Business to Business: Pharmaceuticals

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Business to BusinessPharmaceuticals

• Yi-fan (Eddie) Fang
• Sudhir Gopal
• Suman Grandhi
• Debby Keller
• Yucheng (Frank) Hu

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Welcome to Pharmaceutical B2B

• Electronic commerce technology will affect
  most major business processes along the
  pharmaceutical value chain, from drug discovery
  to end-user distribution.
• Jim Montgomery, Vice
  President, Global Strategy, EDS Health.
• Directly linking healthcare providers with
  pharmaceutical manufacturers over the Webhelps
  to streamline the supply chain by reducing the
  number of touches in the purchasing process,
  creating efficiencies that will yield significant
  cost savings and promote free market access.
• 
  PharmasMarket.Com.

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Major Players

• Suppliers/Manufacturers.
• Merck Co., Inc.
• Glaxo Wellcome / SmithKline Beecham.
• Bristol-Myers Squibb.
• Abbott Laboratories.
• Pharmacia Upjohn, Inc.
• Vertical Markets.
• Chemdex.
• Medibuy.
• Wholesalers/Distributors.
• Amerisource Health - McKresson HBOC.
• Bergen Brunswig - Neuman
  Distributors.
• Classification based on 1999 sales, growth,
  market share percent of revenue from
  pharmaceutical products (Sources Hoovers Online,
  Fortune).

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Sample Front Pages From Major Players
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Who Are the Customers?

• For Suppliers/Manufacturers
• Vertical Markets
• Wholesalers/Distributors
• For Vertical Markets (e-procurement/fulfillment)
• Suppliers - Pharmaceutical Companies
• Buyers
• Distributors and distributors customers
• Laboratory researchers
• For Distributors
• Pharmacies (Merck-Medco, CVS.com, More.com)
• Hospitals, Home Health agencies
• Chain warehouses/stores
• Governments

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Traditional Distribution Model
I N TERNET
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Changes in Business Structure From Online B2B

• The Internet has done away with the traditional
  supply line!
• Consumers in all segments can buy direct.
• Wholesalers, distributors and other
  intermediaries are unnecessary being
  dis-intermediated.
• Implications?
• While direct-to-consumer advertising is
  increasing, there hasnt been a decline in
  pharmaceutical sales-forces as predicted
  earlier.
• (Philip Loftus, VP Director
  Worldwide IS Architecture Technology, Glaxo
  Wellcome ).

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How Do They Attract Customers?

• Manufacturers
• Promotional campaigns
• Community Company Programs
• Scholarships, minority employment
• Sponsor scientific education programs in schools
• Charity Involvement
• United Way partnership (Abbott)
• Name visible during newsworthy events
• Donate supplies to support disaster relief,
  emergency needs
• Traditional media
• Vertical Markets
• Media attention
• Expanded market reach, product selection sales
  opportunities
• Distributors
• Member networks

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Value Added Incentives

• Suppliers/Manufacturers
• Efficient replenishing of stocks
• Immediate product introductions
• Ability to post Request for Quotations (RFQs)
  for lowest cost brand
• Bundle services(Vendor Management Inventory,
  Customized Certificates of Analysis, Financial
  services) to give purchasing flexibility
• Vertical Markets
• Streamlined creation of multi-supplier orders
• Market site handles order processing, customer
  service and account collections
• Reduces cost of servicing each sale
• Rapid, real-time review of order status
• Expanded market reach sales opportunities
• Ability to post Request for Quotations (RFQs)
• Lowest cost supplier (Chemdex)
• Personal favorites lists for fast, easy
  re-ordering

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Value Added Incentives (Cont.)

• Distributors
• Investor relations info (stock quotes, financial
  reports)
• Efficient market distribution of products
• Informational advantages
• Manufacturers can effectively pull demand data
  for products from wholesaler
• Bundling products
• Customizing orders/packaging/inserts
• Customer FTP
• Disease specific information (Amerisource, Bergen
  Brunswig)

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Value Added For All Major Players

• These added incentives have customers making use
  of their sites across all major player segments
• Lower start-up costs / working capital needs
• Reduced marginal cost of servicing next sale
• Scalability of infrastructure and security
• Advanced, easy-to-use search engines
• Detailed ordering info (how to/guidelines) for
  ease of use

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Converting One-shot Customers Into Repeat
Customers

• Manufacturers
• Online continuing education courses(GlaxoWellcome)
  
• Exclusive agreements with pharmacy buying groups
• Provide environmental protection and safety
  resources(plant safety audits, technical training
  and 24-hour emergency service)
• Vertical Markets
• Personal Feel register for membership join
  community
• Switching cost after creating an account to
  obtain convenient services (i.e. quick
  purchasing, automatic billing, etc.)
• Integrate with third-party and back-office
  systems to increase switching cost
• Serve as daily start-page and first
  point-of-contact
• eAuctions submit search products, check
  progress
• Supplier eRFP promotions

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Converting One-shot Customers Into Repeat
Customers (Cont.)

• Distributors
• Personalization and customization of site
• Switching cost after registering to access site
• Customer service programs to ensure satisfaction
• Alliances with big suppliers to build credibility
  and attract customers

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Recommendations- Where Should Pharmaceutical B2B
Go From Here

• Develop long term partnerships as the basis for
  an Internet Brand presence.
• Broaden customer base by entering other players
  market to reach more customers.
• Create more specific customer segmentations
  levels for diff. customer types.
• Permission Marketing campaigns.
• Email reminders, newsletters, and updates to
  focus attention on company.
• Utilize Internet advertising.
• affiliate programs, reciprocal links, swapping
  banner ads, WWW on everything.

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Conclusion- Watch for Changes From Impending
Federal Regulations
Regulatory model for traditional pharmaceutical
transactions-heavily monitored
United States
Federal
State
Practice of Pharmacy
Licensing
Practice of Medicine
FDA
FTC
DEA
There are currently no state or federal
regulations regarding the online pharmaceutical
industry. We conclude impending regulations will
greatly affect the growing market.