WebMD makes changes to plug revenue drain

A deal with Microsoft is being revised, and the company is now focusing on bundling its products with handheld devices.

By Tyler Chin, amednews staff. April 9, 2001.

The free ride for doctors using WebMD Corp.'s physician portal seems to be coming to an end.

The Elmhurst, N.J.-based health company announced on March 22 that it and Microsoft Corp. had signed a nonbinding letter of intent revising their 1999 deal, under which Microsoft had agreed to invest up to $250 million in WebMD over five years, including underwriting $150 million worth of physician subscriptions. The new financial terms have not been disclosed.

Because the agreement hasn't been finalized, WebMD declined to comment on whether Microsoft would stop subsidizing the cost of physician subscriptions. But in a March 22 conference call, the company said it was migrating from subscription-based sponsorships as a source of revenue.

In a telephone interview later, Tony Vuolo, WebMD's chief financial officer, said the physician portal would be bundled with wireless handheld products the company plans to roll out later this year. Those products will enable doctors to access WebMD's portal as well as its Medical Manager practice management system via handheld devices. Doctors would be expected to pay for that, rather than having a large corporation underwriting the cost.

WebMD said it had a net loss of $3.1 billion for the year ended Dec. 31, 2000, up from $288 million the year before. Revenue for 2000 was $517 million, up from $102 million in 1999. Revenue for the fourth quarter was $199 million, up from $33 million for the same period a year earlier.

As of Dec. 31, 2000, WebMD had about $710 million in cash and marketable securities on hand and was not in danger of running out of money in the foreseeable future, Vuolo said. The company declined to say how many physicians are using its Internet services.

Separately, a judge in the U.S. District Court for the Eastern District of North Carolina on March 21 ordered WebMD to continue transmitting de-identified claims data to Quintiles Transnational Corp., Research Triangle Park, N.C. WebMD had stopped supplying the data on Feb. 23 over concerns that the data transmissions violated state privacy laws.

The judge continued a preliminary injunction barring WebMD from stopping the flow of data to Quintiles, which repackages and sells the data to pharmaceutical companies for use in examining industry trends.

Quintiles gained exclusive access to the data as part of the deal it made last year when it sold its claims clearinghouse unit to WebMD.