Overshadowed by the Uniting to Combat NTDs announcement made last week in London (see my post of 2/1/12 and Combat NTDs) was the release of a report on how private sector companies and grant-supported organizations have addressed and can address the need for medicines in bottom-of-the-pyramid (BoP) markets. “Bringing Medicines to Low Income Markets: A guide to creating inclusive business models for pharmaceutical companies” (Medicines for BoP) was sponsored by the German Federal Ministry of Economic Cooperation and Development (BMZ) and Sanofi and written by Endeva, a consulting firm offering “enterprise solutions for development.” While I commend the authors for addressing the opportunities and challenges of the BoP medicines market, I found that they fell short on three points: not emphasizing the role of a major player, governments; not providing compelling examples with details; and the depth and utility of the guidance provided.
The report starts well with a succinct description of the market’s opportunities and challenges. Here’s my summary of the salient points made:
- the demand (need) is large with 1.7 billion people lacking access to the basic, essential medicines and another 2.3 billion with limited access;
- this 4 billion have annual incomes of under $3000 but spend about $160 billion on health care of which about one-third is on pharmaceuticals;
- drugs are 2-6 times more expensive in the under-served markets than in developed markets due to taxes/tariffs, middleman mark ups, and supply (inventory) problems;
- in lower-income countries communicable (infectious) and non communicable diseases or NCDs (e.g., diabetes, heart disease, cancer) contribute equally to a country’s mortality rate while in middle income countries the NCDs contribute more than twice as much as the communicable diseases; and
- companies seeking to enter the BoP markets are challenged by missing “market enablers” such as the lack of doctors and other trained health practitioners, regulations (in many countries 20-30% of the drugs sold are counterfeit), infrastructure for delivery and stocking of products, financing for businesses providing health care, and insurance plans (70% of low-income patient drug purchasing is out-of-pocket).
The next section of the report provides a “tool,” really a framework description of what everyone in business should know: to sell a product the customer has to recognize its value, it needs to be in a form she/he can use, and be affordable and available. Also described are the key actors: governments, international organizations (like WHO), bilateral agencies (like the BMZ and USAID), foundations, microfinancing organizations and insurers, NGOs, and the private sector. Unfortunately, the rest of the report is heavily weighted in its examples and recommendations toward the existing dominant actors of the bilateral organizations, NGOs, and foundations. For example, the report does not mention ways in which the governments, to my mind the key responsible party for providing the right to a basic level of health care, can improve their performance. One route which I have posted on in the past (“A Plan for Essential Care” 1/20/11 ) is the use of a “health sector wide approach” (or health SWAp) in which the public health system is strengthened by requiring that all donors’ funds are administered by the responsible government agency with full accounting and transparency so that the funded activities, which are typically aimed at specific diseases like HIV/AIDS, polio, and malaria, are coordinated with government efforts to provide basic health services like pre- and ante-natal care and immunizations. Businesses are most successful over the long term in environments where the risks are known and predictable and governments by proving regulations, infrastructure, and a justice system provide that environment.
I was also disappointed in the report’s case studies (really examples, not studies which would be more in depth). While the authors note that the more than 100 documented examples from pharmaceutical companies as well as other organisations such as NGOs were analyzed, relatively few provide the promised “inclusive business models for pharmaceutical companies.” Of the 18 given, four involve solely NGOs and are therefor are not self-sustaining (Cases 5, 13, 14, and 17), and six are marginally relevant to selling into the BoP markets (Cases 2, 3, 6, 7, 8, and 18). My summary of the cases and comments are as follows:
- Case 1: Novartis/Sandoz creating decentralized education/delivery program in rural India which now reaches more than 42 million people (a good example but it would be nice to know its current status and profitability).
- Case 2: Sanofi and the non-profit product development organization, Drugs for Neglected Diseases Initiative, developing a fixed dose combination drug to treat malaria (a worthy effort but started and maintained by donations).
- Case 3: BMZ and Bayer Healthcare conducting a sexual health awareness campaign in Bosnia (provides a general health education, which while needed and may help build a market, is not tied to product sales).
- Case 4: Gilead and Cipla developing fixed doses combination antiviral drugs to make compliance to anti-AIDS treatment easier (a good example of designing products for the market but the authors should have mentioned Gilead’s nonexclusive licensing program that brought down the price to first-line anti-virals).
- Case 5: DataDyne selling it mobile phone-based data collection system for health care surveillance and delivery (primarily being used by NGOs and relevance to drug supply chain management is not clear).
- Case 6: WHO bringing together several groups and representatives of the vaccine industry to write specification for future vaccine appropriate to developing countries (helpful guidance but may be a barrier to innovation).
- Case 7: Novo Nordisk collaborating with the Chinese Ministry of Health to provide education and training to health care providers on diabetes (again, useful education but possible posing a conflict of interest for both parties).
- Case 8: Abbott’s Indian subsidiary holding small-scale educational events (again, education).
- Case 9: Sproxil starting market testing of an anti-counterfeiting system (I’m not sure of the utility of this approach since it tells the buyer the drug is counterfeit after purchase).
- Case 10: Square Pharmaceutical of Bangladesh creating a vertical drug distribution system to decrease costs and increase quality (a good model and financials would be helpful).
- Case 11: Novartis working with other companies and the Tanzanian government to use a mobile phone platform to track drug supplies in public health facilities (similar to Case 5 but more relevant to companies).
- Case 12: Mi Famacita providing high-quality affordable medicines to low income communities in Mexico though 16 franchised pharmacies (a good model and financials would be helpful).
- Case 13: Village Reach, an NGO, delivering vaccines with commodities like natural gas, in Mozambique.
- Case 14: Riders for Health, an NGO, transporting health workers via motor cycle in Gambia.
- Case 15: Novartis creating a system for Filipino overseas workers to prepay for products at discounted prices, called Kaagapay Health Connect (important approach but aimed at the self-pay market).
- Case 16: Pfizer providing an “eCard” discount drug purchasing card in the Philippines and Indonesia (important approach but aimed at the self-pay market).
- Case 17: UpLift India Association, an association of NGOs, proving micro insurance to its 120,00 members.
- Case 18: GlaxoSmithKline (GSK) creating a business unit to address developing country markets (GSK announced in early 2010 and it is an important strategy but the details have yet to be shown; see my post “GSK in the Lead but Who Will Follow” 1/28/10).
The report’s final chapter is said to provide “practical guidance to pharmaceutical companies on how to get started with inclusive business, including tips for strategy, internal organisation and partnerships.” Really it provides general guidance and needed to reflect a better understanding of the pharma industry and its progress in entering emerging markets (I note that, of the organizations proving expert advice used, only 10 of 34 were for-profits). What and where are certain products needed? What is the relative level of government support of health care infrastructure in various countries? What is needed for product approval and registration? Which local companies may make good partners? Overall, I give the report an “A” for effort in tackling the BoP biz challenge but a “B minus” for utility. My amateur opinion is that NGOs, foundations, and bilateral and international organizations should work through governments to build out the country’s health care infrastructure, and the private sector should develop appropriate and affordable products, provide commercial and patient financing, and build supply and distribution chains.