce when it comes to sales of replacement contact lenses,
especially when such barriers can threaten, rather than promote, consumer
health? To answer this question, it helps to understand how the contact
lens industry works.
A Brief History and
Overview of the Contact Lens Market
Originally contact lenses were
custom made from rigid materials. Commonly called “hard” lenses, they
required eye care professionals to engage in the labor-intensive practice of
customizing the fit of lenses to each patient’s eyes. As hard contacts
were a customized item, consumers were effectively limited to purchasing them
only from eye care professionals.
Technological advances led to
the introduction of “soft” contact lenses in the late 1980s. Unlike
customized hard lenses, soft lenses are standardized, mass-produced commodities.
The most popular soft contact lenses are disposable and are designed to be
replaced every two weeks. The fastest growing segment of the industry are
disposables that are replaced every day. Currently, soft lenses are worn
by approximately 85 percent of all contact lens wearers. More than 90
percent of the orders we ship are for disposable soft lenses.
As
the market moved towards mass-produced disposable lenses, consumers began to
purchase their lenses from outlets other than the doctor who prescribed them.
A variety of entities – pharmacies, mass merchandisers, and mail order
companies – began selling replacement contact lenses directly to consumers.
Contact lenses are perfect for
centralized distribution. Boxes of contact lenses are small, light, and
easy to ship and the product must be replaced regularly. Because of the
wide spectrum of possible parameters, the product is just too unwieldy for the
average eye care professional to maintain stocks sufficient to quickly meet all
of their customers’ needs.
Companies with the ability to
(1) centralize distribution, (2) store hundreds of thousands of different
prescription parameters; (3) purchase in bulk; and (4) execute Internet and
phone orders, can bring efficiencies to the market place – efficiencies which
benefit consumers through lower prices and more convenient service. Once a
customer has ordered from us, getting replacement lenses should be as easy for
the customer as a couple of clicks .
Unfortunately, the efficiencies
of this business model (and the benefits it makes available to contact lens
wearers) are in many states being thwarted by unnecessary regulations and
statutes which shield vested interests from the competition and market
efficiencies made possible by the advent of disposable soft lenses and the
Internet.
The introduction of soft
disposable lenses did more than change the economics of the contact lens
business – it also created a conflict of interest: Eye doctors sell the
products they prescribe.
There is no customization of
disposable contacts. Consumers most often buy these mass-produced lenses
four 6-packs at a time. Daily disposable customers commonly buy 180 or 360
lenses at a time.
When
contact lenses were custom made, it was necessary for eye care professionals to
sell the lenses they fit on their own patients. With disposable,
mass-produced, widely available soft lenses, it is no longer necessary for the
prescriber to sell what they prescribe.
As the market place
transitioned to soft disposable lenses, the practices of eye care professionals
remained the same. They retained the ability to both prescribe and sell
contact lenses, creating a conflict of interest which has increased costs and
restricted consumer choice.
Comparing how contact lenses
and prescription drugs are prescribed and sold helps illustrate how this
conflict of interest impacts consumers.
With prescription drugs, there
are a number of protections which -- while not perfect – help preserve
competition, promote innovation, and protect the consumer.
For example, first, when a
patient visits a family care physician, the patient knows the doctor is not
going to sell what he or she prescribes. Second, the patient is entitled
to receive a copy of the prescription, and can take it to any pharmacy the
patient wishes. Third, when the patient gets to the pharmacy, he or she is
often given the choice of a generic equivalent.
These protections are not
available to contact lens wearers. First, eye doctors do sell what they
prescribe. Second, the patient is often not entitled to, and even more
often does not receive, a copy of the prescription, and may not take it to a
pharmacy because the doctor is the pharmacy. Third, not only are there no
generic alternatives, consumers often don’t have a choice of brands.
With contact lenses, the eye
doctor, not the patient, usually chooses the brand. There can be financial
incentives for eye care professionals to prescribe certain brands. Many
eye doctors do not prescribe brands unless they sell those brands in their
store. In some cases, eye doctors prescribe private label brands sold only
in their store and available nowhere else – leaving consumers to essentially
pay a premium price for a generic product.
The conflict of interest in the
contact lens industry catches the consumer in the middle. When a consumer
decides to purchase her contacts online, she must get permission from one
supplier (her eye doctor) in order to purchase from another. There is a
financial disincentive for eye doctors to give competitors permission to make a
sale to their customers.
Rather than update their laws
and regulations to take into account the changes in how contact lenses are fit,
manufactured, and sold, many states have adopted laws and regulations designed
to preserve this conflict of interest and insulate eye care professionals from
competition.
An Analysis of State
Impediments
1.
No Right to One’s Own Prescription
Having a contact lens wearer
receive a copy of her own prescription is essential to promoting competition for
replacement lenses. The prescription has been called the consumer’s
“ticket” to lower prices and better service.
Yet in the majority of states,
consumers have no right to copies of their own prescriptions. A survey
conducted by The Detroit Free Press indicates that consumers in the Detroit
region often have a difficult time obtaining their prescriptions. Of fifty
(50) optometrists surveyed, only one would release contact lens prescriptions to
patients after an exam. Fifty-four (54) percent of optometry offices
stated that they never release contact lens prescriptions to patients.
In some states, Americans have
a right to their own contact lens prescription – but only if they ask for it.
In these states, burdensome requirements are commonly used to frustrate the
limited rights consumers do have. Under Illinois law, for example,
consumers have a right to a copy of their prescription, but are required to
request the release in writing.
Finally, in the few states
where contact lens wearers do have an automatic right, that right is often not
enforced.
Under federal law, every
American has a right to a copy of his or her own eyeglass prescription.
However, the rule setting forth this right does not extend to contact lenses
because when the rule was adopted in 1978, contact lenses were custom-made.
We support updating federal law to extend this rule, commonly known as the
“eyeglass rule,” to include contact lenses.
2.
Restrictions on Who May Sell Contact Lenses
The laws of several states
attempt to prohibit the sale of contact lenses over the Internet. In some
states, these laws seek to grant monopolies to in-state eye care providers.
We believe these laws are unconstitutional. Georgia law, for example,
attempts to have contact lenses sold only in a face-to-face transaction with a
state licensed eye care professional. Similarly, under New Mexico law,
only state licensed physicians or optometrists would be allowed to sell contact
lenses.
3.
Use of Prescription Lengths to Stifle Competition
Many states do not set a
minimum period for the expiration of a contact lens prescription. Absent a
medically reasonable minimum standard, eye care professionals can legally write
unduly short prescriptions – in some cases as short as one day -- to frustrate
a consumer’s ability to purchase replacement lenses from other sources.
In a recent issue of Contact
Lens Spectrum, Dr Joe Goldberg, an optometrist and Emeritus Fellow of the
American Academy of Optometry described how prescription length can be used for
competitive purposes:
“We can’t eliminate mail
order replacement businesses, but we can use our professional ingenuity and
patients’ contact lens prescriptions to challenge them.”
He went on to note that:
“Patients should obtain mail
order lens replacements only during the service life of the lens prescription.
Therefore, practitioners must limit the service life of a lens prescription.”
Dr. Goldberg ultimately
recommends that eye care providers write prescriptions for six months, a period
substantially shorter than recommended by leading professional associations.
The American Academy of Ophthalmology states that, “While the optimal time
limit for a contact lens prescription has not been clearly defined, most eye
care professionals would recommend evaluation of the fit within two years, and
the more conservative would advise one year.” Similarly, for adults aged
eighteen (18) to sixty (60), the American Optometric Association suggests an
evaluation every one (1) to two (2) years.
Mr.
Chairman, I ask that the text of Dr. Goldberg’s article be included in the
record at the end of my testimony.
On average, consumers spend
approximately $100 for an eye exam. By attempting to force consumers to
come in for frequent eye exams without medical justification, eye care providers
can both compel consumers to spend money on unnecessary exams and at the same
time enhance the eye doctor’s ability to sell additional products.
4.
Prescription by Brand
Some states require that
prescriptions for contact lenses be brand specific. These laws enable eye
care professionals to write prescriptions for brands sold only to the doctors
that prescribe them. An increasingly popular tactic is for eye care
professionals to write prescriptions for exclusive store brands available only
from the prescriber. Charles Hom, an optometrist in Walnut Creek,
California, described this tactic in an issue of Contact Lens Spectrum, stating
that:
“I
often do not give the patients a choice. I don’t say this is a private
label lens. I just say, ‘This is the best lens for you. It’s the
one you should be wearing.’”
As noted above, this tactic
effectively forces consumers to buy generic lenses at premium prices.
Mr. Chairman, I ask that
the text of Dr. Hom’s comments be included in the record.
5.
Oversight by Self-Interested Boards of Optometry
A state-afforded right to a
prescription is still no guarantee the consumer will get her prescription.
Enforcement of this right is generally left to state boards of optometry,
comprised largely of optometrists.
Recently, 1-800 CONTACTS and
the Texas Optometry Board (“TOB”) entered into a legally enforceable
agreement whereby the Board agreed to require optometrists to respond to 1-800
CONTACTS’ efforts to verify that a customer’s prescription is valid.
In turn, 1-800 CONTACTS agreed to wait indefinitely for optometrists to verify
prescriptions.
Texas optometrists have failed
to respond to these verification attempts more than half of the time.
These refusals have generated more than 10,000 written complaints to the Texas
Optometry Board in the last three months alone. Neither we, nor our
customers, have received any response nor do we believe any action has been
taken.
California stands in marked
contrast to Texas. State legislators, ophthalmologists, optometrists and
consumer groups worked together to develop a regulatory system that protects
consumer’s health and promotes competition. In 1998, 1-800 CONTACTS
agreed with the California Medical Board to implement a passive verification
method for verifying prescriptions. Under this method, 1-800 CONTACTS
communicates to the eye care provider in writing the exact prescription
specifications received from the customer. It also informs the eye care
provider that it will complete the sale based on this prescription unless the
eye care provider advises it within a specific time period that the prescription
is expired or incorrect.
Earlier this week, Governor
Davis signed legislation that essentially codified the passive verification
agreement in place since 1998. This law was supported by the California
Optometric Association which stated that the law “supports safe and
responsible patient access to contact lens prescriptions” and that the law
“strikes a reasonable balance between access and accountability.”
Recommendations: Fair
Competition Benefits Consumers
Contact lens wearers need and
deserve the same protections that prescription drug purchasers and even eyeglass
wearers have. Contact lenses have changed, but elements of the old system
which forces consumers to purchase primarily from their prescriber have not.
Without similar protections, contact lens wearers who try to purchase online and
through other sources will continue to be impeded by state laws which frustrate
competition and hurt consumers.
As mentioned previously,
pending federal legislation would open the market to competition and benefit 35
million Americans who wear contact lenses. We urge adoption of such
legislation.
Thank you for the opportunity
to appear before the Subcommittee to share our views on these important issues.
I would be happy to answer any questions you and the other Members of the
Subcommittee may have.
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