Epocrates, Mobile App Developer Since Palm Days, Preps for IPO-And for Push Into Electronic Medical Records

1/25/11Follow @wroush

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the traditional FDA-approved prescribing information, which discloses a drug’s safety and effectiveness profile. Even though this information, sometimes known as the “package insert,” is something many doctors rely on every day, few electronic medical record systems have found a way to display it very effectively. “If you were to ask physicians about the drug reference information in their existing EHRs, a lot of them are not happy, which is why a lot of them are still using Epocrates alongside their EHR,” she says.

Epocrates’ first EHR apps will be written for the Apple platforms. Last November the company spent $14 million to acquire Modality, a Durham, NC-based app studio that’s built more than 140 iPhone and iPad apps, including dozens of medical reference apps. Epocrates said in an announcement that the acquisition would augment its in-house Apple expertise and “accelerate the delivery of innovative clinical solutions.”

But even with the extra help on board, the company faces some challenges. As Epocrates itself points out in the obligatory “risk factors” section of its S-1 pre-IPO paperwork, it has limited experience building EHRs, which are a lot more complex than its older reference products. Patient data is protected by the notoriously stringent Health Insurance Portability and Accountability Act, or HIPAA, and privacy breaches or data inaccuracies could open the company to big lawsuits. On top of that, there’s no guarantee the government will certify Epocrates’ EHR as one of the systems that group medical practices can buy to qualify for the stimulus-act incentives.

But “a lot of what we do is regulated, so we do understand regulations,” Crane points out—referring, for example, to laws restricting the way drugs can be advertised and promoted. And the Epocrates brand should confer a big advantage, she says. “Our identity is mobile, simple, accurate, and usable at the point of contact” with patients, she says. “And we already have access to the network that we’re going to sell to, so we understand their needs and their issues.”

And just as important, Crane says, Epocrates understands how to monetize mobile information services without alienating its end users: physicians. Epocrates might be able to charge less than competitors for its EHR service if it can earn money in other ways.For instance, it could use its service as an expanded platform for sponsored messages from drug or medical-device manufacturers. “Imagine the physician has a diabetes patient, and needs to communicate about why they need to control [their condition],” Crane says. In that situation, she says, “sponsored patient literature is a benefit to the pharmaceutical company, and the doctor, and the patient. That’s just a simple example.” (In such encounters, information about patients and their conditions would never be revealed to pharmaceutical companies, she says.)

Investors themselves will get a chance to judge how well positioned the company may be for the already-competitive EHR market when Epocrates goes out on the market later this year. The company hopes to sell 6.16 million shares of common stock at $13 to $15 per share, which would bring in up to $92.5 million in gross proceeds. That would more than double the company’s total capitalization, and presumably create some long-awaited liquidity for Epocrates’ venture investors, who include Sprout Group, Goldman Sachs, Interwest Partners, Draper Fisher Jurvetson, Three Arch Partners, and The Bay City Capital Fund.

Wade Roush is Xconomy's chief correspondent and editor of Xconomy San Francisco. You can subscribe to his Google Group or e-mail him at wroush@xconomy.com. Follow @wroush

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  • http://www.emrandhipaa.com EMR and HIPAA

    You highlight well the challenges that Epocrates will face going into the EMR world. They’re not use to the SaaS model and that will be an important challenge to deal with appropriately. Plus, while they have the clinical content, it will be interesting to see how usable their EMR software is and in what form factors they provide.

    I think it will also be interesting to see how many Epocrates users actually look at the Epocrates EMR. Seems like Epocrates might be about a year or so too late to really capture the market effectively.

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