Prescribed To Profit
Anita Devasahayam , 1-Jul-2001

In an era where B2B plays are rapidly disintegrating, giant brick-and-mortar drug distributor Zuellig Pharma has engineered its own prescription to profit by setting up AsiaRx an online pharmaceutical marketplace.

The US$17 million Asian-grown electronic exchange, managed by Interhealth Technology, is a joint project of Zuellig Pharma and Internet consultancy, Zefer. AsiaRx made its debut simultaneously in Hong Kong, the Philippines and Malaysia last October.

Within months, the cash register was ringing and the volume is set to hit maximum highs over the next two years. Average orders from general practitioners in private practice to pharmacies at hospitals in Malaysia alone is between US$1500 to US$13,000 monthly.

In Malaysia, Zuellig Pharma represents 50 pharmaceutical and healthcare multinationals such as 3M, Sanofi-Synthelabo, Pfizer, Novartis, Bristol Myers, Johnson-Johnson and AstraZeneca to distribute over 11,000 types of products to more than 10,000 clients across the country. Sales volume last year stood at US$144 million.

The pharmaceutical industry is undoubtedly minting money with an estimated US$250 billion spent annually on medical drugs worldwide as the number of common age-related diseases become more prevalent. According to Forrester Research, the sale of medical supplies and pharmaceutical drugs in Asia will be the fastest-growing segment of B2B e-commerce, rising to US$44 billion in 2003 from US$1 billion in 1999.

For hospitals and general practitioners looking to cut costs, the benefits of electronic exchanges that streamline the supply chain are immediately apparent. Operating costs can be cut and margins improved without price hikes or compromise in quality of care.

"Simply put, the deals are done. With AsiaRx, we are cutting cost by moving the order process online," said EDApharm's Managing Director Mervin Paul. EDApharm has been charged with promoting the AsiaRx brand in Malaysia. The company works in tandem with Interhealth Technology that is responsible for maintaining the e-commerce site. (In May this year, EDApharm relinquished its responsibilities of the Web site to Interhealth Technology, which has also taken over the marketing role.)

Under Paul's charge, over 800 doctors in Malaysia signed up for the service with nearly half of that from the Klang Valley. While the number of users is small, sales are in the tune of over RM1 million (US$263,000) a month.

Doctors' acceptance

According to the Malaysian Medical Council, there are more than 10,000 doctors in Malaysia of which an estimated half are in the private practice. More than 5000 doctors have visited the AsiaRx site since its debut, indicating that the brand is highly recognised among medical practitioners.

At the site, doctors can sign on for free and order products from dozens of drug manufacturers by catalogue, price or preference. "In the early days, we held promotions to draw in the doctors - we would offer 10% rebate on some drugs or if purchases hit a certain limit for orders placed online."

While AsiaRx facilitates the ordering of pharmaceutical products online, the last mile is still done the old fashioned way via fax. Paul said that individual suppliers are necessary to handle fulfilment of orders offline as well as confirm and verify details. Delivery and settlement are done offline as well.

"Compared to an offline transaction, using AsiaRx is convenient. It also frees the sales staff, allowing them to concentrate on updating themselves with new information and conveying that information to doctors instead of visiting them to find out what drugs they need to buy for that month," he pointed out.

He said that major pharmaceutical firms were also encouraged to use the vertical trading portal to buy medication and medical supplies on behalf of their customers.

"We do have doctors who are simply too busy to order online and they either tell us to train their support staff or get the sales rep to key in the order online for them."

Paul conceded that not all doctors are 'Net savvy and convincing those "who are not computer literate" is an uphill task. He illustrated an example of a doctor who gladly filled the form until the point where she was required to state her e-mail address. "She panicked and refused on grounds that she will receive junk and
unsolicited mail."

Stumbling blocks like these prove to be temporary. The juiciest attraction to draw new members are monthly promotional campaigns as savings start from US$150. "We have doctors ringing up to ask about the next campaign before they even log on."

Members also gain access to new tools that give them an insight into the procurement process. "They check the status of their orders, or look for a specific product to see if it is in stock."

The portal also connects customers directly to product information, manufacturers and distributors in a secure and customised environment, configured for each user.

"Doctors can go back and review their previous orders and transaction history as a personal database is created for each user. Many find this very useful,"said Paul.

Click-And-Mortar Strategy

Zuellig's click strategy is firmly held in stone with the online presence locked on to the operational side that gives flow to the distribution, marketing and sales process.

Having established itself as a provider of logistics services with warehousing, distribution and customer order management facilities, the drug distributor is fast transforming its distribution centres located across Asia to paperless operations.

The current national logistics centre that serves as a bulk centre will be replaced with a newly-constructed automated central distribution centre (CDC) in Bukit Raja, Selangor. The new CDC aims to consolidate order processing, warehousing, packing, delivery and collection at a single venue. By December, activities at distribution offices in Perak, Johor and Penang will be merged at Bukit Raja.

Inventory management runs on first-in first-out basis with movements controlled on a batch level through a comprehensive recall procedure. Improved efficiency, reduced error rates and shorter lead-time to fulfilment has become the order of the day. The supply chain promises fewer stock-outs and lower inventory levels.

"Once an order is placed online, the order processing department at Zuellig will pick, pack and deliver the order to customers. This is done almost in an instant -deliveries can be done within a day through this just-in-time process compared to the past when it took at least two days to process an order," said Paul.

He added that a delivery tracking system has also been put in place allowing customers to monitor movement of their orders. "Doctors from the interior areas and those across the South China Sea in Sabah and Sarawak appreciate this service."

Having created an efficient back-end engine, AsiaRx aims to improve its front-end offerings over time. Paul anticipates that a fee would be imposed for those using the service. "By then, it would be a norm and users would not be fussy about it but would expect good service."

With the promise of smaller inventory and speedier access to essential medication, the creators of AsiaRx hopes that over time, manufacturers would rely on the portal for incisive marketplace information while doctors and pharmacists would appreciate data on each drug's reliability and performance.

Anita Devasahayam can be reached at anitadm@

The Company
AsiaRx is an online pharmaceutical and healthcare exchange jointly established by one of Asia-Pacific's oldest drug distributor Zuellig Pharma and Zefer, a New York-based Internet consulting and services company.

Competitive Strategy
Creating an electronic exchange for the medical fraternity to use for purchasing medical supplies and medication.

Delivery time slashed from a minimum of two days to 24 hours
Real-time access to customer profile and transaction history
Delivery tracking to monitor movement of goods
Cut inventory by implementing just-in-time practice with automated warehouse in the background
Relegating sales staff from mundane job of taking drug orders from customers to updating themselves with new product information