MARCEL DEKKER, INC.

270 MADISON AVENUE NEW YORK, NY 10016

2003 Marcel Dekker, Inc. All rights reserved. This material may not be used or reproduced in any form without the express written permission of Marcel Dekker, Inc.

CLINICAL RESEARCH AND REGULATORY AFFAIRS Vol. 20, No. 4, pp. 399407, 2003

E-Commerce in Healthcare and Pharmaceutical MarketingOpportunities and Concerns

S. Altan Erdem, Ph.D.1,* and Ashish Chandra, Ph.D.2
1

School of Business and Public Administration, University of Houston-Clear Lake, Texas, USA 2 Graduate School of Management, Marshall University Graduate College, South Charleston, West Virginia, USA

ABSTRACT
There has been a growing emphasis on the use of e-commerce in various business settings. While most of e-commerce practices have been in business-to-business marketing arrangements, the traditional consumer marketing has also been subject to numerous e-commerce applications. One of the recent trends in traditional consumer marketing is relating to those consumers who happen to be actual and/or potential patients searching for either a medical service provider or a medical treatment of some sort or even a pharmaceutical product. Accordingly, the eld of healthcare is having its share of the e-commerce craze. The purpose of this article is to highlight some of these e-commerce practices in the healthcare and pharmaceutical marketing arena. It is hoped that the issues raised in this article will provide the related parties with added incentives to explore the questionable sides of e-commerce in the eld of healthcare.

*Correspondence: S. Altan Erdem, Ph.D., Professor of Marketing, School of Business and Public Administration, University of Houston-Clear Lake, 2700 Bay Area Blvd, Houston, TX 77058, USA; E-mail: Erdem@cl.uh.edu. 399
DOI: 10.1081/CRP-120026121 Copyright & 2003 by Marcel Dekker, Inc. 1060-1333 (Print); 1532-2521 (Online) www.dekker.com

MARCEL DEKKER, INC. 270 MADISON AVENUE NEW YORK, NY 10016

2003 Marcel Dekker, Inc. All rights reserved. This material may not be used or reproduced in any form without the express written permission of Marcel Dekker, Inc.

400

Erdem and Chandra

INTRODUCTION Healthcare marketing is a relatively new concept (1). Considering the fact that it so long to recognize the role of marketing in the eld of healthcare, one would have serious doubts when it comes to the use of the Internet in healthcare marketing. Yet, the growing use of the net in healthcare marketing appears to be the living testament to the popularity of the practice. After all, patients have always wanted to eliminate the stress associated with their doctor visits. It would be safe to assume that doctors and their personnel like to minimize the hassles associated with various paperwork related to payments, insurance reimbursements, etc. Accordingly, today we witness numerous practices in various forms such as telemedicine, Web-based treatments, interactive online medical consultations, e-hospitals, etc. We have seen 247% growth in the number of hospitals using the Internet for marketing over the last ve years (2). It is now the time of e-commerce in healthcare marketing considering the fact that today over 100 million Americans turn to the Internet for health related information and, as a matter of fact, the usage of Internet as a source of health information increased 100% from the year 2000 to the year 2002 (3). Another major component of e-commerce related to health issues involves online pharmacies. Consumers are now looking for convenience and cost savings when making a purchase decision. Internet drugstore is a major convenience for the consumer as it lets them shop quickly and easily, day or night. It also allows a consumer easy access to the vast retail drug store market where they can even do a price comparison without driving or calling multiple competing stores. At present, online pharmacies oer a wide array of prescription drugs, over the counter (OTC) drugs, and health and beauty products. A consumer can shop for intimate or personal items and even e-mail a pharmacist for condential advice or research drug information and disease states, all without loss of condentiality or leaving the comfort of their home or oce. Some online pharmacies also oer value added services such as, reminders when it is time to order rells, discount coupons, price comparisons, health information, and quick rells. The benets of and concerns related to online pharmacies and healthcare marketing are discussed in brief below.

BENEFITS OF ONLINE PHARMACIES Rapid Information Transfer Capabilities Before the advent of Internet technology, the dissemination of information and products from one part of the world to another used to take a tremendous amount of time. The primary mode of information transmission and product requests was in the form of printed materials, such as product purchase forms, mailed to the consumer and vice versa. Telex, telephone, and telegraph are also some other forms of information transmissions and delivery but they were not only available to only a select group of people, but also they were quite expensive. The same was true for fax. As compared to these Information transmission techniques, Internet is relatively cheap for both the consumer and the marketer. Internet access is readily available in most countries, which are often called developed countries. Rapid advances in the

MARCEL DEKKER, INC. 270 MADISON AVENUE NEW YORK, NY 10016

2003 Marcel Dekker, Inc. All rights reserved. This material may not be used or reproduced in any form without the express written permission of Marcel Dekker, Inc.

E-Commerce in Healthcare

401

telecommunications technology have in the recent years made Internet accessible to consumers even in the developing and underdeveloped nations.

Borderless Trade Internet trade can also be called as a borderless trade. The tremendous amount of revenues that are generated by this form of trade is perhaps one of the reasons that it is being called as one of the most eective and ecient forms of commerce. Internetbased marketers can easily promote their products to consumers worldwide at a relatively low expense as compared to traditional marketing techniques. With this form of boundary-less marketing, people from dierent countries can view and order products from companies and suppliers located in dierent countries. This way, the marketer can expand their customer base and even their market share by attracting international consumers. However, for some U.S. pharmaceutical companies, foreign-based online pharmacies have aected their sales (and likely the prot margins as well) in the U.S. markets. Recently, due to the increasing popularity of Canadian online pharmacies among U.S. consumers, which sell U.S. made pharmaceutical products cheaper than the U.S.-based online or retail pharmacies, GlaxoSmithKline Inc. stopped shipping drugs to Canadian wholesales that sold the products to online pharmacies (4).

Enhanced Market Share Online pharmacies can also benet signicantly by increasing their supply line as they have the potential of purchasing goods from a larger market. This is especially true in areas of herbal and alternative medicine. At present, it seems like online pharmacies can supply only a select group of products, such as OTCs and herbals, to consumers located in foreign countries. This form of trade can give the international consumers easy access to purchase prescription products from anywhere in the world and hence making it a true global market for online pharmacies. However, online pharmacies should pay great attention to the standards and legal systems of foreign countries where they intend to ship prescription drug products directly to consumers. The FDA recently issued a warning to foreign online pharmacies about illegal sales of Cipro in the U.S. by these companies (5). The U.S. federal ocials have also worked closely with authorities in foreign countries to shut down some online pharmacies, which were involved in selling prescription drugs to the U.S. consumers (6).

Economic Gains for Consumers In the past, consumers sought various forms of cost containment methods, such as using a generic substitution or similar products that are available in the formulary of the health service provider of the consumer and are relatively cheap. Online pharmacy services are a new form drug distribution that provides prescription and

MARCEL DEKKER, INC. 270 MADISON AVENUE NEW YORK, NY 10016

2003 Marcel Dekker, Inc. All rights reserved. This material may not be used or reproduced in any form without the express written permission of Marcel Dekker, Inc.

402

Erdem and Chandra

OTC products to the consumer in a cost eective manner. Consumers can gain signicant economic gains by having prescriptions transferred to online pharmacies.

Maintenance and Chronic Therapy Management As healthcare systems evolve, its focus is shifting from strictly controlling cost to improving patient compliance and outcome in a cost-eective manner. Quality of care, value, and accountability are becoming goals of our healthcare system. Maintenance and chronic drug therapy represents the mainstay of online pharmacy business. Patients on this type of therapy require fewer counseling sessions for monitoring their disease state. For most patients on maintenance therapy, the convenience of online pharmacies may be persuasion enough.

Value Added Services Web-based pharmacy services are marketing their ability to save money for the consumers and employers by providing value added incentives such as online libraries that provide information on dosing, side eects, and contraindications. They also have the capability to provide drug and healthcare related information that may not be readily available to pharmacists and consumers via e-mail once the information is obtained.

SITUATIONS WHERE ONLINE PHARMACIES ARE NOT A GOOD OPTION There is no doubt that online pharmacies oer a multitude of conveniences over the more traditional pharmacy settings. However, as indicated earlier regarding drug sales to U.S. customers by foreign based online pharmacies (46), there is growing concern that this e-commerce formula which often works for selling books online will not work for OTC and prescription drug products. There are some downsides to ordering drugs online. A few situations where online pharmacies may not be a good option for the consumer and the pharmacy itself are discussed below.

Potential Health Hazards Drug interactions, noncompliance, and misuse or abuse are major concerns of industry experts, prescribers, and regulators. Anecdotally, many of these professionals now doubt in the success of this form of sales and distribution for drug related products. The cost of noncompliance is quite signicant and even the consequences are quite severe. Based on national statistics, in 1995, in the state of New York only, it was estimated that noncompliance was perhaps the reason for as many as 8600 deaths, 1.4 million lost work-days corresponding to approximately $100 million in income, and also an increase in hospital and nursing home re-admissions (7).

MARCEL DEKKER, INC. 270 MADISON AVENUE NEW YORK, NY 10016

2003 Marcel Dekker, Inc. All rights reserved. This material may not be used or reproduced in any form without the express written permission of Marcel Dekker, Inc.

E-Commerce in Healthcare

403

Given the fact that pharmacies have drug proles on hand, the one-on-one relationship between the pharmacist and patient is critical for ensuring compliance. Online pharmacies may not be able to assist a patient in understanding adverse drug reactions and often lack the ability to discuss a specic drug use or provide suggestions regarding alternative therapy.

Emergency Situations Online pharmacies can be quite inconvenient for emergency situations such as emergency trauma, serious allergy attacks, sudden asthma attack, immediate use of antibiotic therapy, etc. Under those circumstances, it is highly advisable for the consumer to use the traditional retail pharmacy outlets.

High Product Delivery Costs There are sti fees for overnight and next day shipping services, some as much as 15 dollars, in addition to standard freight charges. Although, most services utilize secure encryption for information placed with orders, there is the potential for computer hackers to access the most secure systems. Worse is the fact that most Pharmacy Benets Managers (PBMs) and/or health insurance providers programs do not as of yet recognize the online pharmacy services for co-payment billing.

Consultation Costs Most of the times when an online pharmacy provides the heavily discounted price to the consumer, they do not tell them what other costs may be associated with the drug purchase from the online pharmacy. It is usually the goal to convince the consumer that the drugs cost less at the online pharmacy, which truly may be the case. However, there may be physician consultation fee associated with the dispensing of the product, which can run the cost of pharmaceutical products up quite rapidly. There is also a signicant concern regarding the fact that how can a physician who has not seen the patient, but only seen a form lled out by the patient, make an accurate assessment that the patient really needs the product?

HEALTHCARE ON INTERNET There are many advantages to healthcare marketing on the net. As the Internet gains more signicance in dierent aspects of our lives, the world of healthcare bounds to have its share of the Internet use gradually. One needs to make sure that these two crucial areas are combined properly. For instance, having user-friendly websites to address specic healthcare needs would denitely benet patients; they are provided with valuable and comprehensive information at low

MARCEL DEKKER, INC. 270 MADISON AVENUE NEW YORK, NY 10016

2003 Marcel Dekker, Inc. All rights reserved. This material may not be used or reproduced in any form without the express written permission of Marcel Dekker, Inc.

404

Erdem and Chandra

cost. Obviously, when some of these basic marketing expenditures go down, the nal strategy would result in a more cost ecient marketing.

Concerns About the Information on the Net It has been noted that consumers have been raising their desire for health information on the net for sometime. According to Wilkins and Navarro (8), 82 million or 40% of Americans are currently on-line and 50% of them reportedly are health information seekers. By 2005, the number of wired Americans is expected to grow to 120 million or 58% of the population, with almost three-quarters of them predicted to be health information seekers. Seventy-seven percent of these users seek specic health information and they want this information on-line, specically from physicians. It is stated that healthcare information is accessed more than sports, stocks, and shopping. One may wonder about the kind of information being sought. It has been reported that while women, 38% of the users, seek information about medical prescriptions and diagnostics, most men, 28% of the users, seek information about insurance and pharmaceutical companies (8). While majority of physicians have been using traditional print media as their preferred communication medium, this trend has been changing recently. Recognizing the fact that the net provides a network of information available to the public 24 h of the day, seven days a week, one can realize that there is not a medium that can compete with the Internet and its incredible power on public. Accordingly, the healthcare industry is in the process of adopting the net as a new method of communication to patients. By using the net, doctors are able to provide their patients with ne details on issues such as nutrition, diets, and disease prevention. Some surgeons now display before-and-after pictures. While it is true that these could be done by using traditional communication tools such as newspapers and/or magazines, it is also true that these outlets not only would be more expensive but also would be eective mostly in the short-run since most of them are discarded once they are read. Since the information on the net will be there for a long while, one would expect fewer unnecessary inbound calls made to doctors. That would very easily lead to a lower overhead in the long run. As suggested by Shinkman (9), internet-based practice management, catering to physician needs as well as customer needs, and coordinating patient appointments and referrals, can replace the unnecessary back-oce management in the future.

Concerns About Patient Satisfaction As the healthcare industry is getting more competitive, patient satisfaction is becoming a crucial consideration area. Providing the patients with informative patient health information lines may be a small but very valuable step for numerous providers. It has been reported that many patients do not fully comprehend all the information that they are presented with in the examination room. Oering an on-line medical bulletin board can give these patients an alternate outlet to use to

MARCEL DEKKER, INC. 270 MADISON AVENUE NEW YORK, NY 10016

2003 Marcel Dekker, Inc. All rights reserved. This material may not be used or reproduced in any form without the express written permission of Marcel Dekker, Inc.

E-Commerce in Healthcare

405

improve their understanding of the issues without having to go through calling on their doctors and/or pharmacists. Since patients use the information on these sites, one has to make sure that it is accurate, up-to-date, and comprehensive. The continuous growth in the self-care industry suggests that there are times that some patients use these sites to diagnose their problems. It was reported that in 1998, one third of medicine shoppers were more likely to self-treat without going to their doctors for minor illnesses. The problem arises once these patients diagnose their symptoms, some actually pursue over-the-counter drugs that are not the best options for the cases in hand. In these cases, these potential customers are not only turned away, but also left with the wrong information which results in them misdiagnosing their symptoms, and may be doing the things that they should not be doing. Obviously, this should be prevented. It is interesting to note that many physicians have been expressing their concerns about the quality of the information on the net for quite sometime (10). These doctors are concerned not only about the questionable self-treatments pursued by the patients but also about the future of doctor-patient relationship when they have to explain those patients that their information is not always accurate. In order to monitor the accuracy of the medical information on the net, in 1995 some of the Internet and telemedicine experts created the Health on the Net (HON) Foundation, which is now used as one of the popular seals for healthcare websites. If a website subscribes to the voluntary code of standards established by HON, it can display the HON seal on its pages. Most of these standards are about making sure that the parties who give medical advice are medical professionals (or nonprofessionals who have to disclose their lack of expertise in those related areas). While this is a worthwhile eort, it has also been stated that not all HON standards are comprehensive enough to eliminate somewhat questionable information on these sites, not to mention that the foundation does not serve as a watch-dog due to its lack of formal power in the industry (10).

Concerns About the Website Development Any e-commerce strategy is a collection of rather comprehensive tasks. For instance, on-line marketing activities of hospitals include components such as discussion groups, research, communications with doctors and patients, newsletters, referrals, intranet, disease management, health education, physician directory, recruiting, e-mail, and website (2). While all these are essential, 95.7% of marketers who report using on-line marketing strategies have websites as their primary basis for marketing. Obviously, it is a fact that a website itself remains the cornerstone of e-commerce and this fact requires a good understanding of what is required in developing these websites. Interestingly, most healthcare organizations use websites primarily for promotion and recruiting purposes. Some are adding more creative functions such as interactivity between doctors and patients, and sites that link physicians to clinical data repositories. Even though there are many cost eective ways to incorporate some of these options (11), most are rather expensive but they also point to the very essence of e-commerce in any business.

MARCEL DEKKER, INC. 270 MADISON AVENUE NEW YORK, NY 10016

2003 Marcel Dekker, Inc. All rights reserved. This material may not be used or reproduced in any form without the express written permission of Marcel Dekker, Inc.

406

Erdem and Chandra

It is crucial for healthcare providers to recognize that websites need to be examined as new ways of providing health services as opposed to tools such as newspapers, magazines, and radio to communicate with the outside world. One should build cross-functional teams composed of information technology (IT) professionals, medical specialists, healthcare administrators/sta, and patients. These cross-functional teams can bring dierent priorities and perspectives together in developing new ideas to be implemented on the Internet. While IT professionals are essential in developing proper e-commerce strategies, the human side of the topic in healthcare requires the other parties play rather active roles in determining the practical bases for the successful implementation (12). In case of websites, one has to make sure that they are designed in such ways that patients are able to use them to perform various functions such as having interactive discussions, completing forms, and scheduling appointments at the convenience of their home (13).

CONCLUDING REMARKS The evolutionary changes of the American healthcare system are occurring with an increasingly concerned and cynical public concerned with threats to its privacy. With the arrival of complex and technologically advanced computer systems the public has become more concerned with the impact it will have on maintaining the privacy of personal information, especially the information concerning their health. People are concerned that errors will be made, information might be sold or misused, and that automation will allow unauthorized to access their personal health records. Some of these concerns may be because people are unaware of the content of their medical records and do not know which information can be used for or against them. It appears that the Internet will provide the platform that will tie together the fragmented healthcare service providers, payers, and patients. The technology made possible by the net has the potential to establish communication channels among all these parties. By using these channels, the eciency in the marketplace is bound to improve and raise the level of satisfaction of its participants. The key point is to examine the concerns such as the ones listed above carefully in developing the e-commerce strategy. It is necessary to integrate the health care management practices with new information technologies oered by the Internet. After all, having a successful e-commerce strategy in healthcare marketing requires much more than just going on-line with a website.

REFERENCES 1. Berkowitz Eric N. Essentials of Health Care Marketing. Gaithersburg, MD: Aspen Publishers, 1996:319. 2. Fell Daniel, David Shepherd C. Hospitals and the web: a maturing relationship. Marketing Health Services Summer 2001; 3639. 3. Anonymous. AMA survey nds Internet has major impact on way physicians practice medicine. Health Care Strategic Management Sept. 2002; 20(9):10.

MARCEL DEKKER, INC. 270 MADISON AVENUE NEW YORK, NY 10016

2003 Marcel Dekker, Inc. All rights reserved. This material may not be used or reproduced in any form without the express written permission of Marcel Dekker, Inc.

E-Commerce in Healthcare

407

4. Whitwham Brian. US voters love of Canadas internet drugstores making politicians cautious. CMAJ: Canadian Medical Association Journal 2003; 168(8):1033. 5. Carroll Jill. FDA issues warning to overseas web sites about illegal sales of Cipro in the U.S. Wall Street JournalEastern Edition Nov. 02, 2001; 238(88):A9. 6. Pear Robert. U.S. and Thai ocials attach internet sales of medicine. New York Times Mar. 21, 2000; 149(51334):A18. 7. Anderson Wayne K. Pharmacists in the health care system. http://wings. bualo.edu/academic/department/pharmacy/pp/deanhtml/paper.html, 1999. 8. Wilkins Stephen T, Frederick H. Navarro. Has the web really empowered healthcare consumers? Marketing Health Services Fall 2001; 510. 9. Shinkman Ron. Back-oce, online. Modern Healthcare Jan. 2000; 46. 10. Wolinsky Howard. Physicians role in helping patients navigate the web. ACP-ASIM Observer Nov. 1998. 11. Solomon Susan. E-Marketing on a shoestring. Marketing Health services: Spring 2001; 35. 12. Flammini Steve. Leveraging an integrated HIS. Health Management Technology 2000; 21(8):1217. 13. Goedert Joseph. Partners healthcare system uses the internet to integrate its delivery system and foster collaboration among physicians. Health Data Management Dec. 1999; 2735.

MARCEL DEKKER, INC. 270 MADISON AVENUE NEW YORK, NY 10016

2003 Marcel Dekker, Inc. All rights reserved. This material may not be used or reproduced in any form without the express written permission of Marcel Dekker, Inc.