Internet pharmacies are also ripe for major expansion. Although online drugstores have been among the flops of the dot-com era, Forresters health-care e-commerce team estimated that the online pharmaceutical market could be worth $22 billion by 2004.
One company holding out hope — and dollars — is Drugstore.com. Launched with great fanfare in 1999, the company reported a net loss of $28.6 million for the fourth quarter of 2000. In January, it announced 125 layoffs, hoping the costs savings will help it meet its sales and revenue goals for 2001. Drugstore.com Chief Executive Peter Neupert said the company still has to grow about 30 percent to achieve its goals, "but thats doable."
Drugstore.com still has $130 million in cash and a market capitalization of $88.5 million, but its stock price earlier this month was at $1.25 per share, down 95 percent from its 52-week high. Neupert said that as Drugstore.coms revenue increases, the $130 million in cash will be enough to carry the company to profitability, some time in 2004.
Partnerships will be key to profitability for online drug companies such as Drugstore.com: They cant make money unless they have the approval of the insurance companys procurement manager, who decides where patients can get their prescriptions filled. Online companies have to build trust with each other to tap into the business-to-business e-health market and its potential of tens of billions of dollars of annual revenue.
Successful online drug companies will also use the Internet to target specific drugs to specific consumers. As drugs are developed for every subcategory of disease, pharmaceutical companies will make fewer blockbuster pills, the kinds that tens of millions of people take daily. To make money, theyll need to market their pills to virtually everyone with that specific disease. The Net will be the natural vehicle for reaching highly segmented markets. MyGenome.com, now in its prelaunch phase, aims to give consumers access to diagnostic testing and services such as DNA banking.