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CLINICAL RESEARCH AND REGULATORY AFFAIRS Vol. 20, No. 4, pp. 399–407, 2003
E-Commerce in Healthcare and Pharmaceutical Marketing—Opportunities and Concerns
S. Altan Erdem, Ph.D.1,* and Ashish Chandra, Ph.D.2
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
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 ﬁeld 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 ﬁeld 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
400 Erdem and Chandra INTRODUCTION Healthcare marketing is a relatively new concept (1). 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. INC. Inc. all without loss of conﬁdentiality or leaving the comfort of their home or oﬃce. such as product purchase forms. We have seen 247% growth in the number of hospitals using the Internet for marketing over the last ﬁve years (2). Yet. A consumer can shop for intimate or personal items and even e-mail a pharmacist for conﬁdential advice or research drug information and disease states. • 270 MADISON AVENUE • NEW YORK. mailed to the consumer and vice versa. As compared to these Information transmission techniques. This material may not be used or reproduced in any form without the express written permission of Marcel Dekker. but also they were quite expensive. Consumers are now looking for convenience and cost savings when making a purchase decision. The beneﬁts of and concerns related to online pharmacies and healthcare marketing are discussed in brief below. and health and beauty products. telephone. price comparisons. Telex. etc. one would have serious doubts when it comes to the use of the Internet in healthcare marketing. over the counter (OTC) drugs. etc. 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. Web-based treatments. today we witness numerous practices in various forms such as telemedicine. Rapid advances in the . After all. BENEFITS OF ONLINE PHARMACIES Rapid Information Transfer Capabilities Before the advent of Internet technology. Internet access is readily available in most countries. patients have always wanted to eliminate the stress associated with their doctor visits. day or night. insurance reimbursements. The same was true for fax. the growing use of the net in healthcare marketing appears to be the living testament to the popularity of the practice. Internet drugstore is a major convenience for the consumer as it lets them shop quickly and easily. interactive online medical consultations. Accordingly. All rights reserved. health information. which are often called developed countries.MARCEL DEKKER. 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. online pharmacies oﬀer a wide array of prescription drugs. At present. Considering the fact that it so long to recognize the role of marketing in the ﬁeld of healthcare. Another major component of e-commerce related to health issues involves online pharmacies. e-hospitals. Some online pharmacies also oﬀer value added services such as. discount coupons. the dissemination of information and products from one part of the world to another used to take a tremendous amount of time. Inc. the usage of Internet as a source of health information increased 100% from the year 2000 to the year 2002 (3). It would be safe to assume that doctors and their personnel like to minimize the hassles associated with various paperwork related to payments. and quick reﬁlls. NY 10016 ©2003 Marcel Dekker. The primary mode of information transmission and product requests was in the form of printed materials. reminders when it is time to order reﬁlls. Internet is relatively cheap for both the consumer and the marketer.
Enhanced Market Share Online pharmacies can also beneﬁt signiﬁcantly by increasing their supply line as they have the potential of purchasing goods from a larger market. which were involved in selling prescription drugs to the U. consumers.S. 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 eﬀective and eﬃcient forms of commerce. Economic Gains for Consumers In the past. pharmaceutical companies. for some U.S. 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. E-Commerce in Healthcare 401 telecommunications technology have in the recent years made Internet accessible to consumers even in the developing and underdeveloped nations. to consumers located in foreign countries.S. made pharmaceutical products cheaper than the U. people from diﬀerent countries can view and order products from companies and suppliers located in diﬀerent countries. due to the increasing popularity of Canadian online pharmacies among U. foreign-based online pharmacies have aﬀected their sales (and likely the proﬁt margins as well) in the U.S. However.S. it seems like online pharmacies can supply only a select group of products. 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. Online pharmacy services are a new form drug distribution that provides prescription and . consumers sought various forms of cost containment methods. The U.S. This material may not be used or reproduced in any form without the express written permission of Marcel Dekker. This is especially true in areas of herbal and alternative medicine. The FDA recently issued a warning to foreign online pharmacies about illegal sales of CiproÕ in the U. 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. stopped shipping drugs to Canadian wholesales that sold the products to online pharmacies (4).MARCEL DEKKER. Inc. which sell U. federal oﬃcials have also worked closely with authorities in foreign countries to shut down some online pharmacies. Recently. This way. With this form of boundary-less marketing.-based online or retail pharmacies. Internetbased marketers can easily promote their products to consumers worldwide at a relatively low expense as compared to traditional marketing techniques. by these companies (5). GlaxoSmithKline Inc. NY 10016 ©2003 Marcel Dekker. the marketer can expand their customer base and even their market share by attracting international consumers. However. Borderless Trade Internet trade can also be called as a borderless trade. consumers (6). INC. All rights reserved.S. • 270 MADISON AVENUE • NEW YORK. At present. such as OTCs and herbals. markets.S. Inc.
noncompliance. customers by foreign based online pharmacies (4–6). in the state of New York only. • 270 MADISON AVENUE • NEW YORK. it was estimated that noncompliance was perhaps the reason for as many as 8600 deaths. Potential Health Hazards Drug interactions. prescribers. and regulators.MARCEL DEKKER. and contraindications. 402 Erdem and Chandra OTC products to the consumer in a cost eﬀective manner. NY 10016 ©2003 Marcel Dekker. INC. SITUATIONS WHERE ONLINE PHARMACIES ARE NOT A GOOD OPTION There is no doubt that online pharmacies oﬀer a multitude of conveniences over the more traditional pharmacy settings.4 million lost work-days corresponding to approximately $100 million in income. Patients on this type of therapy require fewer counseling sessions for monitoring their disease state. and accountability are becoming goals of our healthcare system. Maintenance and chronic drug therapy represents the mainstay of online pharmacy business. its focus is shifting from strictly controlling cost to improving patient compliance and outcome in a cost-eﬀective manner. 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. side eﬀects. in 1995. as indicated earlier regarding drug sales to U. The cost of noncompliance is quite signiﬁcant and even the consequences are quite severe. 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. . However. 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. value. Inc. There are some downsides to ordering drugs online. Consumers can gain signiﬁcant economic gains by having prescriptions transferred to online pharmacies. many of these professionals now doubt in the success of this form of sales and distribution for drug related products. 1. the convenience of online pharmacies may be persuasion enough. and also an increase in hospital and nursing home re-admissions (7). and misuse or abuse are major concerns of industry experts. For most patients on maintenance therapy. Quality of care. All rights reserved. Anecdotally. Maintenance and Chronic Therapy Management As healthcare systems evolve. Inc. A few situations where online pharmacies may not be a good option for the consumer and the pharmacy itself are discussed below. This material may not be used or reproduced in any form without the express written permission of Marcel Dekker. Based on national statistics.S.
sudden asthma attack. but only seen a form ﬁlled out by the patient. Online pharmacies may not be able to assist a patient in understanding adverse drug reactions and often lack the ability to discuss a speciﬁc drug use or provide suggestions regarding alternative therapy. NY 10016 ©2003 Marcel Dekker. Consultation Costs Most of the times when an online pharmacy provides the heavily discounted price to the consumer. Inc. they do not tell them what other costs may be associated with the drug purchase from the online pharmacy. Although. the world of healthcare bounds to have its share of the Internet use gradually. there may be ‘‘physician consultation’’ fee associated with the dispensing of the product. most services utilize secure encryption for information placed with orders. However. All rights reserved. which truly may be the case. It is usually the goal to convince the consumer that the drug’s cost less at the online pharmacy. High Product Delivery Costs There are stiﬀ fees for overnight and next day shipping services. they are provided with valuable and comprehensive information at low . Inc. INC. immediate use of antibiotic therapy. One needs to make sure that these two crucial areas are combined properly. etc. Emergency Situations Online pharmacies can be quite inconvenient for emergency situations such as emergency trauma. E-Commerce in Healthcare 403 Given the fact that pharmacies have drug proﬁles on hand. which can run the cost of pharmaceutical products up quite rapidly. As the Internet gains more signiﬁcance in diﬀerent aspects of our lives. • 270 MADISON AVENUE • NEW YORK. there is the potential for computer hackers to access the most secure systems. the one-on-one relationship between the pharmacist and patient is critical for ensuring compliance. This material may not be used or reproduced in any form without the express written permission of Marcel Dekker. make an accurate assessment that the patient really needs the product? HEALTHCARE ON INTERNET There are many advantages to healthcare marketing on the net.MARCEL DEKKER. in addition to standard freight charges. Worse is the fact that most Pharmacy Beneﬁts Managers (PBMs) and/or health insurance providers programs do not as of yet recognize the online pharmacy services for co-payment billing. serious allergy attacks. For instance. Under those circumstances. it is highly advisable for the consumer to use the traditional retail pharmacy outlets. some as much as 15 dollars. having user-friendly websites to address speciﬁc healthcare needs would deﬁnitely beneﬁt patients. There is also a signiﬁcant concern regarding the fact that how can a physician who has not seen the patient.
Concerns About Patient Satisfaction As the healthcare industry is getting more competitive. doctors are able to provide their patients with ﬁne details on issues such as nutrition. this trend has been changing recently. NY 10016 ©2003 Marcel Dekker. seek information about medical prescriptions and diagnostics. Obviously. and shopping. It has been reported that while women. one can realize that there is not a medium that can compete with the Internet and its incredible power on public. INC. the number of wired Americans is expected to grow to 120 million or 58% of the population. the ﬁnal strategy would result in a more cost eﬃcient marketing. 82 million or 40% of Americans are currently on-line and 50% of them reportedly are ‘‘health information seekers. internet-based practice management. Seventy-seven percent of these users seek speciﬁc health information and they want this information on-line. Providing the patients with informative ‘‘patient health information lines’’ may be a small but very valuable step for numerous providers. 38% of the users. Recognizing the fact that the net provides a network of information available to the public 24 h of the day. It is stated that healthcare information is accessed more than sports. one would expect fewer unnecessary inbound calls made to doctors. most men. All rights reserved. and disease prevention. when some of these basic marketing expenditures go down. the healthcare industry is in the process of adopting the net as a new method of communication to patients. According to Wilkins and Navarro (8). As suggested by Shinkman (9). Accordingly. Oﬀering an on-line medical bulletin board can give these patients an alternate outlet to use to . This material may not be used or reproduced in any form without the express written permission of Marcel Dekker. That would very easily lead to a lower overhead in the long run. 404 Erdem and Chandra cost. it is also true that these outlets not only would be more expensive but also would be eﬀective mostly in the short-run since most of them are discarded once they are read. catering to physician needs as well as customer needs. While it is true that these could be done by using traditional communication tools such as newspapers and/or magazines. speciﬁcally from physicians. diets. can replace the unnecessary back-oﬃce management in the future. It has been reported that many patients do not fully comprehend all the information that they are presented with in the examination room. Since the information on the net will be there for a long while. Inc. • 270 MADISON AVENUE • NEW YORK.’’ By 2005. seek information about insurance and pharmaceutical companies (8). One may wonder about the kind of information being sought. Inc. and coordinating patient appointments and referrals. While majority of physicians have been using traditional print media as their preferred communication medium. 28% of the users. seven days a week. By using the net. with almost three-quarters of them predicted to be health information seekers. patient satisfaction is becoming a crucial consideration area.MARCEL DEKKER. Some surgeons now display before-and-after pictures. 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. stocks.
Obviously. newsletters. physician directory. these ‘‘potential customers’’ are not only turned away. If a website subscribes to the voluntary code of standards established by HON. some actually pursue over-the-counter drugs that are not the ‘‘best options’’ for the cases in hand. Concerns About the Website Development Any e-commerce strategy is a collection of rather comprehensive tasks. recruiting. and sites that link physicians to clinical data repositories. this should be prevented. Even though there are many cost eﬀective ways to incorporate some of these options (11). one third of medicine shoppers were more likely to self-treat without going to their doctors for minor illnesses. The continuous growth in the ‘‘self-care industry’’ suggests that there are times that some patients use these sites to diagnose their problems. This material may not be used or reproduced in any form without the express written permission of Marcel Dekker. which is now used as one of the popular seals for healthcare websites. Some are adding more creative functions such as interactivity between doctors and patients. communications with doctors and patients. 95. up-to-date.7% of marketers who report using on-line marketing strategies have websites as their primary basis for marketing. 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). Inc. The problem arises once these patients ‘‘diagnose’’ their symptoms. and comprehensive. and website (2). research. not to mention that the foundation does not serve as a watch-dog due to its lack of formal power in the industry (10). referrals. one has to make sure that it is accurate. e-mail. While all these are essential. in 1995 some of the Internet and telemedicine experts created the Health on the Net (HON) Foundation. • 270 MADISON AVENUE • NEW YORK. All rights reserved. Obviously. In these cases. but also left with the wrong information which results in them misdiagnosing their symptoms. it has also been stated that not all HON standards are comprehensive enough to eliminate somewhat questionable information on these sites. Inc. In order to monitor the accuracy of the medical information on the net. 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. health education. and may be doing the things that they should not be doing. Interestingly. For instance. 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. INC. intranet.MARCEL DEKKER. . E-Commerce in Healthcare 405 improve their understanding of the issues without having to go through calling on their doctors and/or pharmacists. NY 10016 ©2003 Marcel Dekker. disease management. most healthcare organizations use websites primarily for promotion and recruiting purposes. it can display the HON seal on its pages. most are rather expensive but they also point to the very essence of e-commerce in any business. It was reported that in 1998. 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). on-line marketing activities of hospitals include components such as discussion groups. Since patients use the information on these sites. While this is a worthwhile eﬀort.
While IT professionals are essential in developing proper e-commerce strategies. Hospitals and the web: a maturing relationship. 2. NY 10016 ©2003 Marcel Dekker. Fell Daniel. payers. It is necessary to integrate the health care management practices with new information technologies oﬀered by the Internet. 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. By using these channels. Berkowitz Eric N. 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. The key point is to examine the concerns such as the ones listed above carefully in developing the e-commerce strategy. especially the information concerning their health. AMA survey ﬁnds Internet has major impact on way physicians practice medicine. REFERENCES 1. 20(9):10. and radio to communicate with the outside world. Marketing Health Services Summer 2001. and that automation will allow unauthorized to access their personal health records. One should build cross-functional teams composed of information technology (IT) professionals.MARCEL DEKKER. having a successful e-commerce strategy in healthcare marketing requires much more than just going on-line with a website. 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. In case of websites. All rights reserved. 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. 1996:319. and patients. information might be sold or misused. magazines. The technology made possible by the net has the potential to establish communication channels among all these parties. MD: Aspen Publishers. After all. Essentials of Health Care Marketing. the eﬃciency in the marketplace is bound to improve and raise the level of satisfaction of its participants. 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. 3. These cross-functional teams can bring diﬀerent priorities and perspectives together in developing new ideas to be implemented on the Internet. 2002. • 270 MADISON AVENUE • NEW YORK. Gaithersburg. medical specialists. David Shepherd C. 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). healthcare administrators/staﬀ. Health Care Strategic Management Sept. This material may not be used or reproduced in any form without the express written permission of Marcel Dekker. Inc. completing forms. and patients. People are concerned that errors will be made. and scheduling appointments at the convenience of their home (13). Inc. Anonymous. 36–39. INC. It appears that the Internet will provide the platform that will tie together the fragmented healthcare service providers. .
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All rights reserved. • 270 MADISON AVENUE • NEW YORK. INC. . Inc. This material may not be used or reproduced in any form without the express written permission of Marcel Dekker. NY 10016 ©2003 Marcel Dekker.MARCEL DEKKER. Inc.