Medical Device Link.

Much has been said during the past several months regarding the collapse of business-to-business, or B2B, Web sites. Once promising ventures have seen their stock prices collapse in the absence of tangible profits, sending investors and employees fleeing back to the more solid foundations of traditional brick-and-mortar companies. Illustrative of this is Atlanta-based B2B medical supplies online marketer Medcenterdirect.com Inc., which earlier this month withdrew its planned $131 million initial offering of its common stock, citing current market conditions.

The problem afflicting B2B concerns are virtually identical to those that affected commercial sites a year earlier: Users will shop around on-line for the best prices and then buy them elsewhere, often times off-line. To put it simply, how can B2B sites make money in a medium whose users are used to getting information for free?

Medical B2B exchanges have not been spared from the turmoil affecting the broader B2B world. Take as an example the case of Ventro Corp., an Internet marketplace operator that just one year ago saw it’s stock prices skyrocket to $239.81. By December the company’s stock had plunged to around $2 a share, prompting them to announce that they would close two of the six marketplaces they owned, including Promedix, a specialty medical devices (and the company’s first) exchange. The company also laid off 235 workers. Ventro will continue to operate the four other exchanges, including Broadlane, a hospital supplies marketplace. The company now focuses on providing technology to Internet marketplaces, instead of creating and operating them.

Adopting a more circumscribed approach to B2B commerce has been a more successful strategy for medical B2B services provider Neoforma.com Inc. The company stays on the software side of things, preferring to partner with existing suppliers to create Internet-based marketplaces. Neoforma has partnered with the giant healthcare GPO Novation to create Marketplace@Novation, which has the advantage of having access to a solid supply and distribution base from which to operate. The partnership with Novation alone has already signed on 69 manufacturers and distributors and 344 hospitals (83 of which have been connected by Neoforma).

The company, who is also partnering with VHA Inc., University HealthSystem Consortium (UHC), and i2, had net revenues of $1.0 to $1.2 million in the fourth quarter on gross revenues of $36 million. This represents an increase in marketplace transactions and total net revenue of approximately $33.2 million and $751,000, respectively, compared to the same period in 1999.

Not to be left out, health care distributors have jumped into the fray with their own site, The New Health Exchange. The site was founded by wholesale suppliers Cardinal Health Inc., AmeriSource Health Corp., McKesson HBOC Inc., and Fisher Scientific International Inc., who have committed $100 million to the site. The site has yet to begin operating, but expects to begin this spring.

For their part, medical device manufacturers unveiled the Global Healthcare Exchange in early 2000. Although such big names as Johnson & Johnson, GE Medical Systems, Baxter International Inc., Abbott Laboratories Inc., and Medtronic Inc. are investing in the venture, very little of substance has come of it. As of February 2001, there has yet to be an official announcement of even their Web site address.

In order to be successful, i.e. profitable, medical B2B marketplaces will have to continue to hone their strategies and learn from the mistakes of their peers in the B2B community. The difficulty that these companies have had up until now does not mean that there is not a bright future ahead, at least for those companies who manage to survive today’s tough market conditions.

Notable Links

Featured Companies