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The Wall Street Journal

Online Dispenser of Drugs Wants Some Respect

Wall Street Journal – Nov 16, 2004

SCOTTSDALE, Ariz.—The home page of KwikMed.com’s Web site looks like a run-of-the-mill source of sexual-stimulant pills, complete with a picture of a couple being playful in bed and a banner declaring: “Viagra as low as $6 per dose.”

But from his headquarters in a low-slung office park here, KwikMed Chief Executive Peter Ax is waging a lonely campaign to win respect for his business.

Despite opposition from the medical establishment, pharmaceutical companies and many state and federal lawmakers, Mr. Ax is hoping to convince critics that his business of prescribing and selling drugs online is not only lawful, but also an important medical service.

“This is the future of medicine,” says Mr. Ax, a 45-year-old venture capitalist. He says he has invested millions in KwikMed, which deals in “lifestyle drugs” such as impotence treatments Viagra and Cialis and hair-loss remedy Propecia.

KwikMed has won permission from the state of Utah to operate legally as long as it adheres to a strict set of guidelines. That makes it the only online prescription Web site in the U.S. that has won explicit approval from a state, according to the Federation of State Medical Boards.

Even so, KwikMed is facing an avalanche of opposition. The FSMB has asked Utah to reconsider its approval of KwikMed. Viagra manufacturer Pfizer Inc. has lobbied the Utah state legislature to crack down on KwikMed. A number of lawmakers on Capitol Hill are proposing federal legislation that would target online pharmacies. And dozens of states have revoked or suspended the licenses of doctors and pharmacists who work with Web pharmacy sites.

With such forces arrayed against it, KwikMed’s efforts to legitimize its business—and online prescriptions in general—may seem quixotic. Mr. Ax’s efforts, in the short term, are hurting his business as less scrupulous competitors undercut him. Already, many other pill-dispensing Web sites have gone under, gone underground or moved overseas. “Everyone who is serious about doing it the right way is either considering selling or changing their business model,” says Tania Malik, former chief executive of VirtualMedicalGroup.com, another such site.

But KwikMed’s efforts as an early pioneer in the field raise the larger question of whether online prescription services have a legitimate role in the medical community in the future. Many medical professionals believe that the Internet will eventually be a powerful tool for doctors and patients. But in a field where most doctors still keep paper files, it’s too early to say how e-prescriptions will evolve.

While many people use Web pharmacies like drugstore.com to fill prescriptions they get from their doctor, KwikMed goes a step further by not only selling drugs, but also arranging for patients to obtain a prescription from a doctor through an online consultation. The National Association of Boards of Pharmacy says companies that do so are “rogue” sites. But KwikMed says what sets it apart is that it does more than simply provide a perfunctory consultation with a doctor: Its physicians review an extensive online medical questionnaire that patients fill out.

Each potential customer must fill out a 20-minute survey before KwikMed’s doctors will write a prescription. Although many other Web sites have questionnaires, KwikMed convinced regulators that its form was more comprehensive than even the medical histories taken during a visit to a doctor’s office.

Excerpts from a sample medical report generated by KwikMed.com, based on a hypothetical patient’s responses to the site’s branching questionnaire. The company says its doctors likely wouldn’t prescribe erectile-dysfunction drugs for “John Q. Public.”

Based on answers to the “branching” questionnaire, which chooses follow-up questions based on patients’ responses, KwikMed says it typically turns away 3% to 5% of prescription seekers. While some may try to log back in and answer the questions differently, Mr. Ax says the company can thwart such attempts using address information.

Consumers have reason to be skeptical of most online pharmacies. Some sell highly addictive narcotic painkillers and other potentially dangerous drugs. In an investigation released in June, the U.S. Government Accountability Office found that some Web pharmacies ship counterfeit drugs or drugs that have not been stored properly, while other don’t ship the drugs at all. And in one high-profile case, 18-year-old California high-school student Ryan Haight died in 2001 after taking a mixture of narcotics that he purchased online.

In May, U.S. Democratic Sen. Dianne Feinstein of California and Republican Sen. Norm Coleman of Minnesota introduced a bill that would prohibit Internet pharmacies from distributing drugs based only on an online questionnaire and would give state attorneys general the power to shut down Internet pharmacies in other states.

KwikMed’s Mr. Ax acknowledges the problems of the industry but says KwikMed will prove that online prescribing can be done right. He points to studies showing that doctors often fail to ask key questions when taking a medical history in person, and that patients don’t always provide truthful answers. To solve these problems, some doctors advocate using computers to take medical histories.

“People are more willing to talk to a computer than a doctor about sensitive information,” says John Bachman, a professor of family medicine at the Mayo Clinic, Rochester, Minn., and author of an article about the usefulness of computer questionnaires in a Mayo Clinic publication last year. However, he adds that computers “don’t replace the doctor-patient relationship. It’s a tool that aids the physician.”

Allan Wenner, a Lexington, S.C., doctor hired by KwikMed as an adviser, says that some conditions such as erectile dysfunction usually don’t require a physical examination. Mr. Wenner, a passionate advocate of using computers for patient interviewing, helped KwikMed develop its questionnaire, which draws from a database of 5,000 questions and offers different questions based on the answers received.

Mr. Ax worked on Wall Street as an investment banker before moving to Arizona in 1997 to help run a national chain of coin-operated laundries. During the dot-com boom, he co-founded Takes.com, a site that sought to give away stock options to consumers who surfed its Web site. Nasdaq opposed listing the company, because the business model relied on a listing with the exchange and the site wasn’t yet functional. Mr. Ax fought the ruling and eventually won, but by then the tech bubble had burst.

Mr. Ax bought KwikMed in 2001 for a sum in the single-digit millions, he says, and vowed to completely revamp the way it operated. Indeed, a year after he bought the company, a federal grand jury in Arizona indicted KwikMed’s former owners on 198 counts. The U.S. attorney’s office in Arizona alleged that in the majority of cases, no physician reviewed applications before prescription drugs were shipped. Several of the former owners have since pleaded guilty to some of the charges.

The old KwikMed generated handsome revenue. The indictment alleges that in 1998 to 2000, the Web site boasted sales of more than $28 million, from at least 48,816 orders and 41,817 refills. Mr. Ax says he decided that the customer list in itself could defray much of the cost of the purchase, if he was forced to shut down the business.

In an unusual move, KwikMed’s lawyer, Kevin Marino, voluntarily submitted the company to the jurisdiction of the Utah board that licenses doctors and pharmacies—even though that board does not oversee Web sites. By 2002, KwikMed had won over the Utah regulators by giving them veto power over everything from the drugs the site would sell, to the doctors and pharmacists it would hire, to the wording of its hiring contracts. KwikMed even allows Utah regulators to access a database containing its patients’ medical history and the results of online consultations. (The company’s corporate headquarters are in Scottsdale, but its pharmacy is in Ogden, Utah.)

Diana Baker, bureau manager for the Utah licensing board, says the board was persuaded by the arguments presented by Messrs. Ax and Marino. “There was definitely some concern and some question, but the way it was presented was professional and with integrity,” she says.

But Peter Knudson, majority leader of the Utah state Senate, says he intends to introduce a bill in January that would bar KwikMed from operating in the state.

“If they’re going to prescribe medication, I want their physician to see the patient face to face,” says Mr. Knudson, who works as a dentist in Brigham City. “The Utah Medical Association agrees with me, as does most of the pharmaceutical community. The only one who doesn’t is KwikMed.”

After KwikMed’s doctors write prescriptions, they are transmitted to a pharmacy in Ogden run by Alan Winter. A few doors down from his storefront operation, Terrace Pharmacy, Mr. Winter and a technician fill KwikMed’s orders. A computer prints orders and mailing labels, and Mr. Winter counts out and dispenses the drugs KwikMed sells into child-proof bottles.

KwikMed’s business isn’t doing that well. At first, Mr. Winter was filling 200 to 300 orders a day, but when KwikMed bolstered its questionnaire and made ordering tougher, volume declined to 100 a day. Sales have dropped by more than 50% since the handover, as some customers saw they could get the same drugs elsewhere online, for less money and less hassle—shorter questionnaires or none at all.

Another stumbling block: Google Inc. and Yahoo Inc., which together account for two of every three Internet searches, both decided in the past year to limit search-related pharmaceutical advertising in the U.S. to licensed U.S. and Canadian pharmacies that don’t write prescriptions based only on online interactions—barring KwikMed from buying ads on those sites.

For now, Mr. Ax says nearly 70% of orders come from existing customers. Still, he says KwikMed’s best days lie ahead.

“If we can get regulators across the U.S. to adopt our methodology, we can create an enormous business that is hugely profitable,” he says. “That’s our gamble.”

Licensed to Prescribe Online