By Marion Jeng
Africa is a vast continent, plagued by a myriad of challenges matched only by the magnitude of its potential. Health care is a particular challenge here that has been a priority for public, private and multilateral institutions for decades, with mixed results so far. Today, innovative health tech start-ups are rising to the challenge – 2021 having seen an 81% increase in investments in this ecosystem1.
Challenges Facing Health Technologies
After years of political instability across the continent and constant competition between national governments, multilateral lenders, private donors and increasingly involved non-governmental organizations (NGOs), health care is messy and complex.
One of the main obstacles to progress is the fragmentation of supply chains. Africa imports 94% of its pharmaceuticals, with local manufacturers producing only 25-30% of pharmaceuticals and less than 10% of medical supplies2. When these extended supply chains meet national health agencies with poor infrastructure, which struggle to forecast, procure and distribute what is needed and when it is needed, the ability to deliver treatment or medicine is severely compromised. affected. Competition and lack of cooperation between NGOs and national actors exacerbate this fragmentation.
A major problem that complicates matters is that there are simply too few qualified health professionals, especially in rural areas.. As a result, Africa needs to tackle 25% of the global burden of disease with only 1.3% of the world’s health workers3. This is a monumental challenge, partly caused by the emigration of experts through “brain drain” and compounded by underfunded and mismanaged public sectors that must coexist with the chaotic network of healthcare provided by NGOs and charities.
The third problem facing African health technology providers is the lack of quality control of medicines. Qualified laboratories are rare and there are few guidelines or national/regional laboratories to promote standardization between laboratories. This, along with the two previous structural issues mentioned above, makes Africa a hotbed of counterfeit and counterfeit medicines. The World Health Organization estimates that fake medicines account for 42% of global trade4 – a $200 billion market. In Nigeria alone, fake malaria drugs result in 12,300 preventable deaths and nearly $1 billion in unnecessary expenditure each year.
Technological innovation brings solutions
There is no simple or easy fix, as many problems require top-down, systemic action that no single charity or business can provide on its own. However, innovative start-ups and new technologies have already proven to help doctors and patients achieve better and more reliable results.
Innovation in delivery delivers myriad benefits to the end user, whether through consumer-facing or supplier-facing solutions. Concretely, this means delivering medicines directly to consumers or to hospitals and pharmacies – bypassing inefficient or insufficient state-led supply chains or hyper-localized NGO efforts.
New technologies are also being used to ensure medicines are of sufficient quality by providing increased oversight of supply chains and manufacturing processes – such as the Internet of Things (IoT) and blockchain. The IoT can provide irrefutable, real-time information on the journey of drugs and equipment from production to delivery. Similarly, blockchain can do the same by providing irrefutable algorithmic proof of production, packaging, and transportation.
RxAll and True-Spec Africa, for example, have both developed AI-powered scanners to determine the legitimacy of drugs. Medsaf, a Nigerian innovator, enables pharmacies to directly link manufacturers to hospitals and pharmacies to ensure legitimacy and value for money.
Innovations in distribution
Getting the medicine to the person who needs it remains the main challenge. Over the past 12 months, vendor-facing solutions have grown rapidly, growing more than consumer-facing offerings. It should be noted that Mpharma has acquired Mutti’s network of local pharmacies and the supplier ShelLife now has 1,600 outlets across the continent. Investments in this ecosystem have seen substantial growth, with investments reaching $392 million in 2021, an 81% year-over-year gain.
Funding has, however, been concentrated in a few key companies – such as mPharma, Goodlife Pharmacy, Rocket Health and DrugStoc accounting for 72% of the money, with the rest split between 23 much earlier players – suggesting a varied and competitive market. with him everything remains to be played at this very early stage.
The healthcare model mirrors the broader B2B e-commerce space, where companies such as TradeDepot and Wasoko have successfully raised significant rounds and become essential to their industries, although emerging healthcare tech companies are just at an early stage.
Therein lies the “proof of existence” of the latent potential in this market. Fast-moving consumer goods distributors have already moved on, albeit at relatively low margins, which provides a model for the much higher-margin health technology sector to emulate and provide clear evidence of what is possible with an increasingly wide range of potential investors.
Telemedicine is another very promising avenue for health technologies on the continent. Health services and advice can be easily distributed over the phone or the Internet. This enables remote contact, care, counselling, reminders, education, intervention, follow-up, and even remote admissions. This method of care, most common in Nigeria, Kenya and Ghana, has been massively adopted over the past five years, thanks in part to the pandemic. Today, it represents a proven and viable alternative for the delivery of health care and can respond directly to the insufficient supply of medical professionals and services, especially in rural areas.
The expansion of telemedicine has gone hand in hand with the growth of the consumer-facing health technology industry and is linked to both pharmacies and dispensaries. They provide a natural mutual symbiosis, as people who need access to affordable medicines will also need access to remote care.
Driven by loyalty, solutions for service providers have also extended to telemedicine. A practitioner can issue a prescription that the patient can then fill with pharmaceutical providers belonging to the same company.
How start-ups can stay ahead
With increasing competition and the entry of several e-commerce giants into the pharmaceutical distribution market, it is becoming increasingly essential that health technology delivery companies, whether consumer-facing or providers, expand their offerings – potentially through telemedicine or financing.
In the short term, the arrival of these new e-commerce players will mainly disrupt the over-the-counter medicine sector, but could also ultimately impact prescription providers. This can go through acquisitions and partnerships; a not uncommon trend, with Amazon buying Pillpack and Flipkart in partnership with 1MG in India, for example.
However, the threat of market entry by large e-commerce players is prompting existing players to grow faster, especially after Covid 19. For example, mpharma, a major pharmaceutical player, has set up 100 virtual clinics in seven new markets – enabling telemedicine to complement its physical pharmaceutical offering.
However, it is not the easiest option for vendor-facing distribution companies looking to focus their market presence. As mpharma has found, it is easier for pharmacies to grow into telemedicine than for providers facing distribution companies – partly because of regulation, and secondly because pharmacies have a physical presence in this area. Partnerships, and over time also acquisitions, can be key here. In Kenya, D2C distributor MYDAWA now offers telemedicine services powered by SASAdoctor and uses Zuri Health to deliver goods.
The bottom line
We expect the health tech sector to expand even faster in the next 5-10 years. The cost of providing health care has dropped significantly thanks to telemedicine. Confidence in the reliability of medicines is growing as more and more supply chains are controlled or monitored end-to-end. Companies like mpharma design comprehensive healthcare networks that ensure better outcomes for the mass population. The big e-commerce players looking for higher-margin products are already big enough to seriously consider entering the drug market, as e-commerce giants elsewhere in the world have already done. While the challenges of inconsistent regulation and lack of social and economic infrastructure remain major hurdles, there is no doubt that the next decade will see the rise of better-funded and broader health technology players. across the continent offering international investors much higher margins than almost any other e-commerce category.
By Marion Jeng, Partner, Dai Magister