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PRESCRIPTION
FOR CHANGE
The State of Healthcare
E-commerce
Prepared for the U.S. Postal Service®
By the Editors of Internet Health Management

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Contents
Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Healthcare Goes Digital . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
A Shift in Shopping Trends . . . . . . . . . . . . . . . . . . . . . . . . . 6
How Companies Have Started Capitalizing . . . . . . . . . . . . . . . . 7
Taking Stock of Pharmacy Customers . . . . . . . . . . . . . . . . . . 10
The Rise of Startups . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Changing Consumer Expectations . . . . . . . . . . . . . . . . . . . . . 13

Healthcare Shipping . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

The Role of Technology in Healthcare . . . . . . . . . . . . . . . . . . . 16

The Challenge Ahead . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Footnotes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

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Executive
Summary
The U.S. health system can be hard
to change. That explains why most
consumers still head to their nearby
drugstore to fill or refill a prescription or
still must make the time to seek treatment
in the brick-and-mortar world of hospitals
and doctor’s offices.

But healthcare is changing, moving online

more and more. These days, drugstores
are increasingly digital—and they’re
not just for prescriptions. If the world’s
biggest online retailer, the big retail
pharmacy chains and some well-funded
digital pharmacies have their way, digital
drugstores will soon transform from
mainly offering prescription order and
pickup or delivery services into online
healthcare shopping malls.

Digital drugstores will

soon transform . . .
into online healthcare
shopping malls.

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Healthcare
Goes Digital 80%
Consumers’ preferences for the convenience of all searches for a new doctor
of digital access are expanding into begin online.
healthcare. Nearly 80% of all searches for
a new doctor begin online and more than

52%
half (52%) of providers and insurers have
offered online portals for individuals to
access electronic medical records or check
out lab results.1,2 In response, at least 76% of
hospitals now have basic electronic health
record systems capable of giving patients
more digital access via secure portals to of providers and insurers have
view medical records and perform other
offered online portals.
tasks.3

76%
Even health insurers are becoming
more digital. They are building better
websites and mobile apps that enable
plan members to view and manage
their benefits, view claims histories and
research healthcare costs, among other
activities.
of hospitals have electronic health
Healthcare is changing. The $4 trillion records systems.
system is becoming more consumer-
driven. As consumers spend more out of
pocket on healthcare and take on greater
responsibility for managing their own
care, they’re finding themselves buying
more medical equipment and supplies—
often online.2 That increase in consumer
spending is opening new e-commerce
opportunities for web merchants
willing to take on the complexity of
selling healthcare products online, say

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“Healthcare is an
e-commerce market
with a lot of growth
potential,” says Kate
McCarthy, a Forrester
Research Inc. analyst.4
It’s already a sizable market: consumers
spent an estimated $12.0 billion on online
healthcare equipment and supplies in
2017.4 Those numbers are based on an
analysis of more than 200 healthcare
equipment and supplies merchants by
Internet Health Management, a sister
publication of Internet Retailer.

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A Shift in
Shopping

$9,596
Trends

$7,700
Consumer-driven healthcare is especially
beginning to change how consumers
shop online for medical equipment and
supplies. Look across the broad spectrum
of retailers selling healthcare-related
products, and you’ll find a wide array of
retailers. There are dominant web-only
merchants and big drug store chains. There
are also many smaller niche merchants
that sell medical equipment—such as beds,
walkers, wheelchairs or bath and shower
seats—as well as online retailers that carry 2007 2017
only healthcare supplies, such as those
for diabetes, incontinence, sleep apnea,
urological needs and wounds.

Consumers are shopping online more for

healthcare products because they are In 2017, the average
paying more out of pocket for all forms of
healthcare, including for products, services
consumer spent about
and treatments outside of hospitals and $9,596 on all forms of
doctor’s offices. In 2017, the average
consumer spent about $9,596 on all forms healthcare, up 24.6%
of healthcare, up 24.6% from $7,700 in from $7,700 in 2007.
2007, says the Centers for Medicare and
Medicaid Services.4

“We are an aging population spending

more on canes, walkers, glasses,
supplements and a wide variety of other
products as we each personally manage
more of our own health and wellness
or become caregivers at home for our
families,” says Gene Alvarez, Vice President
of Gartner Inc. and e-commerce analyst.4 “A
lot more of that buying will happen online.”

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How Companies
Have Started
Capitalizing
The change in healthcare is opening
new opportunities for big and small
merchants—and many web retailers are
looking to gain an edge and market share
in an expanding segment. For example,
the biggest online retailer is expanding
into the digital pharmacy market with the
acquisition of an online drugstore that
takes digital prescription orders, packages
those orders and delivers them to a
customer base of about 40,000 patients
nationwide.5

That same dominant online retailer also

currently has more than two dozen
medical supplies categories on its website.
The categories are extensive, ranging
from suture thread and stethoscopes to Many web retailers
wheelchairs and over-bed tables.
are looking to gain
The two biggest retail drugstore chains— an edge.
which combined operate nearly 20,000
pharmacies nationwide and individually
do more than $1 billion annually in
online sales—aren’t letting the largest
e-commerce site operator go unnoticed.

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55%
Because drugstores—and the pharmacists
who work there—often have close
relationships with their customers, many
consumers give their druggists a lot of
steady business. For example, 55% and
40%, respectively, of web shoppers at the rate of repeat buyers to
two largest drugstore chains are repeat
largest drugstore chain
buyers, says e-commerce measurement
firm Connexity.6 That significantly

40%
outpaces the 33% median rate of
repeat buyers among the top 1000 web
merchants ranked by Internet Retailer on
Top500Guide.com, per Connexity.6

With established customers, online

drugstores of varying sizes want to lock
rate of repeat buyers to second
in loyal online healthcare shoppers with
a wider variety of easy-to-use services
largest drugstore chain
that include complete prescription drug
management systems, along with the

33%
ability to see doctors online, buy or renew
health insurance, get health and wellness
advice, receive digital coaching and shop
for a growing array of health, beauty and
other over-the-counter products.

median rate of repeat buyers

at top 1000 web merchants

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The two largest pharmacy companies

both have aggressive plans to turn their
current drugstore-focused e-commerce
operations into diversified digital
healthcare delivery service systems. For
example, one big drugstore chain is in the
process of acquiring one of the biggest
health insurance companies, looking to
turn its e-commerce site and network
of stores into a one-stop shop for filling
prescriptions, seeing a doctor online,
managing their health insurance benefits
and shopping for goods.

Another big drugstore chain is also working

to deploy consumer telehealth kiosks
in its stores. This would allow a walk-in
customer to go online and connect with
an emergency room physician who can
provide an exam through a high-definition
video-conference connection.

For now, the program is limited to a single

kiosk with telehealth capability at one store
in Manhattan. However, the retailer plans to
add additional locations this year.

Another big
drugstore chain
is also working to
deploy consumer
telehealth kiosks in
its stores.

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Taking Stock
of Pharmacy
Customers
The big drugstore chains see pharmacy
customers as a large customer base that
wants to comparison shop and purchase
and manage their healthcare online.
For example, 66% of consumers would
consider seeing a doctor online and even
more consumers would prefer a virtual
doctor’s visit if the visit resulted in a
faster prescription refill, notes a recent
survey of 2,100 consumers by Harris Poll
and a telehealth services provider.6 The
survey found that 78% of consumers are
willing to have a video visit with a doctor.6

But sheer size and loyal customers alone

might not be the only way to carve out
market share in the emerging digital
drugstore market. Even though big

78%
drugstore chains offer multiple ways to fill
prescriptions online and talk to pharmacists,
customers still experience lengthy wait
times for medications.
of consumers are
It takes, on average, about 45 minutes
before a prescription is ready for pickup willing to have a video
or delivery.6 About 40% of consumers also
must make a return trip to the drugstore
visit with a doctor.
to pick up their order because the drug
was out of stock, and more than one third
of prescriptions are never picked up, says
market research from one digital pharmacy
startup.6

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The Rise of
Startups
Several well-funded online drugstores
are banking on e-commerce and better
pharmacy management technology, in
combination with fast delivery, to carve
out a niche. In New York, one startup
wants to build a lasting e-commerce
business by delivering prescriptions for
free in about two hours to customers
living in Manhattan and the other
boroughs.

Another digital pharmacy based in

Manchester, New Hampshire, which
is set to be acquired by a big web-
only merchant, helps patients order,
reorder, properly take and track multiple
prescriptions at once. The online
pharmacy manages multiple prescription
medications for customers by presorting,
packaging and delivering the drugs—all
with a 24/7 pharmacy staff that can be
contacted either online or via phone. Several well-funded
online drugstores are
banking on e-commerce
and better pharmacy
management technology,
in combination with fast
delivery, to carve out a
niche.

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Every two weeks, customers receive a

personalized package containing presorted
Startups face a
medications, along with a recyclable stiff challenge
dispenser and any other medications that
cannot be placed into packets, like liquids because traditional
and inhalers. Each shipment includes a
medication label that explains what each pill
pharmacies—especially
is and how it should be taken. In addition the big chains—have
to presorting medications, the digital
pharmacy coordinates refills and guarantees the biggest base of
all medications will ship on time. Online tools online customers.
allow customers to track their shipments,
refills and co-pays.

However, startups face a stiff challenge

because traditional pharmacies—especially
the big chains—have the biggest base of
online customers, and they can leverage
those existing relationships to drive
more prescription sales and other digital
healthcare services. That explains why they
are rapidly adding more convenient services.

For example, one national chain introduced

free, same-day delivery for prescriptions and
certain over-the-counter items in Manhattan,
and in July expanded same-day delivery to
Miami, Boston, Philadelphia, Washington,
D.C. and San Francisco.

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Changing
Consumer
Expectations
In general, consumers are increasingly
concerned with delivery of medical
equipment, supplies and prescriptions
according to one online retailer that
projected 75% of its business would be
from healthcare supplies.4 “We have
patients that have a condition so we do
a lot in the incontinence space, in the
wound care space and in the dietary and
nutritional space,” one healthcare web
merchant says. “It’s a cash market for
people that have a need for an item, and
they’re willing to reach into their credit
card to obtain what they need for their
medical condition or their family.”

As in most other markets, consumers

expect free shipping—or at least Even more important
affordable shipping options. But even
more important to healthcare shoppers to healthcare shoppers
is having multiple convenient shipping
options to choose from and the ability to
is having multiple
track packages. convenient shipping
That means consumers want more than options to choose from
just an e-mail confirmation that their order and the ability to track
has been placed.
packages.

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Consumers want multiple shipping

options including:

Next-day delivery

Shipping and returning to store

Shipping to an address different from the billing address

Choosing a time of delivery and a specific location

Viewing regularly scheduled and one-time pickups by date, time,

address, status or type

Viewing completed and canceled pickups for up to 30 days

Making changes to a request for a one-time pickup

Changing or canceling scheduled and one-time pickups to

eliminate unneeded or multiple trips

Requesting a pickup and processing a return at home or

at the office

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Healthcare
Shipping
“Buying medical equipment and supplies There are web
isn’t the same as buying a book on
[online],” Alvarez says. “Delivery and
merchants offering
shipping matter when the purchase can more value-added
be life or death, such as knowing exactly
when new oxygen tanks will be delivered.” services such as
Most durable medical equipment and
free “white glove”
healthcare supplies web merchants have treatment . . . for high-
basic shipping options—including free
shipping—in place and some form of order end orders such as a
tracking. But there are web merchants
offering more value-added services such
hospital bed.
as free “white glove” treatment (which
includes delivery and setup) for high-end
orders such as a hospital bed.

To compete with the biggest online

retailer, which has more than 100 million
users of its subscription two-day order
fulfillment and delivery service, the big
national chains are adding more options
for pickup in store or affordable same-day/
next-day prescription delivery.7

But like most aspects of digital healthcare

and healthcare e-commerce, changes will
be quicker to occur than before.
Yet change won’t happen overnight.

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The Role of
Technology in
Healthcare
Consumers clearly want more digital
options to manage their health, wellness
and insurance benefits. More consumers
now see technology as part of getting and
using healthcare services. For example,
75% of consumers see technology as an
important component of managing their
health, according to Accenture.8

Patients in general are pleased with these

digital services. 74% of patients say they
were satisfied with their experience via
digital healthcare, but 47% of survey
respondents would prefer an immediate
virtual appointment over a delayed regular
office visit, Accenture says.8

Even though emerging technologies such

75%
as artificial intelligence, robots, virtual
assistants and various forms of machine
learning are just now being implemented
in various forms across the U.S. healthcare
system, patients see advanced use of consumers see
of technology as being beneficial in
delivering care.
technology as an
important component
of managing their
health.

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Consumers are more readily adopting

technology that automates processes or Hi
judgments, Accenture says. Nearly one
in five consumers (19%) have used health
services that are powered by artificial
intelligence, such as virtual clinicians and
home-based diagnostics.8

Consumers say they are likely to use a

variety of intelligent health technologies,
including home devices that test blood for
a variety of indicators (66%), intelligent
virtual health assistants (61%), and virtual
nurses that monitor their health condition,
medications and vital signs at home
(55%).8

“Consumers increasingly expect to use

digital technologies to control when,
where and how they receive care services,”
says Kaveh Safavi, who leads Accenture’s
global health practice.

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The Challenge
Ahead
59%
Healthcare providers and payers still face
challenges—and lots of implementation to
come. Consider these current milestones:

More than 95% of the nation’s

of Americans think
nearly 6,000 hospitals have an online doctor ratings
electronic health records system.
But less than one-third (29.7%) are important, and
are sharing, sending and receiving 54% of patients aged
electronic patient records with
different outside provider groups.9 18 to 24 use the web
as their primary way
The American Medical Association
to find a doctor.
found 59% of Americans think
online doctor ratings are important,
and 54% of patients aged 18 to 24
use the web as their primary way to
find a doctor.10 But hospitals appear
to be lagging behind patient demand
in these areas. Only 53 (10.6%) of
hospital systems offer physician
ratings and reviews on their website,
and only 53 (11.2%) and 23 (4.6%),
respectively, have digital health
features that let patients add or
update their personal information
and view treatment plans for their
medical condition.10

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Overall, healthcare insurers are

getting better at building the kind
of web tools consumers will use.
But most consumers don’t really
like dealing with their health
insurer, online or off. In fact 33%
of consumers would rather deal
with a lost credit card than select
or manage their healthcare
benefits, according to a survey
from one major healthcare insurer.11

Given how complex and

segmented healthcare is,
not every segment will
embrace digital quickly—
and some perhaps not
at all.
But the healthcare system is
moving in the right direction. “Despite
the significant investments in digital
technology, the U.S. healthcare system
won’t transform itself overnight, but it will
change,” Safavi says.

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FOOTNOTES

1. Mark Brohan, “Even with a referral, 80% of patients still check out doctors online,” Internet Health
Management, May 22, 2018.
2. Vaishali Patel and Christian Johnson, “Individuals’ use of online medical records and technology for health
needs,” The Office of the National Coordinator for Health Information Technology, Apr. 2018.
3. Dustin Charles, Meghan Gabriel and Talish Searcy, “Adoption of Electronic Health Record Systems among
U.S. Non-Federal Acute Care Hospitals: 2008-2014,” The Office of the National Coordinator for Health
Information Technology, Apr. 2015.
4. Mark Brohan, “Healthcare is good medicine for these web merchants,” Internet Health Management, May 30,
2018.
5. “Five questions about Amazon’s play for the $300 billion pharmacy market,” Bloomberg News via Internet
Health Management, Jul. 3, 2018.
6. Mark Brohan, “A digital prescription for change,” Internet Health Management, Feb. 28, 2018.
7. Allison Enright, “5 things we learned from Amazon’s annual report,” Internet Health Management, Apr. 19,
2018.
8. Mark Brohan, “Consumers want sophisticated digital health tools,” Internet Health Management, Mar. 7, 2018.
9. Mark Brohan, “Stingy hospitals still not sharing many electronic records with outside docs,” Internet Health
Management, Feb. 2, 2018.
10. Mark Brohan, “The Digital Hospital 500: Who is (and isn’t) engaging patients online,” Internet Health
Management, Oct. 11, 2017.
11. Mark Brohan, “One-third of consumers now comparison shop the web for health insurance,” Internet Health
Management, Oct. 10, 2016.

About the Author: Internet Health Management

Internet Health Management offers in-depth coverage of the internet, mobile, and e-commerce technologies and
business strategies on the web-based initiatives and strategies driving the future of consumer-driven healthcare
in the U.S. healthcare system.

For more information, visit Internet Health Management

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