February 28, 2001, 12:00 AM

PlanetRx exits retail for high-tech drugs

PlanetRx’s decision to leave retailing leaves Drugstore.com as the last major pure-play in that sector.

John McAlpin, president and COO of Memphis-based PlanetRX.com, won’t talk about the difficulties of running an online retail drugstore other than to call the sector “challenging.” But his company’s actions speak louder than words. In February, PlanetRx bailed out of the retail pharmacy in favor of higher-margin specialty business targeting serious chronic disease. “These are the kinds of drugs you can’t always find at the corner drugstore,” McAlpin says.

“PlanetRx has 1.4 million customers,” McAlpin says. “Our world gets a lot smaller now, but these are much more loyal customers.” If high volume, high margin is the winning ticket in e-commerce, it’s not surprising that the online corner drugstore approach was a losing bet for PlanetRx. The company lost $98 million in 1999, its first year of operation. And it’s not the only player to pull the plug. Another online drugstore and supplement seller, Mother-nature.com, shut down in November. The margins on cough syrup and beauty products pale beside the opportunity presented by expensive, life-sustaining prescription drugs-particularly when they’re covered by health insurance. That’s already the landscape today, and the company has its eye on the future, too. Recent discoveries in genomic science will lead to the development of even more customized, tricky-to-transport and distribute prescription drugs.

PlanetRx aims to give its new business another big boost with the acquisition of a smaller specialty drugs pharmacy (name undisclosed) it hoped to complete Feb. 21.

The announcement leaves Bellevue, Wash.-based Drugstore.com virtually alone as a pure-play e-retail pharmacy, with a potential boatload of new customers who may choose to transfer prescription and sundries needs from PlanetRx. But before it counts up all those new customers, it’ll have to contend with another new development in the online pharmacy world. Pillbot.com, launched in February by a privately held New York company, promises to reduce comparison shopping online for prescription drug prices to no-brainer status. Pillbot crawls online prices of Drugstore.com, Walgreen.com, and others for the lowest prices, which is displays as winners on a results page.

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