Recent newspaper reports have focused on the migration of venture capital funds away from biotechnology to Internet investment opportunities. Venture funds such as Accel and Oak have stopped making biotechnology investments, and other venture funds have significantly cut back their investments in the sector.

Ironically, the Internet presents a huge opportunity for creating successful startups that will directly serve biotechnology and pharmaceutical companies, enabling them to become more efficient and profitable.

The "business-to-business" Internet model will address numerous needs of the biotechnology industry, including content aggregation, e-commerce, software and services to accelerate all aspects of the research, development, marketing, and sales process for a new drug.

The pharmaceutical industry sorely needs the assistance of the Internet. Currently, most pharmaceutical companies' use of the Net is limited to internal communication and exchange of content. This limited usage fails to address major problems facing the industry, including:

  • a shrinking period of market exclusivity for new drugs, thanks to an expanded market for generic pharmaceuticals and rapid technology advances;

  • the need for a huge increase in research and development throughput yielding new drugs in the next few years, for pharmaceutical companies to maintain their current profit margins; and

  • the tripling of the number of patients in clinical trials over the last few years, making these trials the chief bottleneck for the approval of new drugs (this is still largely a paper-driven process).

Throughout every phase of developing and selling a new drug, the Internet is beginning to be applied, with excellent results.

Starting at the beginning and working forward, the Internet is permitting software and service providers such as Celera Genomics to provide core biological information to multiple companies through its sequencing of the human genome.

Bioinformatics companies, meanwhile, are providing software to Celera's customers and other pharmaceutical companies to help manage and analyze the deluge of genomic information becoming available.

Once this biological information successfully identifies drugs worthy of testing in humans, clinical trials begin. Use of the Internet in clinical trials makes sense at all stages, including the design of clinical trials, the recruitment of patients, the collection and analysis of data derived from human testing, and the preparation of submissions to the FDA.

Most of the process is driven manually, through the use of paper case report forms. On average, case report forms submitted to the FDA contain three errors per page. What is badly needed is an "operating system" for clinical trials, which would model patient entry criteria into trials and yield electronic reports in a form suitable to submit to the FDA. Timing is of the essence, since it is expected that by 2002, all submissions to the FDA will be required to be electronic.

Following drug discovery, clinical testing and FDA approval, the sales and marketing for new drugs begins. Until recently, this was simply a matter of hundreds of "detail men" in a pharmaceutical company's sales force visiting doctors in their offices and trying to sell them new products.

Alternatively, immense drug distributors (that is, middlemen) would sell large quantities of product to group purchasing organizations (GPOs) representing hospitals, clinics, and medical groups. The advent of managed care organizations (MCOs) required drugs to be approved by the MCOs for the patient to obtain reimbursement. This is now more of an opportunity than a problem.

From the patient's standpoint, on-line drugstores such as Drugstore.com are a valued source of information and products. On-line drugstores are now aligning with MCOs and their emissaries, pharmaceutical benefit management companies (PBMs), to make life easier for the patient.

The drug distribution is being transformed by this phenomenon of disintermediation. The Internet is lessening the need for detail men, drug distributors, GPOs, and other intermediaries.

But middlemen are fighting back. Bergen Brunswig Corp., one of the nation's largest drug distributors, recently announced the launch of an Internet auction site, Pharmabid.com, where doctors and hospitals will bid against each other for drugs and medical supplies.

Patient usage of Internet-provided personal health information is also growing quickly, enabling the patient to gain access to huge quantities of helpful (and hindering) information about health care issues.

In response, professionally validated providers of personal health care information are being started, such as CancerFacts.com, which provides personal decision support tools to patients seeking to make decisions about alternative cancer therapies. The service takes actual patient data, inputs it into "historical" clinical trials, and then delivers a personalized report for the patient, complete with information on treatment options, questions that should be directed to the patient's physician, and a description of the range and probability of possible outcomes.

In response to all of these developments, biotech and pharmaceutical companies are beginning to look beyond their current limited internal use of the Internet. This phenomenon is only beginning, however, leaving a large opportunity for emerging entrepreneurs and health care information technology companies.

Reprinted with permission. All rights reserved. Mass High Tech 1999.