Rs, did you see this? It was in the Seattle PI the day I left.
Now this is one hell of an eye-catcher.
>>Prescriptions in cyberspace
Virtual pharmacies hope to tap health care market
By CAROL SMITH
P-I REPORTER
The locally owned pharmacy may be following the independent bookstore into the tar pits of commerce, but the concept of a neighborhood pharmacy isn't extinct yet.
The neighborhood just got a whole lot bigger.
Soma Corp., a Seattle-based internet company, two weeks ago launched Soma.com, the first licensed online pharmacy to sell prescription drugs and other goods typically found in drugstores, including vitamins and health and beauty aids. The company, which employs 30 people, aims to bring the qualities of a neighborhood pharmacy - customer service, convenience and a personal relationship with a pharmacist - to cyberspace.
Like Amazon.com, the monster internet book retailer, Soma.com is hoping that being first will give it a competitive edge in an untested market.
But its lead time may be slim.
Redmond-based Drugstore.com, headed by former Microsoft executive Peter Neupert - the man who launched Slate and MSNBC - and backed in part by Starbucks' Howard Schultz, plans to launch its own prescription, health and beauty products Web site this quarter. San Francisco-based PlanetRx Inc., and Rx.com based in Austin, Texas, will also launch Web sites shortly.
Several other companies, such as Greentree.com, already sell vitamins and health supplements over the Internet. And drugstore giant Rite Aid Corp. and specialty vitamin retailer General Nutrition Cos. recently announced plans for their own joint-venture Web site.
There's a reason so many competitors are poised to jump on the pharmacy market: It's huge, and growing with every day that baby boomers age.
Americans spent more than $100 billion on prescription drugs last year, according to David Restrepo, analyst and head of health practices for Jupiter Communications in New York, a market research firm specializing in how the Internet and other technologies are changing traditional consumer industries. They spent another $30 billion on over-the-counter drugs.
Over the next four years, prescription drugs are expected to hit $150 billion in sales, according to Tom Pigott, son of retired Paccar Chairman Charles Pigott and founder of Soma Corp. "It's five times the size of the book market," he said.
Whether Internet pharmacies will be able to capture a share of those sales remains to be seen.
"The market (for online prescriptions) doesn't really exist yet," Restrepo said. "It's just now starting to happen."
Some analysts see opportunities. Others, obstacles.
"It's a business that requires a lot of verification, fraud prevention and background review by pharmacists," said Bob Allison, division manager for Paladin Internet, an e-commerce consulting and development firm in Seattle.
"It's a little more complicated functionally than to process and ship books or CDs to somebody."
The question is whether an online pharmacy can satisfy any of the three criteria that make for successful e-commerce ventures: "easier, faster, cheaper," said Kip Martin, senior research analyst with META Group in Stamford, Conn.
To be successful, online pharmacies will have to change consumer behavior, he said. And that could be difficult given people'' concerns over the security of their medical information and the need for absolute reliability in delivery of medications.
"What's the benefit to me, the customer?" said Martin, who remains skeptical that online pharmacies will find a niche on the Net. "I've got to trust these guys with pretty sensitive stuff."
Soma is betting that people will gravitate to online prescription buying for the convenience, privacy and 24-hour-a-day access to a pharmacist to ask questions. In addition, the site will provide services customers can't get at regular pharmacies, such as e-mail reminders that their refills are due.
Prescriptions will also cost less than at chain drugstores because Soma won't have the "brick and mortar" overhead, Pigott said.
The company, which was founded in December 1997, already has a 25,000-square-foot automated plant in Ohio for filling prescriptions. The company has seven employees in Ohio and another 23 providing administrative support and marketing at the Seattle headquarters. The Ohio plant, which at peak capacity will be able to fill 50,000 prescriptions a day, is situated within one hour of three major express mail handlers, including UPS and Airborne, enabling overnight delivery.
So far, Soma has received a master pharmacy license from the Ohio State Board of Pharmacy and the U.S. Drug Enforcement Agency. Under e-commerce laws, those licenses permit prescription distribution in all 50 states. Soma has, however, applied for separate pharmacy licenses in all 50 states. It has been approved in 30 so far, and expects the remaining states to follow suit in the immediate future. Pharmacists based at the Ohio plant will verify all prescriptions before they are shipped, Pigott said.
Getting prescriptions in the mail isn't new. Mail-service pharmacies, which mostly handle refills, now account for about 10 percent of prescriptions ales and are one of the fastest-growing segments of the market, Pigott said.
Indeed, some pharmacists view online drugstores as glorified mail-order businesses that will play a role in dispensing drugs but won't replace face-to-face pharmacy interactions.
"The question is: Do you look at drugstores as a commodity or a service, " said Arthur Zoloth, pharmacist and vice president of Northwest Pharmacy Services, a pharmacy benefit management company in Renton.
There are advantages to having a pharmacist who knows the patient and the patient's medication history, he said.
If consumers use online services to fill prescriptions for chronic conditions, and use storefront pharmacies for medications for acute problems, they run the risk of problems with drug interactions because neither pharmacist knows about all of the medications being taken, he said.
Unlike mail-service pharmacies, which mainly do refills, however, Soma.com will also be able to process new prescriptions, and do them with a quicker turnaround, Pigott said. That means people could get all their medication needs met through the Web site.
Soma has spent the past year negotiating relationships with 20 major health maintenance organizations and insurance plans to work out billing procedures for prescriptions. In addition, Soma has developed the encryption processes necessary to ensure that a customer's medical information won't be intercepted, he said.
All that remains is for consumers to start buying their medicine on the Web.
Soma, which is already taking orders, and Drugstore.com, which is about to, are both optimistic.
"People are going to be changing their behavior," said Debby Fry Wilson, spokeswoman for Drugstore.com in Redmond. "They demonstrated that over the holidays."
Record online sales during the holiday buying season convinced many that e-commerce has a huge future, Martin said. But consumers are fickle. While some goods, such as books and videos, are flying off the Web, others, such as groceries, have not been so quick to sell.
"It remains to be seen whether people are going to buy deodorant over the Internet," Restrepo said.
The Web, however, has already proven a fertile shopping ground for health information. Analysts estimate that more than one-third of the 48 million people using the Internet each year are looking for medical information. Internet drugstore vendors are hoping it won't be hard to convince them to go the next step and make health-related purchases.
In particular, online pharmacies are hoping to win over the growing number of seniors who are starting to use the Internet.
According to Narrowline Inc., a San Francisco company that monitors Web use, more than 12 percent of those using the Web are 50 or older, up nearly 80 percent compared with last year. Seniors account for 60 percent of health care spending. Getting them to buy online would be critical to the success of an Internet pharmacy, analysts said.
If consumers do switch from storefront to Web-site buying, it could mean big bucks for virtual pharmacies - down the information superhighway.
"It's potentially a more lucrative business than selling books,", Restrepo said.
But it will take heavy spending and brand investment before it pays off, he said. "We don't see a profit anytime soon."
Soma, which has private backing "in the millions," is equipped to build a brand, Pigott said. He wouldn't elaborate on the amount of backing.
Drugstore.com, which employs about 100 people and has backing from venture capital firm Keliner Perkinds, Caufield & Byers, also has the money to make a name for itself, analysts said. Kleiner, Perkins is the firm that helped launch Amazon.com.
"The market is growing, conservatively, at 10 percent a year." Said Wilson of Drugstore.com. "That's an estimated $12 billion to $15 billion in new business opportunity every single year. It's a big new market opportunity where there's a lot of room to shift to e-commerce."
Seattle Post-Intelligencer - Monday, February 1, 1999<< |
