The following is an abridged from the Keynote Address given by CMN and 1To Pharmacy CEO Tim Vasko to the March 24, 2004 COPHARM Conference in Winnipeg, Manitoba

The internet pharmacy is paving the way for the coming E-health revolution

Before I discuss the effect of new technology on how pharmaceuticals are bought and sold around the world, I would like ask you to remember the date “ Sept 24, 2005.” I’ll come to why later.

Along with a few others, E-Trade, pioneered online stock trading. Soon after the advent of E-Trade more than half of all retail stock trades in America were conducted by “online” services.

You can imagine the ramifications of a change like that for the bricks and mortar brokerages. It was awful. Picture Merrill Lynch’s enormous restructuring headaches when they could no longer afford the real estate and phone bills for retail commission sales people.

But while it was awful for Merrill Lynch and the other old-school brokerage houses, it was great for just about everybody else. Buying and selling stocks was easier and cheaper than ever before.

What made this radical paradigm shift possible? Technology, of course. What made things happen so quickly? New advances in the internet, cultural forces, economics, inertia - a host of forces that reached a tipping point or critical mass.

The question for us in the online - and traditional - pharmacy sectors is, “How far away from that tipping point is our industry?” I think we’re close.

I will return to the tipping point, but first I want look at state of the industry, tech-wise, as well as what’s around the corner in three sections: Bad News, Good News, and Really Good News. (Isn’t it nice that there is “really Good News” but there isn’t “Really Bad News”)

The bad news is that the future of the Canadian internet pharmacy that gets by on selling cheaper drugs to Americans is uncertain. There are others with more expertise than me on the latest legislative and regulatory developments, but lets quickly enumerate the factors that have caused this uncertainty:

• The stronger Canadian dollar/weaker U.S. dollar is reducing the margin spread in prices.
  
• Most of the large drug companies - because they don’t like what we are doing - are causing serious supply and price issues.
  
• Various legislative initiatives from U.S. federal and state governments will make likely make this a less attractive industry. (Of course the exception to this is the growing numbers of state and civic governments that are actively promoting internet pharmacies to their employees.)

The good news is that the future of a more broadly defined internet pharmacy is absolutely certain. It will survive and prosper because it is a superior way to deliver a service. It is fast, convenient, efficient, and economical.

Internet pharmacies don’t just match the services bricks and mortar pharmacies can offer – we beat them hands down.

In summary: Imagine no price difference for a moment. Does that eliminate the need for Internet Pharmacy? Walgreen’s in the US doesn’t seem to think so. They are investing in technology to drive sales and retain customers. In that sense they are trying to keep up with us.

The really good news for internet pharmacies is that the people in the industry today have positioned themselves to become major players in the “E-Health Revolution” - a revolution that will make the mere providing of p rescriptions by mail seem like small potatoes.

Here’s what we’ve done:

• We have created infrastructures that will be part of the model of how the e-health revolution will take shape. And we didn’t just do it theoretically. We did it down in the trenches with real people and – frankly – real life and death services.
  
• We have proved that people CAN trust, and WILL trust, “the internet” to deliver perhaps the most vital service in their lives (medications) – and their most personal data.
  
• We have normalized online buying and the idea of online healthcare to a client base that is arguably both the most reluctant to try new approaches and the least tech-savvy: America’s senior citizens.

It’s a good bet that we have done much more to familiarize the seniors of North America with high tech in general, and the internet in particular, than a thousand night courses at a thousand seniors’ centers and community colleges.

A friend told me that his snowbird uncle couldn’t learn how to use a computer to look at the emailed pictu res of his very adorable nephews. But to save $130 a month on Lipitor, suddenly he’s a computer whiz.

And that’s the way it has always been: The greatest motivator for learning a skill is that it will improve your life (i.e. save you money) immediately.

What is this e-health revolution? If I knew for certain the exact shape it will take and precisely what applications will dominate, I would have my development team working on them 24/7.

But we can assume that it will encompass a range of services and applications where, for example, all one’s health records are stored in a single data base that health providers, administrators, pharmacies, labs, insurance companies and other payers will be able to access certain parts of.

The intention of all e-health developments is to meet the rising expectations for quality of care while creating efficiencies demanded by limited budgets. (Helping us do more with less.)

To get some perspective, let’s look at few other industries and how they were transformed by new high-tech tools:

• Finance. Well I’ve already told you about eTrade and the securities industry.
  
• How did Amazon become the worlds largest “book store” under the nose of giant Barns and Noble. Thanks to technology they were able to provide customer service perks that the bricks and mortar stores could not.
  
• The Travel Industry. Travel Agents are virtual and “virtually” non-existent. Expedia, Travelocity and Hotels.com have each grasped the power of technology and created whole new industries.
  

Please note the size of the companies who implement technology. Most of them started out small - and not very long ago. Size is nearly irrelevant. Innovation is the most important strategy for success.

In just the last half decade, Technology has provided many lessons here for both the innovators as well as for the suppliers in the health and pharmaceutical industries.

What’s happening in the USA?

• Walgreens has implemented online pharmacy so people who travel can easily get access to their medications. In Canada, grocery giant Safeway recently announced plans to establish an online pharmacy p resence. Independent pharmacies are now offering their medications online with valid p rescriptions.
  
• Medicare is bringing in p rescription medication payment help for seniors. Companies are processing millions of payment claims daily.
  
• And the “e-scrip” will be a mandate, rather than an option in the next five to seven years. The days of processing prescriptions by fax and paper are numbered.

The Transition of the Health Industry is a reality, and internet pharmacies because we are already using new high tech tools in the “real world” have the rare opportunity to lead the way.

Through our technology systems we have developed many items that encompass data tracking, secure communications, privacy and even case management for long term disease. And some of these will be available on an increasing basis as the industry transitions.

Technology will drive this industry, and the size of the companies that have access to that affordable pharmacy technology will range from the independent “affiliate” who tells their neighbor about their favorite pharmacy and who receives a referral fee for doing that, to the efficient, one person pharmacy start up who uses the software and technology platforms to process the orders, track the credit cards and keep instant access to patient, customer records, in a secure environment.

Pharmacies that can process e mails and have a track of e mail communications, who can respond to consumer demands and questions efficiently and retain a record of all of these in an easily defined format, are going to be the organizations that innovate and survive.

It is not a question of whether technology and pharmacy and health will co-exist for a long time, nor about cross border pharmacy, as the Media would like us all to believe. It is a matter of who becomes the next GOOGLE, Yahoo, Expedia and Amazon or of the Industry – or the next E-trade…

The date Sept 24, 2005 is important because it is 18 months from today. And 18 months was how long it took for e-trade and the other online brokers to get to the point where they controlled more than half of all the retail stock trades in the USA – 52%. Where will our industry be in 18 months? Will we control half of all prescriptions filled? Will Walgreens experience the calamity that the big brokerage houses did? (Probably not they’ll just sell more computers, lawn furniture and whatever else they sell in drugstores nowadays.)

I don’t know where we will be on Sept 24, 2005. I don’t know if the e-health revolution will truly underway by then. But I do know that I’m going to be as ready as I can be. I hope you are too.