Compared with travel, finance, and even the steel industry, healthcare eCommerce is a late bloomer. Despite this slow start, a new Report from Forrester Research, Inc. (Nasdaq: FORR) estimates that the healthcare industry will reach $370 billion in online transactions by 2004. The Web will become the foundation for a new healthcare industry infrastructure that supports complex, multiparty transactions among consumers, providers, insurers, and medical suppliers.

With 32% of online consumers already shopping for health products on the Web, online health sales show no signs of slowing. Forrester expects 8% of all retail health sales — $22 billion — 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.

While retail health sales grab the media spotlight, $348 billion in business-to-business healthcare trade — 17% of the industry total — will move online by 2004. These efforts will be 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 On-line 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.”

To break down the barriers between industry players and enable new levels of collaboration, a healthcare eBusiness network needs to be formed, creating a resilient fabric of interdependent healthcare players linked in real time over the Net. As more business moves onto the Net, the eBusiness network will bring together isolated industry players and enable new levels of collaboration. Medical labs, for example, will use the Internet to streamline the reporting of results to doctors and then expand services to patients. Similarly, consumers will be able to select their preferred ePharmacy for prescriptions, which will carry forward in their patient profiles.

For the Report “Sizing Healthcare eCommerce,” Forrester interviewed 71 healthcare companies, including manufacturers, insurers, providers, and online retail stores. Among the 51 healthcare firms interviewed, electronic transactions already account for an average of 39% of their total revenue in 1999, but only 3% of that revenue moves over the Internet. However, the interviewees anticipate that the Internet will carry 32% of revenues by 2002. Retailers foresee more volume within existing product categories, but they expect most growth to come from expansion into new areas.