House Calls

The prognosis is good for mail order health-care companies.
Magazine Contributor
6 min read

This story appears in the February 1998 issue of Business Start-Ups magazine. Subscribe »

In the average U.S. household's mail, you can count an average of 87 mail order catalogs per year. Yes, mail order has become a way of life for Americans--191.5 million shopped by mail in 1995, according to the Direct Marketing Association, buying everything from lingerie to gardening supplies. And now, because the much-needed service exists, more and more mail order shoppers are buying prescription drugs, vitamins, fitness gear, diet aids and other health-care products from the comfort of their homes and offices.

According to John Schulte, chair of the National Mail Order Association (NMOA), the mail order health-care industry's annual growth rate of 10 percent to 12 percent helped push sales to $6.1 billion in 1996. And that growth rate is expected to remain steady. That's a good prognosis for the 560-plus mail order companies--many of which are small businesses--that currently specialize in the health-care sector, as well as for entrepreneurs who are entering the field.

What's giving the health-care sector such a shot in the arm? Schulte cites all the usual reasons shoppers choose mail order over retail, such as convenience and privacy. But he adds that the graying of America is the major impetus. "As the population ages, there is more need for health-care products," he says. "And seniors have higher levels of income and don't like going out as much, which makes them a prime target for mail order."

Frances Huffman, a freelance writer in Pacific Palisades, California, is a former senior editor for Entrepreneur.

Rx For Business

Since its inception in 1994, Alan Rudy's Express-Med Inc. has experienced a growth rate of 150 percent--a far more robust rate than the industry average. The Col-umbus, Ohio-based distributor of medical supplies has increased revenues from $1.4 million in 1995 to an estimated $22 million in 1997.

The company, which sells diabetic supplies such as insulin, syringes and test strips, as well as respiration medications, wound-care supplies and supplies for incontinence, has hit upon one of the tried-and-true prescriptions for mail order success: built-in re-peat customers. With some health-care products, such as diabetic supplies, repeat orders are almost a guarantee. While a mail order clothing catalog has to constantly come up with new fashions to entice consumers, providers of health-care products are often expected to deliver the same products clients need indefinitely.

But according to Rudy, 34, taking repeat customers for granted can poison a business. Express-Med customer service reps concentrate on building relationships with customers, contacting them when it's time to reorder and following up with another call after an order has been shipped.

Although customer service and repeat business have helped boost business at Express-Med, Rudy says they aren't the key to the company's success. The real secret? "The reason we're successful," says Rudy, "is we're equipped to handle insurance payments." Since many pharmacies don't process insurance claims on diabetic supplies, Rudy claims customers can save up to $100 a month on supplies for which they would have to pay full price at a pharmacy. As the success of Express-Med shows, companies in the fast-growing prescription drug/medical supplies category must be prepared to handle the insurance end of the transaction.

One A Day

Although not all mail order health-care businesses have to deal with insurance claims, entrepreneurs in this arena face all the other challenges most mail order businesses do: advertising, marketing, product development, product expansion, developing a mailing list and more.

For Russell Crist, founder and owner of Wholeaf Aloe Distributors in St. John, Indiana, product expansion is a top priority. For the past 11 years, Crist has offered a limited product line, including aloe vera shampoos, conditioners and lotions. Unlike marketers of prescription drugs, which people are advised to take by their physicians, Crist has had to educate customers about the benefits of aloe vera. "Everybody needs aloe vera, but they just don't know it," he says.

The nation's growing interest in health and alternative medicine is helping spark growth at Wholeaf Aloe Distributors. "The alternative medicine industry is growing [quickly], and our customers have been asking us to branch out into that arena for quite some time," says Crist, 58, who is teaming up with a manufacturer of nutritional supplements to offer additional items such as calcium and melatonin. It's also a strategy to help fight off another big challenge: competition. According to Crist, "There's more competition every day."

And the government may be adding to these entrepreneurs' challenges. Crist warns that some of the large drug companies are lobbying to get the government to require prescriptions for many vitamins currently available over the counter, including vitamin C. This could have a potentially devastating effect on the nation's vitamin marketers, which make up part of the largest sector of the mail order health-care market.

Regulation already affects mail order marketers who sell prescription drugs. For example, Express-Med is required to hold a pharmacy license because it sells prescription medications. It's important to check into any licensing requirements (start by calling the NMOA) before forging ahead with a health-care business.

First-Class Lists

Coming up with a viable mailing list is one of the keys to success in the mail order industry, and the health-care segment is no different. Whether you sell products to individuals, doctors or health-care facilities, your ability to find customers and get direct-mail pieces into their hands can make or break your business.

Finding a "gatekeeper" could increase your customer base dramatically. For instance, if you sell dental hygiene products, you may want to team up with dentists to market your products. You supply dentists with brochures, and they recommend your product to patients.

That's one of the ways Crist has helped boost sales at Wholeaf Aloe Distributors to an estimated $400,000 in 1997. "Lots of doctors order products from us for their patients," says Crist, who also wholesales his aloe vera products to health-food stores.

Crist is just one of thousands of entrepreneurs in this burgeoning field. And while you might think they are doing all they can to ward off competition, some business owners--like Peter Rothschild of Featherspring International in Seattle--are welcoming the increased competition.

Rothschild's company, started in 1972, sold more than $5 million worth of orthotics, insoles and knee braces last year. His company adds some 200,000 names to its mailing list each year, in part because the growing 55-plus market makes up the bulk of the company's customers. Rothschild, 50, sees newcomers to this market as potential buyers for his mailing list. "Since we're a small niche, we can provide names to other companies," he says.

Just as Rothschild is optimistic about the industry's future, the diagnosis for entrepreneurs entering the field looks good. In fact, a mail order health-care business may be just what the doctor ordered.

Contact Sources

Direct Marketing Association Inc., (612) 788-1673, e-mail:,

Express-Med Inc., 3592 Corporate Dr., Columbus, OH 43231, (614) 895-5211

Featherspring International, (206) 545-8585,

National Mail Order Association, (612) 788-1673,

Wholeaf Aloe Distributors, P.O. Box 221, St. John, IN 46373, (800) 599-2652

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