By Leslie Walker
Washington Post Staff Writer
Thursday, March 18, 1999; Page E1
I must be allergic to drugstores. They register right up there on my annoyance radar with dentists' offices. So I was pleased when the wizards of Web commerce said they were moving their potions and lotions into cyberspace warehouses with such names as Drugstore.com, Soma, and PlanetRx. Ah! No more trips down store aisles that blend ammonia smells with Easter sights.
Drugstore.com now keeps an electronic list of my bathroom items, allowing me to reorder anything with a few mouse clicks. And I was pleased to discover that those items cost about 20 percent less than at real-world CVS or Rite Aid stores. The newcomers carry through pretty quickly, too: Soma, for instance, delivered an antibiotic to my Maryland doorstep two days after I filled out a prescription form online.
You can't chat with a pharmacist over the counter, but you can e-mail questions. Soma was slow to answer queries, but the reply was more detailed than the one from Drugstore.com. I found this a more comfortable way to ask questions than in a drugstore with other customers around.
Though limited, my experience has convinced me that this year's race to open online drugstores will have a real impact on how we buy some of the essentials of life. The race began in January, when Soma launched on the Web, and will continue all year, with a new entrant almost every month. All the runners are hungrily eyeing the nation's $100 billion-a-year market for prescription drugs, plus whatever sundries they can sell.
But this race is also about something else – how the Internet can transform purchases that are intensely personal. With millions of folks already turning to the Internet to research their health, online drugstores are in the early stages of figuring out how to take advantage of that. They are linking articles people might want to read to products they might want to buy.
I don't know about you, but I take a pile of supplements every day, tinkering with them the way some people tinker with their stock portfolios. I found the interactive nutritional advisor of Drugstore.com useful because it remembers my age and sex – each time I return, I don't have to retype anything.
Rather than alarming, I found the feature that lets me view my purchasing history at Drugstore.com helpful. And the site design is intuitive, even if its search engine is hopelessly inefficient.
My friends and family, I'll admit, think I'm crazy to see this as convenient. Several questioned the wisdom of releasing personal medical information on the Internet.
But the venture-capital people, seemingly certain that concerns like those are going to wither away, are pumping in serious money.
The biggest bankroll belongs to Drugstore.com, which collected more than $60 million in venture capital and launched three weeks ago. It also has help from Amazon.com, which owns 40 percent of the Seattle start-up. Next to go online will be PlanetRx, a San Francisco firm that raised venture capital of more than $30 million and will begin selling on the Web any day. Its chief executive is Bill Razzouk, who was president of America Online for four months in 1996.
Rx.com plans to go online in a few weeks with private financing partly from Texas doctors and an advertising budget for this year of $20 million. Walgreens and Rite Aid have said they, too, will open full-scale Internet stores by fall.
Each player faces a fact of life that their site is going to be more labor-intensive than most e-commerce operations. That's because for now each time a prescription order is placed, a human being has to call the doctor's office and check that it's legit.
Beyond that, each player has its own take on how to marry content and commerce inside the digital drugstore. Their Internet faces may look similar, but their operations and market strategies differ widely.
Drugstore.com, for example, is a virtual business that doesn't own or run a pharmacy. To reach the Web faster, Drugstore.com took a page out of Amazon.com's book and contracted its prescription work to a pharmacy and distribution center in Texas. But it's applying in all 50 states for the required licenses to start its own pharmacies.
Drugstore.com sells beauty and personal goods as well as drugs and vitamins. The company has photographed 16,000 items so far and hired a group of nuns and monks to do data entry, at the suggestion of Amazon.com founder Jeff Bezos. Every bit of information that you see on a toothpaste box in a store, for instance, is being typed in so you can see it on the Web too. "It is a phenomenal amount of work, but we said we've got to make it easy for people to pick," said chief executive Peter Neupert, a former Microsoft vice president.
Soma, a privately financed Seattle start-up, built a pharmacy in Ohio and is licensed in 45 states. PlanetRx also has a full-fledged pharmacy and delivery center, with drug-dispensing licenses in all 50 states. "We want to have everything from A to Z under control. This is about your health," said co-founder Stephanie Schear. PlanetRx aims for greater editorial depth, cross-linking each product to more health articles.
Rx.com, meanwhile, has installed an automated pharmacy system with conveyor belts and machines that count pills and cap the vials. "This technology drives the cost of filling prescriptions down significantly, " said Rx.com chief executive Joseph Rosson. "It also significantly reduces the margin of error."
Equally important for the success or failure will be the insurance deals, which they are still working out. Soma has a head start, but all of the firms could face an uphill battle persuading the large managed-care pharmacy plans to deal with them.
One of the biggest, PCS Health Systems, was bought in January by Rite Aid, which competes with Internet pharmacies. In the long term, how eager do you suppose PCS will be to help the Internet start-ups?
Maybe that's why I still have a prescription on hold at Drugstore.com. Earlier this month, I ordered it from the Web site and tried to bill it through PCS, my employer's insurer. Drugstore.com sent me an e-mail saying PCS "regrettably" had declined to authorize payment.
I called PCS, which said it is "studying the whole issue of Internet drugstores and deciding exactly what our policy is going to be."
This is just the beginning, folks. You can expect much bigger changes as the Internet creates more and faster electronic connections between players new and old in the nation's health insurance system.
Send e-mail to Leslie Walker at firstname.lastname@example.org.
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