Allscripts: Saving Lives, Saving Costs

As healthcare costs balloon and the population gets older, there is a long-term need for new innovations. Allscripts (MDRX) is one such company that is leading the charge.

The company was founded in 1986 and as a result, originally used traditional means to distribute pharmaceuticals. But with the advent of the Web, Allscripts is rapidly moving towards an e-commerce model.

The market is huge, of course. Pharmaceutical sales are $100 billion in the US and $300 billion worldwide. Despite the large base, sales are still growing rapidly, at about 10 percent per year.

Allscripts is transferring power to the physician. After all, it is the physician who is closest to the patient and can make the best determinations as to what is appropriate. For example, while diagnosing a patient, a physician can input the relevant information in a computer device, get the necessary background information on the patient and then instantly send orders to purchase prescription drugs.

Allscripts uses McKesson as a pharmaceutical wholesaler. The products are then shipped to an Allscripts 61,000 foot distribution facility in Libertyville, Illinois. The facility is state-of-the art and has 93 control checks so as to assure quality. No other company provides such a turnkey service.

Results

A critical deal was with Kinetra LLC, which provides Net connectivity services to physicians and payers. In the five-year agreement, Allscripts will become the exclusive provider of electronic prescription services for the physician and managed care segments. Kinetra has about 75,000 physicians in its network.

The agreement should have a substantial impact on the top-line for Allscripts. The revenue model calls for: hardware fees, software licensing fees and e-commerce.

In fact, the company has been showing strong growth in its e-commerce revenues. In the latest quarter, revenues were $2.9 million, which was up 703.3 percent from the same time last year.

But what has given impetus to the stock is a recent executive memorandum signed by President Bill Clinton. A task force will be created to find ways to reduce medical errors by using technology like that from Allscripts. Between 44,000 and 98,000 patients die each year because of errors. One of the biggest reasons is illegible writing.

So, within the next few years, expect physicians to use handheld devices to digitally provide patient care, which should be very good news for patients, as well as Allscripts.