A casual conversation about the potential of an Internet pharmaceutical business several years ago has turned into a rapidly growing venture for two friends, one a pharmacist and the other a Web business entrepreneur, as they make their dreams a reality with HealthWarehouse.
Based in Loveland, HealthWarehouse, was launched by Lalit Dhadphale and Ron Ferguson in August 2007. Dhadphale, who lives in Nevada, is experienced in Internet business development and Ferguson is a pharmacist. The two met through a mutual friend in Dayton in 2006 and chatted about their interest in the business model.
They both agreed that because of the complicated nature of each of the businesses, neither side had really utilized the other in a way that optimized their possibilities.
"I had wanted to do something like this for a long time," says Ferguson, "but I didn't have the Internet experience. Lalit had the Internet experience and I had the pharmacy experience so we decided it was a good fit."
Indeed, the obstacles to starting such a business were significant.
Strict federal regulations mean that the company must be licensed in each of the 50 states in order to do business nationally, a process that involves a separate exam in each state. So far, HealthWarehouse is licensed in 43 states, says Ferguson, and is still working toward licensing in the remaining seven.
In addition to securing licensing, HealthWarehouse needed to gain the trust of the large drug manufacturers and insurers who must approve the company before doing business with them.
This has been a careful process, say the friends, involving many meetings with individuals in these industries who have the authority to approve HealthWarehouse as an outlet for their customers.
As if that weren't enough, Ferguson says there is still a lot of public misconceptions about online pharmaceutical sales - based on many illegitimate sites that operate on a black market level.
"The barriers to entry in this field are really big," said Dhadphale. It's extremely difficult to get started. But the opportunity is huge."
That opportunity and the skills of Dhadphale, Ferguson and their team have already gotten the attention of outside investors. Pat Delaney, chief financial officer of HealthWarehouse, got involved with the company after he led a team of investors to buy into the business.
In May, after liquidating the assets of a former venture known as Ion Networks based in New Jersey, Delaney and the investors of Ion decided to invest $1 million in HealthWarehouse. They came to that decision after researching at least 65 start-ups around the country for opportunity, he says.
The investment also made HealthWarehouse a publicly traded company, HEWA.OB, as Ion Networks was a public company.
"We looked at everything from solar power, to health care to telecom," says Delaney. "We were very impressed with the HealthWarehouse team. We were looking for the most upside opportunity and this had an almost unlimited upside potential."
Pharmaceutical retail sales is a $300 billion per year industry in North America alone, with global sales adding billions more to that total.
Delaney says he thinks retail pharmacy sales are ready for a change, and the fact that HealthWarehouse offers customers prices of $3.50 for generic prescriptions, below the $4 rate of its lowest competitor, Wal Mart, plus free shipping will make them a tempting choice for consumers.
Using Internet marketing to reach consumers who are frustrated with traditional methods of shopping for medication that may include waiting in line or driving long distances to reach a pharmacy, HealthWarehouse is capturing some of these customers.
In the last year, HealthWarehouse has doubled the number of orders it ships monthly from 3,000 to more than 6,000, says Ferguson, and he expects that trend of growth to continue.
While there are already two large Internet competitors in the industry, Medco and Caremark, HealthWarehouse plans to aggressively price its products to draw in customers, plus offer excellent service to keep them.
Service is another area where the company can differentiate itself from the well-established competitors in the industry, he says.
"The chains are so big and their service is almost inversely proportional to their size," says Ferguson. "We're able to offer good pricing and great service."
Delaney says he has high expectations for HealthWarehouse.
"Our biggest competition is going to be ourselves. Can we execute the plan, can we get our name out there," he says. "There's really nothing to prevent us from having continued growth."
Photography by Scott Beseler
Ron Ferguson
Mass Maker by Beverly International, Cold Springs, KY
The HealthWarehouse interior
The HealthWarehouse exterior
The HealthWarehouse pharmacy
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