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LEAD–Balancing Online Health Issues

With Convenience Comes Sponsorship,

Privacy Trade-offs

he numbers are staggering.

In 1999, 34.7 million people sought medical information on the Web.

E-health companies are springing up on a daily basis. There are curently some 15,000 health sites from which people can get online prescriptions or learn about an HIV cocktail drug.

In San Diego County, three E-health companies are attempting to gain recognition in the fiercely competitive cyberspace.

Women First HealthCare Inc. markets health care products, such as fitness apparel, lingerie and skin care products targeting its health care information online to women ages 35 to 69.

The San Diego-based publicly traded firm is in final negotiations with a major online drug store to market its pharmaceutical products, said Susan Dub & #233;, senior vice president at Women First.

Another local E-health firm, iMetrikus Inc., offers patients with a chronic disease and their health care providers free information on its recently launched Web site, MyHealthChannel.com.

The privately held Carlsbad-based 32-member firm launched its first Web site, PhysicianChannel.com, in August. But the site never took off, because doctors hesitated to logging patients’ medical records online, a company official said.

– Web Site Expected

To Boost Revenues

A third Web site in development is expected to boost revenues for iMetrikus. TherametricsChannel.com will allow health care affiliates to form alliances and buy data from unidentified consumers accessing iMetrikus’ sites, company officials said.

The business model streamlines revenue through advertising, ‘Net-based partnerships and sponsorships.

1-800 Call Doc, a company which has nine doctors making some 800 house calls a month in San Diego alone, is testing an online medical records’ system comprising less than 20 local patients.

The privately held San Diego-based firm is betting its online system will achieve significant savings in administrative and overhead costs by eliminating paperwork, faxes and phone calls, and cutting back on doctors’ valuable time.

Sophisticated technology allowing doctors to link patients’ medical devices to a notebook computer for automated test results will also bolster savings, said Mike Struhs, vice president of marketing at 1-800 Call Doc.

– Opening Lines

Of Communication

The company aims for interactive communication between patients and doctors, between doctors and patients’ relatives, and among doctors. That is, if patients give their consent.

It is hoped the site will be up by August. The company hopes to generate revenue from advertising and sales with online partners.

To say the stakes are high for E-health firms is an understatement.

They have high hopes for reaping the benefits from the expected explosion of online shoppers , a marketplace with a potential of more than $800 billion by 2003, according to an USD study. And this figure doesn’t include the potential revenues from selling collected consumer information to marketers and advertisers.

But, there is a downside.

Reports of inaccurate medical information and shady online pharmacies have left many consumers worried.

– Consumers Frustrated

By Critical Online Report

A Feb. 1 report by the California HealthCare Foundation blasted online health sites for sharing personal information without proper warnings.

Nearly everyone in the online health care industry is worried about eroding consumer trust. But Internet companies insist they are capable of regulating themselves. Many expect online-privacy legislation to be a major bipartisan issue in Congress this year.

Gary Schneider, an associate professor of accounting and information systems at the School of Business at USD, remains skeptical.

“It’ll take a noteworthy kind of horrible thing before Congress will hold hearings,” Schneider said. For now, consumers have to act on the good faith of Net firms and trust their privacy statements, he added.

“If someone tells you the information is safe, there is an excellent chance they are being honest,” Schneider said. “But there is a small chance they are not.”

– Disclaimer Offered

As Warning To Surfers

IMetrikus has a long disclaimer prompting Internet users about encryptions and safety precautions. But, it remains to be seen how many visitors are willing to give out personal information.

The firm also plans to place banner ads on specific sites, said Claude Hooten, vice president of TherametricsChannel.com.

The data gathered by iMetrikus will be a dream come true for marketers because it allows them to target potential customers more effectively.

Dub & #233;, Women First’s senior vice president, said the company has no intention of running ads on its sites, planning to boost its ‘Net-based partnerships instead.

On Feb. 17, Women First announced a partnership with CareGuide.com, a Web site offering visitors access to licensed child and elder care nationwide. Women First also provides content on iVillage.com, a woman-focused New York-based Web site.

– Marketing Products

Via Online Pharmacy

Dub & #233; said the firm is in discussions with other ‘Net-based partners, but wouldn’t offer details. Starting in April, Women First will market its five pharmaceutical products via an undisclosed online pharmacy.

They are Ortho-Est, an estrogen replacement drug; Ortho Tri-Cyclen, an oral contraceptive; Ortho-Prefest, a hormone replacement therapy; Pravachol, a cholesterol-lowering drug; and Esclim estradiol transdermal system, an estrogen patch.

Women First decided to discard an original plan to create its own online drugstore because of the strong competition, she said.

Dub & #233; said all products will be priced competitively or cheaper than those sold in conventional drugstores.

But experts say while online pharmacies, which dispensed some $17 million worth of prescriptions in 1999, can save consumers time, they may not save them money.

But while pharmacy sales make up a major portion of Women First’s income, the company is reinventing itself, too.

– So Far, Stories Not

Attached To Sponsors

So far, Women First’s staff-written online stories providing women, among others, tips for healthy living, have been free of sponsorships, Dub & #233; said.

But that may change, she added.

Yet, such sponsorships can be tricky, reported The Wall Street Journal in a recent article.

Drug-maker grants tend to fund sites dealing with diseases central to their donor’s business, the Journal reported.

Concerns that such practices blur the lines between commercial and editorial content led the Federal Trade Commission to quietly monitor sites, the publication said.

Dub & #233;, however, insisted a pharmaceutical firm sponsoring a specific section at Women First’s sites won’t be able to dictate editorial content.

Some E-health care companies have come under fire for not being forthright about the influence their sponsors have over their sites content, said iMetrikus’ president.

Thompson said iMetrikus’ visitors will be able to identify sponsored information. More importantly, the company will cull information from the Web independent of their sponsors.

Still, Schneider said, consumers should always verify information from multiple sources.

For 1-800 Call Doc, validity may be less a challenge than maintaining privacy. The firm budgeted $1 million to develop its online medical records’ system and Web sites.

Struhs hopes the expense will be offset by advertising money and commissions on product sales from their online partners.

– Controversy Arises Over

Handling Web Information

Some health care experts, however, believe private firms have insufficient safeguards for ensuring the privacy of patients’ medical records, and believe such information has no place on the Web.

Terry Fotre, chairman of information technology at the California Medical Association in Sacramento, is among them.

“I don’t want my information in some businesses’ Web sites where I have no idea what ethical, professional or technical security is in place there,” Fotre said.

Others say the lack of privacy rights in the United States has already led to an uncontrolled flow of information.

“Many people don’t realize the medical information is available anyway,” Schneider said.

Whatever challenges lie ahead for E-health companies, research analyst Richard Lee of Wit Capital in San Francisco remains optimistic.

“Overall, we are extremely optimistic about the outlook for the numerous E-health sectors in 2000,” Lee said.

Lee expects this year’s capital market activity will exceed last year’s $1.5 billion in IPO capital raised.

“We (also) expect an acceleration in the rate of consolidation and partnering.”


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