IDC Forecasts Healthy Growth in the Online Prescription Drug Market

FRAMINGHAM, MA – JUNE 27, 2000 – The online market for pharmaceutical, health, and beauty products is about to get a shot in the arm that will substantially boost revenues. IDC reports the U.S. market will explode from less than $250 million in 1999 to more than $18 billion in 2004. The online market for prescription drugs will account for more than 80% of these revenues, or $14.8 billion.

 

"Consumers are increasingly accepting the Internet as a way to access health-related information and content," said Jim Williamson, senior research analyst with IDC's Consumer eCommerce: Consumer Goods program. "In addition, powerful drug industry players, including managed care organizations and prescription benefit managers, are developing ecommerce strategies. As a result, the growth of this market will accelerate substantially over the next five years."

IDC believes payer organizations, typically prescription benefit managers and managed care organizations, will play a significant role in the online pharmaceutical market. Because payer organizations foot most of the bill for prescriptions, they are highly motivated to reduce costs. IDC estimates one-third of the cost of prescriptions comes from pharmacy fulfillment. To reduce fulfillment costs today, many payer organizations use mail-order prescriptions. IDC believes they will look to further reduce fulfillment costs by investing in online fulfillment. By 2004, payer organizations will account for $14.2 billion, or 96% of the online prescription market.

"Online pharmacies must realistically assess the threat that payer organizations pose to their businesses," Williamson said. "Consumer acceptance of payer groups will be driven by simple economics: People will get their medications where they'll get reimbursed."

Other factors that IDC believes will contribute to the boon in online prescription sales include the overall increase in prescription medicine spending and the aging of the U.S. population.

For online pharmacies looking to capitalize on the boon, IDC recommends partnering with payer organizations and selling related products such as beauty and nutraceuticals.

"Online pure-plays anchored to their original determination to remake the prescription drug industry in their own image will succumb to market powers beyond their control," Williamson warned.

U.S. Online Prescription and Nonprescription Pharmaceutical, Health, and Beauty Market: Forecast and Analysis (IDC #B22503) forecasts revenue growth through 2004 by category. The report analyzes market drivers and presents two growth scenarios. The role of payer organizations in the market's growth is discussed. Additionally, the report presents a timeline, plotting the market's development. The report concludes with recommendations for online pharmacies and payer organizations that want to capitalize on this market. To purchase the report, please contact Demetra Georgakopoulos at 1-800-343-4952, extension 4496 or at demetra@idc.com.

About IDC

IDC delivers dependable, high-impact insights and advice on the future of ebusiness, the Internet, and technology to help organizations make sound business decisions. IDC forecasts worldwide markets and trends and analyzes business strategies, technologies, and vendors, using a combination of rigorous primary research and in-depth competitive analysis. IDC provides global research with local content through more than 500 analysts in 43 countries worldwide. IDC's customers comprise the world's leading IT suppliers, IT organizations, ebusiness companies, and the financial community. Additional information can be found at http://www.idc.com.

IDC is a division of IDG, the world's leading IT media, research and exposition company.

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