Africa is expected to be the fastest growing pharmaceutical market in the world. But in order to gain meaningful inroads there, global players must focus on alternative models for growth that acknowledge Africa’s unique provider networks, writes Lauren McHugh in this opinion piece. McHugh is an MBA/MPA candidate at Wharton and Harvard’s Kennedy School of Government studying innovations in African health care systems.

In this year’s Fortune 500 list, pharmaceutical producers and wholesalers make up seven of the top 100 spots, with another two of the top 20 spots going to pharmacy retail chains. Part of their rise in the rankings over the past decade comes from relentless industry consolidation. But in the hyper-fragmented African pharma market, often cited as having the drug industry’s most potential, I believe companies need to look to alternative models for growth. Providing patients with knowledge, credibility and segmented distribution can allow global players to capture a share of the $45 billion business opportunity this market is expected to represent by 2020.

Africa’s Fragmented Market

The U.S. is edging closer to duopoly in the pharmacy retail sector, with CVS and Walgreens representing at least half of all drug retail sales in most major American cities. The U.S. is also dominated by a steady oligopoly among drug makers, where historically the top 10 producers dispense nearly 60% of the country’s prescription drugs, according to data aggregator IMS Health. The same sub-industries in Africa are made up of not dozens or hundreds, but instead thousands of players.

The 10 largest pharmacy retail chains in Nigeria, Kenya and Ghana manage 186 outlets for a population of almost a quarter of a billion people. An estimated 15,000 mom-and pop pharmacy shops make up the bigger share of the market in these three major economies. Their drugs are sourced from a variety of suppliers: from the several hundred locally registered pharmaceutical manufacturers across the continent, to larger manufacturers based in India, China and Western regions.

In this environment, Big Pharma companies and retailers cannot rely on their usual wholesale-based strategies. Instead, they will need to look to the unique characteristics of African health care systems that can drive scale.

“In this environment, Big Pharma companies and retailers cannot rely on their usual wholesale-based strategies.”

Retailers Not Only as Point-of-Sale, But Also Point-of-Care

Relative to demand, the supply of physicians in Sub-Saharan Africa is extremely limited (one per 10,000 people versus 15 per 10,000 globally according to the World Bank). Even when geographic distance does not preclude access, patients still face long wait times and high prices for qualified care. Consumers often take matters into their own hands, self-diagnosing or seeking treatment directly from pharmacists, pharmacy technicians or pharmacy shop owners. Studies in Cameroon, Ghana and Uganda showed 50%-60% of patients or caretakers consult their local drug outlet as a first line of care for treatment of certain health conditions.

Drug retailers looking to scale sustainably will need to play a role in making legal prescription channels more convenient. HealthStore Foundation, which manages over 60 franchises in Kenya, addresses this by setting up micro-clinics run by registered nurses alongside many of their shops. The model has created a legitimate means to drug access that patients are willing to use: An academic study by Yale and Texas Tech researchers found children living closer to a store received more vaccinations and acute illness treatments. Telemedicine provider HelloDoctor allows patients in Kenya to obtain prescriptions for certain medications through phone-based medical consultations. For pharma producers and retailers, these new modes of diagnosis may soon represent a major point of origin for prescriptions.

Social Capital As a Key Form of Startup Capital

Entering African markets often requires regaining the trust of a skeptical consumer base. An estimated 30% of drugs in Africa are counterfeit, part of a larger multi-billion dollar global fake drug trade. Unlicensed drug outlets are also rife. In Kenya, the non-profit PSP4H estimates that 8,000 of the country’s 12,000 pharmacies operate without a license.

Living Goods, a network of ‘Avon-like’ door-to-door health entrepreneurs in Uganda, Kenya and Zambia, borrows its social capital from the communities in which it operates, rather than building it from scratch. Respected female figures are elected by their neighbors as Living Goods’ health agents. Local chiefs provide character references in place of collateral to establish the credit-worthiness of these micro-franchise owners. Living Goods then supplements the women’s local knowledge and relationships with technical training on health and business, to develop a network of product and information distributors. Using community relationships to deliver health care services has allowed them to scale to five million people, together with BRAC Community Health Promoters, and contribute to a 27% reduction in child mortality, according to a university study.

“Drug retailers looking to scale sustainably will need to play a role in making legal prescription channels more convenient.”

Social capital can also be built over social media. Jacaranda Health, which manages peri-urban maternity clinics outside of Nairobi, maintains a Facebook group with several thousand followers. Hundreds of posts on its page share patient testimonials, photos and “thank you” messages from new mothers. Recently, they transitioned from one-on-one discharge counseling to a group-based model, and are creating ways to facilitate group SMS communications among these cohorts.

The means of building trust are not always explicit. Managers of HealthStore Foundation noticed that the delivery vehicles driving to and from their shops inadvertently helped build their credibility as suppliers. The trucks signaled to customers living nearby that drugs were sourced from outside the area, versus from within where counterfeits are rife. Customer feedback proved an important channel for navigating the unwritten rules of building patient buy-in.

Legislation As a Driver of Rural Distribution

To address the rural access gap, governments in Ethiopia, Kenya and Mozambique (among others) provide legislative support for new cadres of health professions. These begin at the health extension worker level, typically requiring several months of training in the treatment of malaria, pneumonia, and tuberculosis and other common diseases. Classifications reach as high as clinical officer level, requiring three to four years of training and permitting license holders to diagnose and treat a wider range of ailments.

“Reaching the mass market in Africa will require focusing on a much broader base of health care providers.”

Whereas traditional medical degrees in Africa require five to six years of training, paraprofessional roles offer greater possibilities for scale. Across east and southern Africa (excluding South Africa), there are an estimated 250,000 community health workers relative to 35,000 physicians. In Ethiopia, members of the Health Extension Worker program are permitted to administer anti-malaria drugs and antibiotics to treat pneumonia in certain regions, as well as promote vaccines. Community health workers are permitted to distribute anti-malarial drugs in a dozen other African countries, and provide oral contraceptives in Kenya, Lesotho, Malawi and Zimbabwe, according to UNICEF.

Drug marketing in the U.S. primarily targets physicians, on whom drug companies have spent up top $24 billion in past years. Reaching the mass market in Africa will require focusing on a much broader base of health care providers. Local governments have recognized that the needs of patients’ center around access, especially geographic. Drug companies that incorporate cadres of health care professionals created to reach the underserved can extend their distribution to an estimated additional 30% of the Sub Saharan African population.

Locally Grown Ingenuities

With continued uncertainty in the U.S. over drug price regulation, pharma companies’ topline growth calls for a sustained focus on international sales. In Africa, locally grown ingenuities offer new delivery tactics for drug suppliers and retailers. By contributing to the development of health care infrastructure, building patients’ trust and adapting to Africa’s unique provider networks, these players can better serve what is expected to be the fastest growing pharmaceutical market in the world.

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