Online Healthcare Expected To Reach $370B By 2004

According to a new study by Forrester Research, the Internet healthcare industry is poised to explode in the U.S. and become a $370 billion (US$) business by 2004.

To get to that point, the report says, firms will organize around a healthcare e-business network that will serve consumers, providers, distribution chains and payers.

After surveying 71 healthcare companies, including manufacturers, insurers, providers and e-tailers, Forrester discovered that both consumer and business-focused healthcare companies expect Internet-based business to grow dramatically.

Healthcare E-Commerce Build Up

According to the study, the healthcare industry has entered the “e-commerce threshold,” the 12-to 18-month building period preceding explosive online growth.

“Eight percent of retail health sales will move online,” Forrester says. “Retail Web sites like Rx.com and Vitamins.com will take advantage of the groundwork laid by early e-commerce players like Amazon.com and CDNOW without having to introduce consumers to the e-commerce concept. Health e-tailers will ride this powerful retail growth spiral to $22 billion in 2004.”

B2B Will Hit $348 Billion

The real growth in e-healthcare, however, will be in the business-to-business segment, which the study predicts will soar to $348 billion in 2004.

“Businesses have significant technical and organizational hurdles to overcome, so initial forays into B2B e-commerce will take time,” the study points out. “But the out-year market potential in distribution chains and insurance claims is enormous. As online business trade gains momentum, 17 percent healthcare business transactions will move online by 2004.”

Breakdown of Consumer Health E-Commerce

Forrester’s analysis of the consumer e-commerce healthcare market is as follows:

Non-medication health and beauty aid sales will hit $900 million in 2004.

Over-the-counter non-prescription drug sales will struggle to reach $1.9 billion by 2004, because consumers generally use them to treat specific conditions for a short period of time.

Natural health cures will rack up $3.3 billion in online sales. By 2004, 12 percent of natural health product sales will occur online, as patients take charge of their own wellness.

Prescription drugs will dominate with $15 billion in online sales in 2004. Pharmacy benefit managers such as Merck-Medco and Express Scripts will drive the initial wave of online prescriptions to cut costs and improve customer service for their mail-order patients.

Doctors And Hospitals To Follow

According to Forrester, both large institutions and small medical practices will turn to new Net players like Embion, Medicalbuyer.com and Medibuy.com to simplify procurement of everything from drugs to capital equipment — thereby driving Internet efficiencies deep into the distribution chain.

As a result, the study predicts that cost-conscious hospitals will move 24 percent of their purchasing online by 2004.

Meanwhile, as more doctors get wired, Forrester also predicts that 12 percent of private practices will conduct their procurement online by 2004.