Rob Katz

Pop!Tech: Keeping It – Your Medicine – Real with PharmaSecure

Nathan Sigworth and Taylor ThompsonYou’re sick, so you go to the doctor.? He prescribes you drugs.? The medicine makes you better, right?? Unfortunately, that’s not always the case–especially for the billions of people living at the base of the economic pyramid.?

Taylor Thompson and Nathan Sigworth are on a mission to make sure medicine makes patients better, every time.? They are the co-founders of PharmaSecure, a for-profit startup targeting the problem of global pharmaceutical counterfeiting–which kills millions each year.? PharmaSecure will soon launch a cell phone-based system that allows healthcare professionals and consumers to easily confirm the validity of purchased drugs, bridging the information gap that allows counterfeiters to sell more than $50 billion worth of fake drugs every year.Thompson and Sigworth are Pop!Tech Social Innovation Fellows; they presented their work earlier today at the conference.? Prior to their presentation, I had the opportunity to sit down with then for an interview.? After their presentation, the guys were featured on the Wired Science blog (20-Somethings Take on a $50 Billion Counterfeit Drug Biz)–so be sure to check out Alexis Madrigal’s excellent write-up for context before reading on below.?

Rob Katz, Tell me about yourselves–how did you get started in this?

Nathan Sigworth, PharmaSecure: I was thrown in to the world of entrepreneurship while an exchange student at Dartmouth.? I took an engineering design class and designed a gyroscope for kids’ bikes, which replaces training wheels.? (It’s coming onto market pretty soon–but has nothing to do with PharmaSecure.)? As a result of my interest in design, I started taking classes in the business school and in the product design department, etc.? First it was physics; then engineering; finally, economics–and all of it led to entrepreneurship.

Taylor Thompson, PharmaSecure: Growing up, my father worked for World Vision and spent a lot of time in Africa.? When I was 17, he implored me: “Taylor, spend time in Africa!”? So I spent a summer in Ethiopia–much like Global Citizen Year.? There, I got to know people at the bottom of the economic pyramid, people who I would have never known before.? I wanted to help people, so I decided to go to college and become a doctor.?

Even while I was a pre-med, one of my biggest regrets was not learning the language in Ethiopia.? So during another summer, I went to Rwanda, and worked in a hospital and tried to learn the language.? Two days after I arrived, I contracted malaria–but I took drugs, and got better.? I had no idea that there were millions of people who thought they were taking the same drugs as I was, but weren?t getting better.?

Nathan Sigworth: Taylor’s first attempt at social entrepreneurship was kind of funny, actually.? (The two were college roommates at Dartmouth).? He came back from Rwanda with a suitcase of handmade greeting cards made by child-headed households–about $2000 worth.? He was so excited–”I?m going to sell these and make money for the people in Rwanda,” he said.? But they must have sat under his bed in our dorm for two years.? Finally, he got a freshman excited about the project, and she sold them all.? It’s funny, but it’s also a real lesson in business. Give me your elevator pitch.

Taylor Thompson😕 Imagine that your mother has cancer, and she goes to the hospital and the doctors assure you that there’s a drug that will cure her.? So she takes the medicine, but she gets worse and worse–and dies.? Later, you find out that the drug is actually just sugar–it’s not medicine.

The World Health Organization estimates that about 10-30 percent of all the drugs on the market are fakes.? At the same time, the pharmaceutical industry loses $50 billion per year – predicted to rise to $75 billion by 2010 – from counterfeiting.? So this is a complete overlap between the social good and the private interest.? By addressing the problem of counterfeiting, we can solve both problems at the same time.

Nathan Sigworth: We try to solve this problem through information.? We take advantage of cell phones–widely available in the developing world–to allow customers to check and verify the quality of their drugs.? At the same time, we create a pathway of communication between the manufacturer and the end user.? This is fantastic data generation and market research for the pharmaceutical companies. What’s PharmaSecure’s product, and how does it work?

Nathan Sigworth: At this point, we’ve experimented with, and done research on, a lot of technologies that are on the market–like text messages.? We’re looking at different user interfaces and thinking about which is the best for verification.? By exploring all possible technologies, we try to see what might work best for our market-based model.? Remember, we’re a startup.

Regardless of technology, the product is security and information.? We provide security to the pharmaceutical companies and patients, and real-time market data to the drug companies.? You can boil it down to this: we are a market maker for security and information–and the market simply does NOT exist right now.?

Taylor Thompson: The developing world accounts for just under 15% of the total pharmaceutical industry (sales-wise) but more than 30% of industry growth right now.? And there’s no good, systemic way to capture data on who’s buying and selling what and when and why and where.? The only way now is to do basic field surveys–which are either not being done at all or not being done frequently.? Our assumption is that the value of the data increases with scope–the more data points, the better the quality, the more it’s worth, etc. What was your Aha! moment in founding PharmaSecure?

Nathan Sigworth: At the start, we assumed the problem needed a technological solution.? But the real Aha! moment was realizing that the technology is already there – primarily through cell phones – and that it’s the market that needs to be solved.? There’s a market failure between having the right technology versus bringing it to market.? So we stopped thinking about technical development and instead worked on a business model that would allow the price-sensitive pharmaceutical industry and price-sensitive governments to implement a solution that’s appropriate for the BoP. Tell me what we need to know about counterfeit drugs.

Taylor Thompson: Data on counterfeiting are very poor.? So it’s hard to know the extent of the problem–which is actually a market opportunity in and of itself.? In 2006, The Lancet published a study on counterfeiting that showed 53% of the artesunate (a common anti-malarial drug) on the market in Southeast Asia was completely inactive, for example.? There were at least 16 different versions on the market–14 of which were fake.? In another study, in Cameroon, between 20 and 60 percent of anti-malarial drugs were found to be counterfeit.? What’s the most effective way to address counterfeiting now?? Why is it insufficient?

Nathan Sigworth - fakesNathan Sigworth: The ideal situation is what we have in the United States: First, a functioning regulatory authority and second, an enforcement mechanism/legal system that works.? And when a developing country takes the initiative and spends the money to put those in place, they can do it.?

In Nigeria, for example, until the early 2000s, between half and three-quarters of all drugs were counterfeit.? But a new administration came to power, and the under the new head of the Nigeria Agency for Food, Drug Administration and Control, Dora Akunmele, they instituted a program to crack down on counterfeiting.? After just four years, the counterfeit rate dropped from 50 to 75 percent down to 17 percent.? So it’s doable.

Taylor Thompson: Regulation is essential.? But until that happens everywhere, there are really two channels–consumer information/market enforcement, and manufacturer information/retailer enforcement.? On the consumer side, companies use holograms to differentiate real from fake drugs–but the problem is, the holograms get copied.

On the manufacturer side, you could use RFID tags and readers, but each tag costs 5 to 15 cents and the readers cost at least $500–for a drug that sells for 25 cents a dose.? The economics are out of whack.

So we’ve identified ways for consumers to ensure the drugs are real and a way for the pharmaceutical companies to track them, bringing these two streams together.? No more mystery shoppers to check up on retailers here–the consumers are the mystery shoppers. What large do you anticipate the market for your system to be?

Taylor Thompson: Pharmaceutical companies spend around $100 million on holograms every year, for example.? But that’s just the tip of the iceberg.? We think the market could be as large as $50 billion or even $75 billion per year. Tell me about your market research.

Nathan Sigworth: Customers buy drugs from three places–a government clinic, a private pharmacy or an informal drug shop.? Our research broke the markets into people who buy from each, as well as by rural and urban areas.? Across the board, there’s huge awareness of counterfeiting–everyone knows someone who has died or hasn?t gotten better because of counterfeit drugs. Are people willing to pay for information?? And how much?

Taylor Thompson: Yes, people are willing to pay–in both the low-income and middle-income segments.? The primary problem we?re trying to solve is asymmetry–counterfeiters have all the information, while customers have nothing.? We need enough information for people to trust their retailers–and our goal is to make counterfeiting unprofitable.

Even at the bottom of the pyramid, people are willing to pay for the right drugs.? It depends on perception of risk and relative cost.? In poorer areas, people are willing to pay less–so we might have to use a hybrid model to make it work.? But in these areas, pharmaceutical companies want to step up and cross subsidize the price of information to the customer.? In either model, people value information and are willing to pay for it. What’s the response of people on the ground?

Nathan Sigworth: I was talking to a pharmacist in Mumbai who was very excited about PharmaSecure–because now he can be totally confident in talking to his customers.? He knows he needs his customers? trust, but with his current supply chain and the current verification, he himself can?t be sure.? He would love to have this information.

Taylor Thompson: I was in Uganda, talking to a doctor who had done his residency in Nigeria.? When he would treat patients, the residents were taught to assume that if there were no improvements after 1 day, then the drugs were counterfeit.? Imagine living in a healthcare system where counterfeiting is so prevalent that it’s taught in medical schools.? Doctors love the system. What’s the biggest mistake you’ve made or misconception you’ve had so far?

Nathan Sigworth: Very early on, we thought about counterfeiting primarily as a technical problem.? And of course it is–we need the technology to provide a pathway between consumers and pharmaceutical companies.? But the technology exists–the market does not.? We need to create the market–that’s the challenge.

Taylor Thompson: It’s all operational–not about gadgets.? There’s also an image problem–people think counterfeits are another name for generics.? They?re not, of course.? Both generics and brand name drugs suffer from counterfeiting. Speak to the role of dignity and choice in your business model?

Nathan Sigworth: Dignity and choice are the absolute key.? People are motivated by a sense of choice.? There’s very little we can do who take fake medicine and don?t care.? But there’s a whole lot we can do for people who care about the quality of their medication?we can prove that it’s authentic.? And we have found that there’s a huge demand for that in developing markets. Where do see this in 5 years?? 10 years?

Taylor Thompson: I?m a college dropout–I can?t run a multinational company.? (Laughs.)? We want to learn, partner, hire the experienced people–we want to be supplanted and increase the likelihood that Pharmasecure will succeed.

Nathan Sigworth: There’s a problem of economic loss from counterfeiting and human loss from counterfeiting–we sit at the nexus of those losses.? So as a for-profit venture, we have the ability to really get to the issue.? We want to validate this market–there is no market for information on counterfeiting and trigger competition around this issue. What do you say to people who accuse you of profiting off the backs of the poorest people in the world?

Taylor Thompson: This is a major problem that exists for the poor and for the industry–and it’s something that pharmaceutical companies and customers alike are willing to pay to solve.

This is a public health crisis that we?re solving on pharmaceutical companies? tab–while saving those very companies a lot of money.? Why is that bad?