Pubdate: Thu, 5 Nov 1998
Source: San Jose Mercury News (CA)
Contact:  http://www.sjmercury.com/
Copyright: 1998 Mercury Center
Author: Scott Herhold

2 START-UPS VIE FOR PRESCRIPTION DRUG SALES ON WEB SITES

Online medical battle enlists venture elite

A report from the trenches of the Great Online Drugstore Battle resembles a
dispatch from a real war. Neither side is anxious to talk about strategy,
tactics or casualties. In an Internet-commerceworld where people are usually
only too happy to preach the merits of their products, the answers from
PlanetRx and Drugstore.com are the terse and maddeningly vague recitations
of a military press briefing.

But the color of the uniforms and the shape of the weaponry attract
inescapable interest.  Two start-ups, each with a high-profile CEO, each
backed by the venture elite, are aiming to open Web sites, probably early
next year.

Drugstore.com, begun as a concept by entrepreneur Jed Smith, is backed by
the venture firm Kleiner, Perkins, Caufield & Byers. Its CEO is Peter
Neupert, who once served as vice president of news and publishing in
Microsoft's interactive media group. (Among other things, he supervised
Slate, the Microsoft-backed online magazine). Drugstore.com's board includes
Kleiner Perkins' John Doerr and Brook Byers. Its locale of business:
Redmond, Wash.

PlanetRx, which was begun by entrepreneur Michael Bruner, has received $5
million from the venture firms Benchmark Capital and Sequoia Capital.
(Kleiner Perkins does not reveal the size of its investments.) PlanetRx's
CEO is Bill Razzouk, a former executive at Federal Express, and, briefly, at
America Online Inc.  Its board members include David Beirne at Benchmark and
Michael Moritz of Sequoia (Beirne, in fact, recruited Razzouk). Its locale:
Oakland, with a move to San Francisco planned.

Both companies are trying to tackle the complicated task of filling
prescriptions -- and offering related products -- online. What makes it
difficult is that any online pharmacy has to meld its current efforts with
the traditional world of paper and doctors' scrawls. Because many doctors'
offices do not use the Web and because many states do not allow electronic
submission of prescriptions, both start-ups will have to field phoned or
faxed prescriptions from medical offices. The idea is that, ultimately, the
customer will find far more convenience in ordering, say, tetracycline from
the Web -- and then waiting for a speedy delivery -- than in trekking to the
nearest pharmacy. While they pledge to be competitive on price, neither
Drugstore.com nor PlanetRx claims that lower cost is a fundamental part of
its appeal.

A lot of other people have their eye on this same market, which is estimated
to be as large as $160 billion per year through traditional outlets. An
Austin start-up, Rx.com, plans to be operational next year. And some of the
big drugstore chains could follow. But on Sand Hill Road, the question is:
Which of the two venture-backed start-ups is ahead: Neupert or Razzouk?
Kleiner Perkins or Benchmark and Sequoia? Redmond or Oakland? It's almost
impossible to tell from the outside, though it is fair to point out that
Neupert has been in his job a few months longer than Razzouk. Both PlanetRx
and Drugstore.com say it's more important to do things right than to be
first.

``We're up and running,'' says Suzan DelBene, Drugstore.com's vice president
of marketing. ``There's only one big milestone: Opening our front door, and
we're not ready to do that.''

``I think we've got an excellent blueprint. We're pouring concrete as fast
as we can,'' says Razzouk. Ask him when the Web site will open and he says
only: ``Soon.''

Contact Scott Herhold by telephone at (408) 920-5877, by fax at (408)
920-5917, or by e-mail at  .

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Checked-by: Rolf Ernst