NB Health Care

Thursday
March 14
2013

James Militzer

The BoP Needs Drugs: Can the HealthStore Foundation’s model deliver?

In the developing world, 70 to 90 percent of all childhood illness and death is caused by a short list of infectious diseases.

Worse, those diseases usually can be treated with inexpensive generic drugs.

What’s the best way to get those drugs into the hands of the people who need them? The question is more complex than it seems.

Many of the most vulnerable populations live hours or days away from the nearest source of life-saving medicines. And the existing distribution system is limited, suffering from weak supply, poor quality control, rampant counterfeiting, and unfair or inaccessible pricing.

The HealthStore Foundation may have found a solution. Founded in 1997 as the Child and Family Wellness (CFW) Shops network, the organization is using a micro-franchising model to establish a network of small pharmacies and clinics that bring essential medicines to marginalized populations in Kenya. These outlets target the biggest killers in BoP communities, including malaria, respiratory infections and dysentery. They include basic drug shops owned and operated by community health workers, and clinics owned and operated by nurses, who offer a wider variety of medicines along with basic primary care.

Though the HealthStore Foundation is a non-profit, it operates its CFW shops like any successful franchise, with uniform systems and training, outlets located in high-traffic areas like market towns, and strict quality controls backed by consistent monitoring. But with the poorest developing countries spending less than $33 per person on health care each year (compared with $4,500 in the U.S.), it has incorporated both for-profit and non-profit methods to keep costs down. This involves using the franchise network’s combined buying power to obtain quality medicines at the lowest possible cost, as well as subsidizing franchisees through the U.S.-based foundation.

The model is bringing results. Since 2000, the HealthStore Foundation’s CFW shop network has more than quadrupled to 65 locations, including 17 drug outlets and 48 basic medical clinics. This network treats an average of 40,000 customers and patients per month – and over 2.5 million since its inception. In the coming years, it plans to expand its network in Kenya to reach more than 1 million patients per year, and to open hundreds of stores in Rwanda.

Greg Starbird, CEO of the HealthStore Foundation, recently visited the William Davidson Institute’s offices in Ann Arbor. He led a public discussion about the organization and its work, and sat for an interview with NextBillion Health Care. In these discussions, Starbird lays out the core challenges of delivering essential drugs to remote BoP communities, and how his organization is trying (and sometimes failing) to overcome them.

Interview with Greg Starbird, CEO of the HealthStore Foundation

To hear Starbird’s responses to individual questions, skip to the timecodes listed below the video.

Question 1: Is your model funded mainly by donations to the non-profit, or revenue generated by franchisees?

Answer: 0:35

Question 2: You talked a lot in your WDI presentation about the challenges of working with franchisees. As a non-profit, why did you decide to sell medicines through a franchise model, rather than just giving them away for free?

Answer: 3:25

Question 3: Were you concerned that if you’d distributed medicines for free, you would’ve pushed local drug sellers out of business or distorted the market in some way?

Answer: 4:35

Question 4: Are long-term sustainability concerns the reason that you’re trying to move away from subsidizing your drug shops in Kenya?

Answer: 6:06

Question 5: So you don’t think there’s any possibility of a non-subsidized drug retail/distribution business earning an attractive profit in BoP countries?

Answer: 7:15

Question 6: You mentioned in your WDI presentation that you didn’t want to sell higher-margin products like soda or cigarettes in your franchises, even though pharmacies in the U.S. and other countries do this. Is your reluctance due to regulatory issues, public health concerns, or other factors?

Answer: 10:02

Question 7: Theoretically, if regulations permitted it and the margin was high, would you be open to selling non-health care-related products and becoming more of a general store/drug shop?

Answer: 12:17

Question 8: I believe your franchisees pay $5000 to purchase a health store – how did you arrive at that price point?

Answer: 13:50

Question 9: Your franchisees include drug shops run by community health workers, and clinics/drug shops run by nurses. Is one of those more profitable or more difficult to sustain than the other?

Answer: 16:40

The full presentation by Greg Starbird at the William Davidson Institute

The Q&A after the presentation was particularly revealing – questions start at the 24:35 mark in the video below.

Categories
Entrepreneurship, Health Care
Tags
health care, infectious diseases, medical supply chains, Microfranchising, rural healthcare delivery