Drug Sales To Drive $18B Net Health Market

According to data from IT research firm IDC, U.S. sales of pharmaceutical, health, and beauty products over the Internet will boom from less than $250 million (US$) in 1999 to more than $18 billion in 2004.

The study, “U.S. Online Prescription and Nonprescription Pharmaceutical, Health, and Beauty Market: Forecast and Analysis,” predicts that the majority of revenue — 80 percent or $14.8 billion — will come from online sales of prescription drugs.

“Powerful drug industry players, including managed care organizations and prescription benefit managers, are developing e-commerce strategies. As a result, the growth of this market will accelerate substantially over the next five years,” said Jim Williamson, senior research analyst with IDC’s Consumer eCommerce: Consumer Goods program.

Footing the Bill

IDC says that the best way for online pharmacies to cash in on the coming boom is to partner with payer organizations, such as prescription benefit managers and managed care organizations, who foot the bill for many of the prescriptions bought in the United States.

These organizations, according to IDC, are highly motivated to cut costs, and many payer organizations are turning to mail-order fulfillment for refills and other prescriptions that are not time-sensitive.

IDC predicts that these payer organizations will look to cut costs further by investing in online fulfillment of prescriptions. The study says that by 2004, these payer organizations will account for $14.2 billion or 96 percent of the online prescription market.

Williamson said, “Online pharmacies must realistically assess the threat that payer organizations pose to their businesses. Consumer acceptance of payer groups will be driven by simple economics: People will get their medications where they’ll get reimbursed.”

Williamson also had a warning for companies that refuse to roll with the changes: “Online pure plays anchored to their original determination to remake the prescription drug industry in their own image will succumb to market powers beyond their control.”

IDC recommends that companies expand beyond pharmaceuticals and sell such related products as beauty and nutraceuticals.

Satisfied with Health Information

Another reason for the boom, according to Williamson, is that “Consumers are increasingly accepting the Internet as a way to access health-related information and content.”

Williamson’s comments are supported by an earlier report by Cyber Dialogue, which predicted that 33.5 million adults would seek health information online in 2000. Additionally, 49 percent of adults who sought pharmaceutical information online say they are “very satisfied” with the health information they have gathered.

The Cyber Dialogue survey also said that among the 89.5 million U.S. adults who take prescription drugs, 31 percent are currently online and 9.5 million of these consumers have already purchased products online.

Other factors that the IDC says will contribute to the boom in online prescription sales include the overall increase in prescription medicine spending and the aging of the U.S. population.