Media Channels: Casting the Health.Net - people search medical databases for information - Statistical Data Included

American Demographics, March, 2000 by Alison Stein Wellner

Advertisers are reaching out to health-conscious consumers who turn to the Web on a need-to-know basis.

A growing number of consumers are connecting to the Internet in search of health information, and the screech of their modems is music to drug marketers' ears. According to a Harris Poll, 70 million consumers - "cyber-chondriacs" in the poll's terminology - logged on last year to learn more about their health. That's nearly three-quarters of the entire online population.

And quite a few of those users are serious enough about those point-and-clicks to turn them into cash. In 1999, consumers spent $93 million on over-the-counter (OTC) medicine online. By 2004, online spending in the category is expected to hit nearly $2 billion dollars, according to Forrester Research.

As sales mount, so too does the Internet's importance as a media channel to reach consumers about everyday health concerns. Between 1997 and 1998 - the latest full-year data available - spending on online advertising for nonprescription drugs more than doubled, to $2.5 million. And the pace doesn't appear to be slowing: By June 1999, online ad spending had already reached $1.9 million, and that's before the cold and flu season ad rush.

But other than jockeying for product placement and placing banner ads on Web sites, mega-pharmaceutical manufacturers such as Johnson & Johnson and Bayer are approaching the Internet cautiously. "The large manufacturers are considering different channel-conflict issues, and are concerned about possibly alienating current distribution channels," says Bradley Mitchell, chief marketing officer of DrugEmporium.com. The possibility of a manufacturer directly competing with its retail partners online is a thorny issue throughout the consumer goods business.

That leaves Web pharmacies like DrugEmporium.com and Drugstore. com to be the major online OTC drug marketers, for now. But while they lack the channel-conflict problems of their vendors, most online pharmacies have yet to fully tap the possibilities of using the Internet to communicate with consumers about their less-serious health concerns, such as allergies and colds, upset stomachs, and minor sleep disturbances. That's because, so far, consumers have been more interested in turning to the Net for information about illnesses that require prescription medications: The top six conditions or diseases that were of interest to consumers online in 1999 were depression, allergies or sinus, cancer, bipolar disorder, arthritis, and hypertension, according to Harris. Although that list includes ailments potentially treatable by OTC products - sinus problems and arthritis pain, for example - prescription drugs have a higher price point, and are therefore worth more of a marketing inve! stment by online pharmacies, ind ustry experts say. Plus, "there's a stickiness to a prescription that you don't have with an OTC order," says Mitchell of DrugEmporium.com.

Rees Pinney, vice president, sales and marketing for FamilyMeds.com, agrees. "It's the model that's been true as long as health-related products have been sold...When consumers fill their prescription, they want to buy other health products. If you're going to pick up your Allegra or your Lipitor, you're also going to get your Tylenol and Chapstick at the same time."

Most of the tap dancing for the prescription-drug market happens out of consumers' sight, however. Thanks to the dominance of managed care in the United States, drug pharmacies must maneuver through the approval process to get on an organization's prescription plan. "We feel that the best way to develop a relationship with the consumer is to develop a relationship with their managed-care organization," says Pinney. "Once that relationship is developed, we can direct market through the plan to the members, letting them know the benefits of our site." FamilyMeds.com supplements its direct mail efforts with traditional marketing campaigns in a particular plan's region as a way to enhance credibility with plan members.

But measuring up to managed care companies' requirements can be a chicken-and-egg proposition, in that a site has to be established and well known. To achieve that status, online pharmacies must attract consumers to their Web pages, and they largely rely on online advertising to make that happen. To date, efforts have been focused mostly on developing banner advertising, creating partnerships with better-established sites, and building databases for future direct e-mail campaigns.

Most-wanted surfers: high-income mothers. Approximately 60 percent of DrugEmporium.com's buyers are female, according to Mitchell, and in households with children under 18 - and the market is far from fully tapped. The proportion of female shoppers online grew to 38 percent in 1999, from 29 percent in 1998, according to a CommerceNet/Nielsen Media Research study. One challenge is that mothers with small children often have an acute need for medication, but they're not going to want to wait seven to ten business days for delivery of their OTC drugs, says Pinney.