E-Commerce in the Pharmaceutical Industry: Threshold of Innovation


Shruti Pathak
Kedarnath Aggarwal Institute of Management


In last two decades E-commerce has become synonymous with communication, Strategy and business practices, facilitating electronic transactions for business process via EDI (Electronic Data Interchange). E-commerce enhances value of the industry through key underlying processes such as, high value drug innovation, clinical development and trial, project and people management, marketing and sales. The synchronization of E-commerce and corporate strategy has created cogent value for this industry. This article reviews the application of E-commerce and discusses its significance in the pharmaceutical industry implying four major aspects as the covenants for the success of the pharmaceutical industry.


The pharmaceutical industry has become a crucial part of our society adding value to everyday human life. It constantly faces challenges and demands to provide better services to the community. In 80s the pressure was enormous to develop new strengths for delivering products and services efficiently to rapidly expand their presence while managing risk and costs through sharing the resources. To achieve these objectives, the pharmaceutical industry implemented E-commerce in its business process. Typically E-commerce promotes electronic transactions among industries. This paper discusses the application of E-commerce in the pharmaceutical industry from a conceptual perspective. The purpose of this essay is to evaluate and emphasizes the effect of E-commerce on the pharmaceutical industry as an innovative approach. In particular this paper focuses to determine the benefits it has delivered to the industry. Hence this paper is arranged in to four major sections each highlighting different key aspects of E-commerce illustrating its achievements in the pharmaceutical industry. Commonly the pharmaceutical industry is perceived as a research intensive industry. A study by Betz (1987) emphasis's that the pharmaceutical industry is more driven to gain competitive advantage through innovative technology. Bullocks (1996) reports that the percentage of total online revenue generated from 'for-fee' pharmaceutical sites will grow from near zero in 1995 to almost 30% by the end of year 2000, generating revenue of over $ 3.5 billion. Hence in an increasingly competitive pharmaceutical market the necessity to improve speed and access the global operations is supplemented by E-commerce. Mainly business-to-consumer interface is a crucial aspect of the pharmaceutical industry. E-commerce essentially provides such facilities through an integrated system commonly known as, Electronic Data Interchange (EDI) process. Over the years the pharmaceutical industry has successfully expanded its market presence since implementing E-commerce in their business process and user relationship. Strategic Importance of E-commerce in the Pharmaceutical Industry Mainly E-commerce allows better interaction and effective communication among industries as well as with the users by reducing time and effort.

Lin and Huarng (2000) suggest that the pharmaceutical industry achieves significant tasks by utilising E-commerce to circulate information in order to build an integrated network for both the industry and the users. So that it can shrink geographical distances and make timely access to medical information and latest biotech knowledge providing better services to the users and to the pharmaceutical community as a whole. A study by Gagnon (1997) identifies five key types of web sites related to the pharmaceutical industry. He classifies the web sites as, Focused information sites, corporate identity sites, Gateway sites, Storefronts and Strip mall. Focused information sites primarily offer information that is directly useful to the people in the pharmaceutical professions. Gateway sites are the centralized points of entry into diverse resources of Information on the Internet. These types of sites usually create a common channel for exchange of commercial and non-commercial information. Whereas, Corporate identity sites profile different pharmaceutical companies and provide necessary medical information. Storefronts and Strip mall sites generally focus on the user and retailer relationship. For instance, Pharma Indonet is a high traffic web where drug information designed for health the professionals and consumers can be found. Generally the pharmaceutical websites use a specific feature such as 'Biological Data Transport' that integrates the basic concepts of science with product and marketing information. In addition, electronic transaction serves as a potential marketing tool for the pharmaceutical industry. The pharmaceutical industry expands its presence by online campaigns providing relevant information aimed at specific target audience, attracts new investors enhancing mutual relationship, shares company news with the peer groups and the users. Curtis (1995) states that appropriate positioning of the company and its products in cyberspace enables companies to reach wider market and increase their bandwidth. Though this has certain limitations such as, uncertainty of the users about the validity and authenticity of products and information but rightful approaches such as, openness to contact and discussion, on-line advice by registered professionals often minimize such problems. Electronic transaction instantly provides rich details of products and services to the users. Moreover, this offers opportunities for faster, more efficient support activities and qualitative improvement via in-bound and out- bound logistics, sales and after sales services.

Kling and Scachi (1982) report that infrastructure such as, communication and learning within the computing network enhances industry's viability in the long term. Electronic transaction uses specific applications to maintain such infrastructures through E-mode. Generally E-mode creates and enables support systems for computer software and hardware. The combination of software, hardware and people who manage it, generates an underlying process central to the operation of E-commerce. Kalakota and Whinston (1996) indicate that E-commerce has a greater impact on the business-to-business application to gain sustained development through E-mode. More specifically it has important implication when a diverse group of organization members become involved with the decision making process in the pharmaceutical industry. They further add that such interesting prospect of E-Transactions is becoming an imperative for the industry. Similarly Lin (1996) proposes that currently the pharmaceutical industry uses E-commerce as a holistic approach with a strategic intent to exchange information and execute transactions among enterprises and individuals. Since last two decades the E-business community is expanding phenomenally and serves as a dynamic forum for this industry. Some important forms of electronic transactions such as, Intranet, EDI (Electronic Data Intra-change), and diagnostics through virtual simulation have extended E-commerce to different business practices within the pharmaceutical industry. Overall this has considerable impact on the business operations and processes of this industry. Thus Ecommerce is often mentioned as a key enabler of the 'information economy' creating operational and organizational excellence among the industry groups.

In 1998 International Data Corporation reported that world wide E-commerce users have increased by 60% from 40 million in 1996 to 100 million in 1997 which comprises of 58 millions North-Americans, 23 millions Europeans, 15 millions Asia–pacific users and 3 millions of rest users throughout the world (IDC,1998). E-commerce enables pharmaceutical companies to create an electronic highway to interact with the users, suppliers and professionals. Hence the pharmaceutical industry uses its core capability by means of E-commerce to add value for clinical development and channel management, high value drug innovation, marketing and sales. Coombs and Richards (1991) observe that such combination of E-commerce and corporate strategy affirms sustained development in the pharmaceutical industry. In the same way Hanseth and Monteiro (1997) propose that corporate strategy integrated to information technology, telecommunication technology and any other form of transactional communication subsequently leads to the application of E-commerce. As a whole such process is know as EDI (Electronic Data Interchange). Such integrated means of application focuses on the industry as well as on the users creating a system that will work for tomorrow not just for today. In the pharmaceutical industry four major features, such as E-marketing, E-operation, E selling and E-clinical, represent electronic transaction. Mainly the pharmaceutical companies implement these features to leverage their existing capabilities and learn to minimize the risk of information overloads and content redundancy threat. This process of organizing, transferring, and using the information and expertise within an organization, supported by people, content, technology and process helps the pharmaceutical industry to provide efficient service to the users. At the same it adds real value to their industry portfolio. Moreover, this strategic network builds intimate and ongoing relationships between the users and the industry. It is noteworthy that the achievement of real value through E-commerce has remarkable implications on the pharmaceutical companies creating substantial value for the shareholders. It is forecasted that almost 70% of operational economy will be generated by E-commerce by the end of year 2005 (Source-Marvin Zonis and Associates). Furthermore, there are four essential factors those derive real value for the pharmaceutical industry through E-commerce (Source-Andersen group, 1999). First, compelling business process- this allows access to global information, creates Significant new revenue and formulates new business models for the industry. Second, technological mega-developments- this expands bandwidth improving technology and its implementation, synthesizes the vast amount of information contents. Third, favorable regulatory evolution–this monitors and provides guidelines for electronic submission, prepares regulations and preserves intellectual property. Fourth, growing user involvement- this helps to identify consumer action groups, disease information sources, and physicians' intermediation. The pharmaceutical industry strategically uses real value to get access to new target audience through product and process development.

Over the years the pharmaceutical industry has managed to gain sustainable advantage through E-commerce in comparison to other industry sectors. Organizations in this industry regularly update and revise their web pages following quality control mechanism such as, Continuous Quality Improvement (CQI) procedure, providing current and relevant information, training materials, idea submission forms, and online patient satisfaction surveys. Frisse (1996) identifies that E-commerce is becoming a vital means of providing documents to support the administration of medicine and, in many circumstances, the delivery of patient-specific information.

The pharmaceutical industry provides significant support to the users by advising and securing access to individual prescription history, also receives considerable backup by releasing reliable general medical information such as new drug formulation, clinical break-through and availability of further support. This helps them to attract new users and increase their retail base. Also this allows them to maintain constant communication with doctors/ pharmacists and interact with the users. So that they can provide electronic prescriptions and carry on subsequent follow-ups. Henry (1999) highlights that E-commerce creates a forum for the users where they can help themselves in filling and refilling on-line forms, know about their statutory rights and co-payments charges and able to get direct home delivery services. Therefore the strategic importance of E-commerce in the pharmaceutical industry is significant.

Issues and Application of E-commerce in the Pharmaceutical Industry:

In recent years the success of E-commerce has created an impressive trend in the pharmaceutical industry. The public and community health awareness has remarkably increased and a great deal of changes has been observed in our life style. Moreover it has significantly improved the relationship among trading and non-trading partners in the pharmaceutical industry. Rogers (1999) recognizes that the main contribution of E-commerce is 'acting together' by reducing repetition so that trading partners of all kinds can compete more effectively on the issues that improve productivity and reduce costs. The key objectives are to achieve cost reduction, improve productivity, simplify communication, maximize profits and utilize human resource for collective gain. The use of E-commerce following standardized guidelines establishes better working relationship between different partners, suppliers and the users. The uniform practice of such standards brings wholesalers, manufacturers, and group purchasing organizations, drug chains, and claim processors together. However, to maintain and foster such practices security and privacy are paramount. Security and privacy are two major concerns in E-commerce, which need effective protection otherwise users trust and professional ethics would be at jeopardy, or else violated. The personal database of patients and professional classification of practitioners would be at risk if monitoring and controlling would not be prioritized.

Guengerichs (1997) points out that E-commerce follows the Internet protocol and the guidelines for browsers, web servers that exist beyond the corporate security firewall. Hence on the issue of privacy and security, it should be taken with caution that patients visiting virtual doctors on webs need to be aware of the implication and information they are sharing with the others, which might have some repercussion on them. Not only patients but also suppliers, research groups and non-clinical professionals may face detrimental consequences without proper privacy and security. So, protective measures should be enforced in order to retain privacy and security of all the users as well as professionals. In e-transaction Secure Socket Layer (SSL) is a protocol that secures connections to server protecting the information from stray use. Secure Electronic Transactions (SET) is another protocol for browsers and credit card control (source-NASSCOM). But these security measures do not always restrict information filtering and misuse. Similarly legal issues in E-commerce are relative new concepts, which, of course are directly derived from general legal codes and laid out accordingly to the need of the users. The major legal issues in E-commerce are security, authentication, liability through regulation of on-line sales and Rx drugs; privacy, encryption of online therapies and electronic contracting between the partners. For security measures government regulations with statutory effect should be implemented on the practices of the pharmaceutical industry. Equally the authentication of practitioners' identity and validity of web information can be regulated by the respective governments in their regions. To maintain privacy of users, special rules should be imposed with austerity. Moreover, for e-contracts government rules should be reinforced with strict legislations to restrain spurious information and practitioners.

Frook (1998) proposes that such Internet enabled pharmaceutical sites require budget-busting commitments to quality and security infrastructure similar to on-line brokerages. Generally the legal and legislative issues in pharmaceutical industry depends much on, commercial versus non-commercial practices. Proper protection of the users from false or misleading commercials and regulation on advertising of OTC drugs, dietary supplementary, health care services, medical devices, Rx drugs and prescriptive practices can provide a better and healthy service to them and other medical professionals. Equally the medical professionals need to adhere to the framework set by suitable and authenticated authority. So that proper on-line advice and support can be offered to the users.

Supply Chain Management and E-commerce:

Supply chain management is a crucial aspect of all the industry sectors. Like any other industry the pharmaceutical industry is very much dependable on logistic and supply chain management to reach out to their retailers and the users.

Thomas and Ballard (1995) state that the integration and incorporation of information and data, personalized to a user or groups of users allow a customized view of their view and response by creating a type of logistic relationship. From a supplier and user perspective it is known as supply chain management particularly in the context of electronic transaction. In E-commerce primarily EDI serves such purpose for both the supplier and the users. The opportunity to appropriate the benefit of E-commerce lies in developing the rightful sharing of information, data and process between different trading partners. The partners and supplier set realistic expectations to achieve their goals by mutually contributing to resources and capabilities. EDI assists them to allocate the resources in a more time efficient manner and maintains their relationship in tact. This comprises internal and external collaboration, marketing joint web sites, supporting business systems and creating interface with the users.

Supply Chain Management (SCM) in this framework includes, MRP (Material Resource Planning), MRP II (Manufacturing Resources Planning), CIM (Computer Integrated Manufacturing) and ERP (Enterprise Resource Planning). Lawrence (1998) states that basically this explains the concepts and applications of E-commerce that focus on getting the right information at the right time to the right place so that the right people can get the right resources to make the right products at the right time for it to be delivered rightly to the users. It is essential that procurement system should be reinvented for this, so that transaction and processing will be automated. Essentially EDI offer excellent opportunity for such uses and applications. Thus, EDI has evolved a new perspective typically cutting across the traditional function of customer retention and acquisition rather differentiating customers by offering them valuable support to access, store and sort relevant enterprise-wise information. In this context E-commerce has three integrative aspects, such as, information transaction through electronic highway, institutionalization of intermediaries and evaluation of network system. These aspects help to develop sites and procure data. At the same time these provide data safety, quality and assurance; maintain sites for the patients saving their time, money and urgency on priority basis. Such applications include entire on-line trials, medical registration, and access to personal data, laboratory practice, dispensing, query solution and adverse events reporting. Colon (1999) reports these practices reduce the exorbitant cost of large trials with a zero defect result which in future proves to be more environment friendly and establish the innovative aspect of the clinical trials. In addition, he proposes that these practices should be closely monitored for more effective result. Such integrated network created by E-commerce makes supply chain system more efficient for the pharmaceutical Industry.

People and the Users: A New Orientation

The integration of E-commerce with the pharmaceutical industry has created an appropriate forum for the selection and the employment of competent professionals. Moreover professionals attain considerable skills through E-commerce to enhance their expertise and render efficient service to the users. Often professionals in the pharmaceutical industry need organized work place, less clinical trial time and quicker user response, which is now accomplished by electronic transaction of resources, data, on-line conferencing etc. In recent years medical professionals require much more rigorous training to perform multi-task functions than it was in last twenty years. This system has undergone through a radical change of multi-disciplinary and in-house training to provide effective consultation techniques and diagnostic prescription. The prospective medical and para-medical professionals have on-line submission formats available for the recruitment process. Some recruitment process can be entirely conducted by electronic communication, which includes taking entry tests, on-line interviewing and interactive diagnosis. In this context the internal benefit of E-commerce is to attract more skilled people to the pharmaceutical industries offering them right opportunities. This promotes a new trend of right people at the right place in the right time.

Lin (2000) affirms that a new community of medical IT people is now sharing space in the traditional set up of the pharmaceutical industry. Examining the benefit derived from E-commerce.

Roche (1995) says that the part of the excitement of E-commerce stems from it making possible many types of services that either have not previously available or have been based on closed systems that never took off to saturate markets. The pharmaceutical industry constantly strives to make significant differences in our life cycle and life style. So far our life has been better to a large extent by the contribution of the pharmaceutical industry.

Brian (1992) proposes that the relative status of E-commerce in managing life-cycle portfolio changes as the application of E -transaction changes. In essence, through the e-contracts pharmaceutical industry obtains business analysis, design, development, implementation and maintenance of their products and services. Subsequently these products and services contribute effectively to our life cycle and life style. It is reported that the e-contract sales have increased from 50% to 80% in pharmaceutical industry owes a lot to life-cycle portfolio management (Source-PhRMA Annual Survey, 1997). This is perceived as user oriented and value adding for both the users and the industry. Usually different electronic formats are extensively available for the e contracting. The e contracting is classified in to two types; first, contract between the pharmaceutical companies and their buyers; second, contract between the pharmaceutical companies and the users. Such contracts promote e marketing by the means of interactive media and channels. E marketing is primarily based on a direct- consumer campaign. These campaigns enhance value for the industry and make people more interested in their products and services.

Coppola (1999) states that different e-contracts manage as well as influence life cycle leading to better user perception about the industry.


E-commerce in pharmaceutical industry has started a new age both in terms of its uses and applications. This innovation has prepared the industry to offer a significant service to the humankind. The underneath rationale is to serve the whole human race as a collective fraternity achieving mutual benefits. So that, the benefits can be shared among the users, professionals and the industry not only for today but for a better tomorrow. The change in pharmaceutical industry through E-commerce is an on-going process. As technology is developing everyday, the prospect of new achievements and success becoming more assured. Hence, E-commerce has served pharmaceutical industry with substantial success bringing innovation to users and providers.


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Shruti Pathak
Kedarnath Aggarwal Institute of Management

Source: E-mail March 6, 2010


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