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Transforming Healthcare: Epocrates CEO Kirk Loevner (Part 4)

Posted on Saturday, Jan 24th 2009

SM: You came into the company in 2004. What were the first few things you did?

KL: I didn’t have to change the company in a radical way. I looked at the market opportunity for how much physicians and health care professionals would spend for software and reference materials. That is a $400 million market. Pharma spending was $14 billion. One of my contributions was that we should be giving this stuff away free or charging a very low price to get as broad a reach as possible and develop the communication tools for pharma to reach doctors.

There is a fine line, because doctors do not want to look at spam and they do not want to think that the tools they are using are just a bunch of popup ads for pharma. There is a degree of trust with doctors which is important to maintain. We addressed this by making the messaging from pharma to doctors in a way other than spam. All content is clinically relevant. If Lipitor wants to promote a message about Lipitor to cardiologists, then they need to sponsor a study that the New England Journal of Medicine published that talked about the effectiveness of Lipitor versus Crestor. That would be the content we would push to the physicians.

SM: Banner ads certainly seem like they would be worthless in that context.

KL: Clinical content is the key. It is still content that pharma could sponsor or promote, but it is vetted in a way that makes it useful to the physicians, and trusted. Most of the content we push to the physicians is not sponsored content. They find the information in our news, alerts and services to be very valuable.

SM: Do you have editorial teams creating content geared towards the physician audience?

KL: Yes. One of the beautiful parts of the model is that it started on Palms, and is not on the iPhone. We know who are users are and what their specialties are, and we can target them appropriately. That is very valuable for a pharma account or a health plan or someone who wants to reach a certain group of people.

SM: What is the content you are producing in-house?

KL: We have a couple of different groups. One group manages our drug database. The way we present the information is crisp and clear.

SM: I am trying to determine which aspects of the content you are producing are proprietary. It is not WebMD-type content, is it?

KL: It is not. The content is not proprietary; it is the way it is presented and used which is key. You could think of us as editors. On the iPhone you can get information on dosing, safety and monitoring information, identify the copay, pill identification, etc.

SM: It is an effective reference guide.

KL: To date it has primarily been a reference guide, but there are a couple of interesting ways it could be going.

SM: Is it just physicians who are your audience?

KL: It is way beyond that now. Pharmacists, nurses, medical students, and over 25% of the physicians in the country are using our software. We really can reach anyone in the medical field. If you are prescribing medicine on a daily basis, you are going to use us more than if you were a surgeon.

SM: What is your read of the health care system that seems dysfunctional and inefficient? We are spending $250 billion a year on healthcare administration, and we deal with a lot of stupid claims filing and checking. Why don’t doctors file claims through your system? Can you tie them directly to health service providers, and everyone can just be done with it?

KL: There are interesting ways we can go, given our position right now, in terms of moving more into the physician workflow. What we are about, and where we are likely to go, is the clinical side. That deals with patient records, e-subscribing, and other types of clinical workflows versus billing and insurance claims. There are innovative companies such as Athena Health, of which George Bush’s nephew is the CEO. They do revenue cycle management, which means they walk into physicians’ offices and tell them they will take care of all claims and administration for a 6% cut.

Those kinds of companies have been very successful as they make the system more efficient. In general it is a mess because the people who have to invest the money, the physicians’ groups, are not the ones who get the benefit. Nothing ever gets traction because of it, because the economics do not work. The insurance companies are the ones who benefit. It costs physicians $100,000 to put in a patient record system, and they are not going to see a payback on that money.

I believe that up until now you have had large companies selling the whole stack. As standards start to emerge, you will see best-of-breed point solution companies coming out. If there are enough standards, and data can be interchanged easily enough, then a physician practice could purchase pieces of the solution rather than the entire solution. This would result in smaller companies which have more specialized capabilities.

This segment is part 4 in the series : Transforming Healthcare: Epocrates CEO Kirk Loevner
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