Do IBM, Microsoft, Pfizer have the Right Rx?
After IBM, Microsoft and drug giant Pfizer finish their foray into the health-care technology business, they may end up wanting a doctor of their own.
Last week, the three companies said they will join forces to provide billing, record management and wireless services to doctors. But the health-care information technology (IT) sector has numerous money-losing incumbents, and some observers are skeptical that a newcomer can capture much revenue, given the reluctance of many doctors to change their decades-old practices.
The powerhouse trio, which expects to offer services by years end, envisions a tech-savvy doctor who will write prescriptions on a wireless device that sends data directly to the drugstore. At about the same time, the physician and his or her office workers can check medical histories on online databases and generate billing records for insurance companies.
Among the biggest players on the field is WebMD, brainchild of Silicon Valley billionaire Jim Clark. The company, which links insurers, doctors and patients online, lost $3 billion last year on revenue of $517 million, and it is still digesting a spate of mergers.
WebMD, which hopes to turn a profit by late this year or early next year, has a clear advantage over the newcomers. About 250,000 physicians and 1,000 hospitals now use the companys software and online services to automate jobs like data retrieval, health maintenance organization enrollment, referrals and claims processing. Competitors include e-MedSoft.com, Medscape and NDCHealth. Medscape offers doctors a Net-based subscription service that allows them to store and manage medical records on the Web. It lost $321 million on revenue of $48.2 million last year.
Nevertheless, IBM, Microsoft and Pfizer present a formidable alliance, and they see profits in the health-care IT sector, a business that generates some $22 billion in annual sales. But the new partners did not divulge how much they are investing.
The venture will reduce a doctors administrative workload and offer "a cost-effective, customized solution that responds directly to one of the most pressing issues facing physicians today," said Karen Katen, an executive vice president and president of worldwide pharmaceuticals at Pfizer.
IBM will install hardware and software, and provide Web-hosting and helpdesk services through its call centers. Microsoft, which owns 13 percent of WebMD, will supply its .Net Enterprise Server Platform, along with Windows 2000 and wireless applications. Pfizer will use its 8,000 sales representatives to tout the new service to physicians.
In a research note, Amy Arnott, an analyst at Morningstar, said the new deal "could be a significant revenue opportunity" for Pfizer, and that WebMD has "failed to take full advantage of market opportunities in this arena."
Alexander Draper, a senior vice president at The Robinson-Humphrey Co., isnt so bullish. Draper, who has a neutral rating on WebMD, said it will take several years for a new company to gain clients in a field with so many competitors. Other big pharmaceutical companies, like GlaxoSmithKline, have tried and failed to get into the health-care IT business, he said. And theres another problem: "Doctors dont change easily," he said.