Copyright 1999 The Washington Post
The Washington
Post
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May 18, 1999, Tuesday, Final Edition
SECTION: FINANCIAL; Pg. E03
LENGTH: 615 words
HEADLINE:
CVS to Buy An Online Pharmacy
BYLINE: Stephanie
Stoughton, Washington Post Staff Writer
BODY:
Hoping to establish a formidable presence on the Internet, CVS Corp.
said yesterday that it will buy online pharmacy Soma.com for $ 30 million.
Until now, CVS and the nation's other big drugstores have offered
consumers information on drugs or limited prescription-refill
services on the Internet. Customers who use these online sites
first must drop off new prescriptions at a store, or have their physician call
in their prescription. And although consumers can request a refill online, they
still need to pick up their prescriptions at a store. Several online drugstores,
in contrast, can fill new prescriptions and refills directly, mailing the drugs
to customers' homes.
Soma.com, a closely held company based in Seattle,
opened its drugstore site on the World Wide Web in January. Its products include
vitamins and beauty products as well as prescriptions. Its main Internet
competitors are PlanetRX.com and Drugstore.com Inc.
The Soma.com
acquisition gives CVS -- the nation's No. 2 drugstore chain, based in
Woonsocket, R.I. -- an instant edge over its brick-and-mortar competitors and a
way to catch up with online pharmacies. After the announcement, CVS shares rose
50 cents to close at $ 46 on the New York Stock Exchange.
"It means
we're first to market with a unique offering," CVS spokesman Todd Andrews said.
"It gives us the best of both worlds."
Some of CVS's rivals have decided
to try to build an online presence. Walgreen Co., the nation's No. 1 drugstore
retailer, said it hopes to introduce an online drugstore by year's end. Rite Aid
Corp. also is working on developing a full-service pharmacy in cyberspace.
"Who's ahead right now?" said Kent Whiting, Rite Aid's senior vice
president of Internet technology. "I guess their announcement today gives them a
slight advantage, but we intend to be there in the near future."
Drugstore executives are still wondering whether the boom in Internet
retailing someday will lead to significant prescription drug sales online -- but
they're not taking any chances.
"Today [online pharmacies] are not
significant competitors," Walgreen spokesman Michael Polzin said. "How much the
world moves toward getting prescriptions filled online is anyone's guess. But we
intend to be prepared."
Soma.com is one of a handful of online
drugstores that have developed a reliable way of filling prescriptions and
delivering them within a few days, analysts said.
"These pure-play
online retailers have been pointing at the brick-and-mortar retailers and
saying, 'We want to do it the other way, and if you want to join us, you have to
catch us,' " said David Cooperstein, an analyst with Forrester Research Inc. in
Cambridge, Mass. "CVS is putting out its net and saying, 'Gotcha.' "
By
purchasing an established online retailer, CVS also will save development costs
and time, said Gary Giblen, a retail analyst with Banc of America Securities LLC
in New York.
"There is a first-mover advantage in something like this,"
Giblen said. "The consumer gets used to the site."
Online bookselling
giant Amazon.com Inc. owns 40 percent of Drugstore.com. The two products --
prescriptions and books -- are easier to purchase online than apparel, which
often must be tried on.
But some roadblocks exist for online drugstores.
They must secure licenses to sell drugs in every state where they do business.
In addition, they must sign up health insurers before they can begin filling
prescriptions for those plans' members.
"They have trouble getting
connected to the pharmacy networks," Cooperstein said. "CVS already has
9,000-plus relationships with insurance providers. It makes it easier for them."
LOAD-DATE: May 18, 1999 
