The E-Business Revolution
The E-business revolution
Renshaw, Maurice
Pharmaceutical Executive (Eugene) Mar 2000
SOURCE TYPE: PERIODICAL
PM_ID: 13756 ISSN: 02796570
The pharmaceutical industry is poised to take advantage of the tremendous opportunity to use the Internet to substantially increase market share. USA Today reports that in 1998, more than 22 million adults in the United States used and visited an estimated 15,000 health-related web sites. Already, 10 million Americans are regularly using the Internet to find pharmaceutical information, according to Cyber Dialogue. Offline, Americans will spend a projected $150 billion for health-related products and services.
The Internet is now influencing virtually every aspect of society and business, and it has already revolutionized a number of industries. At Parke-Davis (P-D), every strategic and tactical plan that our functional units develop will include an examination of the potential for the Internet to have a facilitating, transforming, or disruptive impact on our key markets.
P-D sees the Internet facilitating the pharmaceutical business in a variety of ways. Those ways include providing access to market and product information, facilitating competitive analysis, and improving staff training. The range of information available allows for sophisticated market analyses and strategic planning.
The Setting
The transforming power of the Internet in our industry is based on the convergence of several factors: pervasive technology in everyone's homes and offices, increased financial responsibility by patients for their own health care, and the increasing presence of electronic "connectivity" between physicians, managed care organizations, PBMs, and pharmacies.
The Internet has demonstrated its ability to create new leaders in a number of industries, including retail and financial services. The accelerated branding power of the Internet has enabled new market entries, such as Amazon and eBay, to catch the market leaders unaware. Every day emerging companies are conquering new categories of e-commerce, the latest being on-line drug stores. In 1998, U.S. mail-order drug sales reached $11.2 billion. Add to that predictions of phenomenal e-commerce growth, and the opportunities become interesting.
Forrester Research has reported all e-commerce revenue figures of $43 billion in 1998 and forecasts $1.3 trillion by 2003. Health care Internet commerce is poised to explode in the United States, reaching $370 billion by 2004, with $22 billion projected to be business-to-consumer retail product sales. The early adopters PlanetRx.com, CVS.com, and Drugstore. com-are creating new relationships with consumers who are becoming hungry for better information and enhanced interactive experiences.
Several of the largest chain pharmacies in the United States are not only online, they are now partnering with pharmaceutical benefit managers and e-business network facilitators. We see that with the PlanetRx and Express Scripts partnership, Rite Aid and PCS, and the most recent arrangement between Merck Medco and CVS and CVS with WebMD. Amazon.com owns a significant stake in Drugstore.com. An alliance has formed between Walmart, America's largest retailer, and Microsoft, the largest software company. And we're now seeing large communication networks partnering with health portals, such as CBS and Medscape; CNN and News Corp. with WebMD; and AOL, which hosts several health portals, merging with TimeWarner.
These new partnerships and alliances raise many questions about who will control the future of health care--managed care, large retailers, mass merchandisers, e-tailers, pharmaceutical companies, or a player who is not currently in the health industry? Not only are there a number of possibilities, but the speed at which the shift in control will happen will be unprecedented in our industry.
Why We've Done It
New combinations of players will continue to emerge to meet the increasingly sophisticated demands of the consumer, changing the very shape of the pharmaceutical business and defying categorization. The dominant players will be those that recognize that companies build customer loyalty with superior service and value. P-D has created a new E-Business Unit to identify how to further leverage our core competencies, including disease management. The unit is also charged with taking advantage of new competitive entities in the form of strategic partnerships between existing and emerging health care companies, pharmacies, portals, and online communities. (See "Circle of Care.")
Doug Sheldon, vice-president of the E-Business Unit, says, "The Internet is a great equalizer, as all pharmaceutical companies will essentially start from ground zero to learn about the Internet and how to best use it. Most of the lessons learned from the Internet lie ahead of us, not in recent history. Our E-Business Unit was set up to rapidly formulate, execute, and interpret e-business strategies while encouraging 'out-of-the-box' thinking to identify new consumer-centric, web-enabled opportunities for P-D, our consumers, and our trading partners."
To be a leader, our senior management recognizes the need to help usher in the Internet into the company with a sense of urgency, yet keep it focused and accountable. The P-D E-Business Unit, in close coordination with senior management, has a mission. The unit will ensure that a balance develops between those who would err by moving too quickly to grasp the vapors of immature Internet opportunities, with those who would move too slowly by holding all opportunities to a more rigid ROI model.
The growing desire of patients to assume more responsibility for their health care decisions is driving the trend toward the patient in health care marketing, which is being accelerated by traditional media and direct-to-consumer (DTC) advertising. Power will rapidly shift to the patient as well. Considerable promotional dollars are shifting from physician-focused marketing programs. Out of approximately $8 billion of pharmaceutical companies' total marketing spend, companies channeled an estimated $1.5 billion in 1998 into DTC programs-and that amount is expected to double in 1999. Yet the Internet is not just another DTC advertising medium. Its potential to deliver quality information goes far beyond that.
What We've Done
P-D has been one of the first pharmaceutical companies to take advantage of the current climate. Our strategic rethinking of e-business initiatives led to the creation of Rezulin Express, a complete disease management program for people with type 2 diabetes. Through a partnership with PlanetRx.com, a full-service online pharmacy, patients who take Rezulin can purchase their prescriptions online at a competitive price and have their orders delivered to their homes.
The program also provides, at no cost to the patient, a web-enabled disease management program through a link to the award-winning site Diabetes.com. The program offers educational materials, information about monitoring progress on Rezulin, reminders for doctors' visits and prescription refills, and access to a team of diabetes-knowledgeable pharmacists available 24 hours, 7 days a week.
To develop Rezulin Express, P-D sought to leverage our core competencies in disease management with the power and speed of the Internet. Our team examined internal communications and addressed Internet training so that we could shorten decision-making cycles and become more reactive to potential opportunities and the needs of the consumer.
P-D's e-business initiatives enable us to connect to patients all over the United States; facilitate access about advances in knowledge, treatment, and prevention; and collect demographic information to further refine programs designed to improve outcomes for patients and their primary care providers. Specifically, the Internet is changing disease management programs at P-D by using e-commerce to link disease state management, direct-to-patient distribution (mail service pharmacies), and DTC advertising.
Although the Internet offers opportunities for improved information flow and transactional efficiency, there are distinct challenges for traditional marketers in the shift to Internet marketing. In the Internet world, no single manufacturer has control, and the cost of entry is still relatively inexpensive. Some view the Internet as a threat to existing channels of distribution. Companies have to allocate resources to training. There is potential for disruption of market leadership for key brands. Another challenge ties in developing appropriate measurement of the adoption of the new Internet technologies and new ways of doing business.
Appropriate metrics for the Internet fall into three categories: competency (staff are trained and knowledgeable), use (the company incorporates the Internet into business activities), and results (web site impressions, shift in market share, process improvement). It therefore became necessary for us to consider certain investments, meant to protect and leverage brand growth, that are not always measurable by classic ROI models. As a result, we are currently developing new metrics models with our traditional trading partners, as well as emerging Internet partners, to continually refine our approach to the new environment.
Now that P-D has web-enabled information resources and e-commerce activities focused within our E-Business Unit, we are able to increase persistency and outcomes among existing patients; attract new patients; expand market reach beyond traditional channels, creating a new channel advantage; and reach patients with balanced, timely information when they're predisposed to focus on their health care. With estimates that more than 119 million people have Internet access and 53 million of them are active users, those abilities can add up to market share and category dominance for P-D.
Maurice Renshaw
Vice-President, Warner-Lambert Company
President, Parke-Davis USA
Maurice.Renshaw@ parke-davis.com |
