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Report: Healthcare E-Commerce to Hit $370 Billion by 2004

A new research report estimates that the healthcare industry will reach $370 billion in online transactions by 2004.

Compared with travel, finance, and even the steel industry, healthcare e-commerce is a late bloomer, says the report from Forrester Research. But the Web will become the foundation for a new healthcare industry infrastructure that supports complex, multi-party transactions between and among consumers, providers, insurers and medical suppliers.

With 32 percent of online consumers already shopping for health products on the Web, online health sales show no signs of slowing. Forrester expects 8 percent of all retail health sales --$22 billion dollars -- will move to the Internet by 2004.

Prescription drugs will dominate the category with $15 billion in online sales as Web pharmacies, insurance carriers, and doctors address reimbursement and liability issues.

Nutraceuticals will generate $3.3 billion in online sales as consumers increasingly take charge of their own wellness. Over-the-counter (OTC) drugs and health and beauty aids will contribute $1.9 billion and $900 million, respectively, to the online retail category, the report says.

So where are all those other billions of dollars? They are in the in business-to-business healthcare trade to the tune of $348 billion, the report says. About 17 percent of the industry total will move online by 2004, driven by the need to control costs, improve information flow and gain transaction efficiency.

New intermediaries will arise to simplify the procurement of everything from drugs to capital equipment, capturing $124 billion in revenues in the process. Meanwhile, insurance companies and HMOs will turn to the Internet to improve claims efficiency, bringing $224 billion in claims onto the Net by 2004.

"Consumers and businesses alike are being driven to the Internet by concerns about escalating healthcare costs," said Elizabeth W. Boehm, associate analyst in Healthcare Online Research at Forrester. "Although most business activities are stovepiped today, Forrester expects that the Internet will topple communication boundaries between consumers, providers, insurers, and health product distribution chains."