Down at the A&P

One may remember that in my posting last week (“Playing the Long Game”), I mentioned that the big pharma company, Novartis, was trying its hand at improving the delivery of health services in rural India.  Based on the limited information I had, Novartis started the program, called Arogya Parivar (“Happy Family” in Hindi), in 2007, and that it involves infrastructure development and health education, now reaches 42 million people, is “generating profits,” and is intended to be a sustainable, scalable business to improve health.  Interested in understanding the model, its economics, and potential for being replicated in other settings by Novartis or its competitors, I looked for more information.  Unfortunately while I found additional details, I did not come up with a description of its business and operating plan or an analysis of its potential and welcome any suggestions on sources of better information.

Novartis provides a general description of Arogya Parivar (AP) as part of its corporate responsibility/access to health care/social business webpage (Novartis CR), and AP’s top guy, Anuj Pasrija, Head of Social Business, Emerging Markets Group (Pasrija profile), has given a few presentations on the program, e.g., to the Associated Chambers of Commerce and Industry of India in November 2010 (Pasrija presentation) and at a corporate social responsibility conference in June 2011 (CSR conference).  I also found two laudatory reviews of AP with some details by an international PR firm (Incanus article) and an Indian-based social enterprise blog (Beyond Profit blog) and a recent “case” write-up by Jain et al. in the International Journal of Business and Management Cases (Jain et al 2012).

From these sources, I summarize AP’s primary features as follows:

  • A grassroots health education program covering diseases specific to a region provided by local, Novartis-trained “health educators” who refer patients to doctors, liaise with local health-related NGOs, and apparently sell drugs on a 10% commission basis;
  • An outreach program through “heath camps” provided by doctors who visit under-served villages and conduct free basic exams (it is not clear if these doctors also sell drugs);
  • A program run with micro-financing institutions to improve the ability of doctors and pharmacies to maintain stocks of drugs and/or improve their operations; and
  • The packaging of AP’s products (80 pharmaceutical, generic, and over-the-counter drugs) in small-quantity (several days of doses), low-priced packs [it is not said how this sales strategy affects compliance].

But while Jain et al. report AP is monitoring the “number of people covered in a health education and awareness program, number of health camps conducted, number of new patients diagnosed and number of doctor referral cards distributed,” they do not provide these data, and apparently AP is not measuring subsequent improvement to the health of its participants.  Based on the numbers from Jain et al. and Incanus article, it looks to me as AP is very widely dispersed, perhaps even overly dilute, that is, a small number of AP employees or affiliates covering a large territory.  There is one supervisor and eight health educators for each “cell,’’ of which in 2009 there were 280, each including between 180,000 and 200,000 inhabitants.  In terms of direct contact, each educator is said to have 30 “patients” or about 0.12% of those in his/her territory.  AP is said to conduct 500 health camps per month which, guessing at 500 attendees each, means the camps reach about 0.05% each month or less than one percent in a year.  As for the economics, Jain et al., as well as the Novartis web page, state AP “achieved break-even within 30 months, and since 2007, sales have increased 25-fold” without giving specifics.  Novartis is apparently satisfied with the economics.  Jain et al. report that Novartis plans to expand the program to cover 350 million people in India in ten years, and Novartis notes on its web page that it is testing similar programs in selected Asian and sub-Saharan countries.

To get more specifics, I turned to a database complied by the Center for Health Market Innovations (CHMI), a project started in early 2010 with Gates and Rockefeller foundation grants that “identifies, analyzes, and connects programs working to improve health and financial protection for the poor.”  I have posted on and praised the CHMI effort (but think less of its utility) (“Innovate or Die” and “Market Tested and Not Yet Approved”).  But two of the weaknesses of the CHMI methodology (self-identification and reporting of results) foiled me:  AP was not in their database.  While I give Novartis and AP an “A” for effort, I’m still in the dark about the program’s business model and potential for improving health among the poorest.  What I (and others struggling with the delivery challenge) needs is something like a Harvard Business School marketing case study like one that was done on the Aravind Eye Hospital chain of India (HBS case list).

Of course, the business model of offering low-priced, low-margin but essential products is a classic one.  In 1912, the founders of the Great Atlantic and Pacific Tea Company, better known as A&P, set up the first in the US, no frills, cash-and-carry Economy Store in Jersey City, NJ, which started an extraordinary period of growth that resulting in 4,638 stores in 1920 and 15,418 stores and $1 billion in sales in 1929 (A&P history).  Can AP be the A&P of health care for the neediest?

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