Summary
Luxottica Group S.p.A.(NYSE: LUX) will be selling contact lenses in affiliation with one of the lowest priced online retailers in the USA Drugstore.com, inc.. They have a place in the vision insurance industry, eyeglass wholesale market, eyeglass retail market, hiring of eye doctors, sales of contact lenses in their stores and online.
Analysis
Contact lens sales are regulated by the FDA and the FTC. The growth of third party vendors of contact lenses has created numerous lawsuits in the past 10 years. Cooper Vision , Vistakon, Ciba Vision, and Bausch have been involved in many of them. 1-800Contacts has brought most of them. Vision direct has been following on their coat tails with generally lower prices than 1-800.
Luxottica has been a heavyweight in eyeglass design and manufacturing for the past 20 years with a large share of the wholesale market and liscensing field. Luxottica purchased Lenscrafters in 1995 from US Shoe corporation.
Luxottica became a real player in the vision insurance carve out industry when it purchased Cole Vision in 2003. since then it has grown at the expense of Vision Service Plan (VSP).
EyeMed, Spectera, and VSP all compete along a few others for the carve out vision care packages offered by employers. These are in addition to the standard medical benefits for eye disease. These benefits give employees the ability to see well while working by giving them routine eye exams and glasses or contact lenses mostly paid for by these insurance plans.
Spectera changed the contact lens portion of this industry around the year 2000. It started supplying contacts as well as the professional services that goes along with the contacts. Spectera was purchased by United Healthcare about 3 years ago. It has since seen a new website, but not a substantial change in their operations from my point of view.
Prior to Spectera's introduction of company supplied contact lenses, most vision plans only included a dollar amount that could be used to purchase contact lenses from either the prescribing eye care professional or a third party.
Will Luxottica now require sales of contact lenses to be done through their subsidiary? Will this take any potential profit from the sale of contact lenses out of the hands of the independent eye care providers as done by Spectera/Optum Health vision care?
It has always been rumored that Luxottica sends advertising directly to their covered lives about their eyeglass stores, Pearl Vision, Lenscrafters etc. Will they now send advertising for their online contact lens vendor?
