Back to Contents of Issue: November 1999

Online health care: Take two aspirins and e-mail me in the morning

by John Stern

The former NEC executive was enjoying his status as a semi-retired advisor. Most of his business life had been spent trying to realize "computers and communication" through the hardware manufacturing at which Japan excels and the closed-standard software at which Japan fails. Now he had been invited to serve on the board of directors of U.S. startup firms, but the experience was still bewildering. "When I served on the Board at NEC," he said, "the only questions about investment were 'if Hitachi and Fujitsu are doing it, why aren't we doing it?' or 'neither Hitachi and Fujitsu are doing it, so why are we doing it?' At these American firms, the board asks 'Since nobody else is doing this, why don't we do it?'"

A vision (of lower Japanese health-care costs) and a tool (the Internet) has allowed CareNet Inc. to build a business with stockholders like Softbank Contents Partners, Kyocera, and eight venture capital funds that don't wait for their competitors to move first. One of the opportunities executive VP Toru Kawanishi and two colleagues from Boston Consulting Group saw when they set up CareNet was reducing the cost of medical manufacturers' representatives (MRs). MRs in total cost an estimated ¥800 billion ($7 billion) a year as they carry samples and literature to doctor's offices. CareNet believes that if even one out of an average three visits a month made by an MR were replaced by Internet delivery, it would have a business opportunity worth over $800 million in the next few years. CareNet is considering an IPO next year on one of the newer Japanese exchanges or NASDAQ.

A doctor may accept an MR's literature, but never look at it; conversely, the doctor may be eager for information on a subject that the MR can't handle. The Internet, coupled with software like Broadvision's One-to-One, offers the ability to dynamically track what interests a Japanese user and present custom information for that user. Broadvision, under VP for Japan Marketing Guiseppe Kobayashi, has already sold its One-to-One tracking software to Hewlett Packard Japan's customer service site. Since 44% of Japanese doctors under 50 already use the Internet professionally, and 68% of nonusers indicate a willingness to try the Internet, online health-care networks present new horizons in marketing. Some years ago, IMS, one of the largest drug marketing database firms in the U.S., gave Tokyo pharmaceuticals executive Henry Marini the green light for an online doctor's network in Japan. A few acquisitions later, that network, advised by Tokyo medical marketing consultant Norman Green, is owned by Kyowa Kikaku, Japan's largest medical ad agency. Merck's Japanese subsidiary Banyu already uses the Internet to market asthma medications to doctors, according to Associate Director for Marketing Research Chris Earnshaw. Sony Communi-cations' So-net Medipro-backed by 14 drug companies -and the Nikkei empire's MedWave are massive marketing sites.

With 22 million Americans using the Internet for medical advice, the recent IPO of Drkoop.com Inc. demonstrated that one can become a millionaire selling stock in a health-care site, even if the site itself is not much of a business (Drkoop.com had revenues of only $43,000 in 1998).

Japan certainly doesn't lack people with medical problems. Yahoo Japan links to over 100 disease discussion sites. Among Japanese Internet users over 30, 83.3% find the Internet a "helpful" source of information. What Japan lacks, according to Hiroaki Mitani, Executive Director of the Japan Internet Medical Association, is widespread experience in managing one's own personal health. As Mitani points out, in Japan virtually everyone is covered by national medical insurance and has been conditioned to believe that they can obtain medical care cheaply at any time. So rather than avoid a visit to the doctor, many Japanese run to the local hospital for slight aches and pains and have less financial incentive to manage their own health. Japanese doctors' greatest worry is that Internet information may be inaccurate, so they support a verification mark for sites such as the one JIMA administers. Despite doctors' concerns, JIMA's own surveys show 68.3% of Japanese Internet health-care site consumers find the information on the Net to be "trustworthy."

Even with few informed patients, and assuming no more than a 10% share of the Japanese health-care market, CareNet reckons the Internet-based health-care-support market to be worth ¥1 trillion (about $9 billion) in the next five years. That's nothing to sneeze at!

John Stern is President of Japan Market Engineering.

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