The traditional trip to the local drug store to stock up on medication for the cold and flu season may no longer be necessary. The Internet, which has already had an impact on just about every other industry, is hitting the drug industry both prescription and nonprescription types.
Despite the regulatory hurdles faced by virtual pharmacies, a recent study by Jupiter Communications projects a $1.7 billion consumer online health market by 2003. You might see your prescriptions filled by a large national center in another state at considerable savings. Or the next time a cold keeps you home, a visit to the local drug store Web site might have the medication on your doorstep in an hour.
Online-only players in the drug market will force traditional retailers to develop an online presence to stay competitive.
Commerce is where the dollars are, says David Restrepo, a Jupiter analyst who specializes in the online health industry. As is the case in other online consumer categories, the total number of dollars when it comes to health is greater in the commerce space than it is in the advertising space. This being the case, Jupiter anticipates further, rapid consolidation, with the marriage of leading health content and health commerce sites an inevitability.
- Jupiter expects that online prescription drug spending will reach $966 million by 2003, representing 0.6 percent of the total retail prescription drug market. Pharmacy benefit managers hold the key to even greater growth. However, the overall prescription drug market is so vast that even a small channel shift to online purchasing creates a substantial market.
- In the over-the-counter sector, Jupiter projects that consumers will spend $314 million by 2003, corresponding to a compounded annual growth rate of 215 percent. Unlike prescription medications, OTCs do not face institutional barriers; therefore, it is expected that the channel shift from offline to online purchasing will be higher for OTC than for prescription medications.
- Jupiter projects that the online nutraceutical market will reach $434 million by 2003, up from $1 million in 1998. Repeat purchasing coupled with a lack of acute need will lead to a significant shift of nutraceutical sales to the online channel. There is also a precedent for the remote purchase of products such as vitamins via established, paper-based catalogs.
- Traditional brick-and-mortar retailers experience roughly a 50-50 split in revenues between the back-end pharmacy and the front-end sundries. Initially in the online drugstore space, personal care items will be of critical importance as structural issues involved in selling prescriptions are worked out. The forecast is that the online personal care product market will grow from $8 million in 1998 to $706 million by 2003, with a compounded annual growth rate of 145 percent.
Todd Shryock (email@example.com) is SBNs special reports editor.