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A problem worth solving

Gregory Rockson was faced with a choice. He could either stay in the US (where he earned his bachelor’s) and live the techie life in San Francisco or return to his home country of Ghana to disrupt the local healthcare system. I wouldn’t be writing this story if he hadn’t chosen the latter.

Suffering from a medical condition of his own, Rockson recalled the struggles his parents had to endure to secure his medication during his childhood. The African medicine supply chain was notoriously hindered by poor logistics, destitute infrastructure, and a corpus of inefficient middlemen. This led to medicine stockouts and as Gregory would later find out, large amounts of medicine being thrown away due to lackluster inventory planning.

Alongside co-founders Daniel Shoukimas and James Finucane, Rockson launched mPharma’s operations in 2013. The company’s first stab at the issue was an e-prescription platform, enabling doctors to easily check where the medicine they wanted to prescribe was available. However, Rockson’s team quickly realized that despite the platform’s best efforts, the problem of medicine availability and affordability remained.

This realization ushered in mPharma’s first of numerous business model iterations and innovations. In 2016, the company launched a so-called Vendor Management Inventory (VMI) product, which placed them in the middle of the medicine logistics network. The data and experience they collected from that pivot would prove to be crucial in its future developments.

“We created a network of healthcare providers (hospitals and retail pharmacies) who subscribed to the model at no cost. For our VMI partners, we took over end-to-end inventory management at their pharmacies - from procurement to withdrawal of expired drugs. We provided inventory to our VMI partners on a consignment basis, so they could free up working capital for business operations.” - mPharma annual report 2021

Business model unorthodoxy

Due to the esoteric and antiquated state of the sector it was disrupting, mPharma never shied away from being inventive in the business models and products it tested out. That philosophy has led mPharma to launch products targeting almost all of the sector’s stakeholders, from patients to pharmacists. For the sake of clarity, I will focus on three main ones.

QualityRx

mPharma took a page out of McDonalds playbook to implement the QualityRX pharmacy franchise model. The deal for pharmacy owners is the following: mPharma finances the refurbishment of your pharmacy (up to $8,000) and manages your inventory, only charging for the medicine you sell. In exchange, you enter a profit-sharing agreement with them.

mPharma went even further with that concept by adapting it to so-called "Patent or Proprietary Medicine Vendors” (PPMV), which are essentially tiny mom-and-pop shops selling over-the-counter medicine. Through the brand “Good Health” and a partnership with the Bill and Melinda Gates Foundation, mPharma thus got involved with yet another link in the African healthcare food chain.

The QualityRx model has led to the modernization of many pharmacies across the continent, not only in terms of appearance but also in terms of medicine availability. The spread of QualityRx also readied pharmacies for two of mPharma’s other products, Bloom and Mutti.

Bloom

Bloom is the SaaS product mPharma developed for pharmacies wanting to digitize their operations, inventory management, and patient logistics. The spread of Bloom benefits from a potent network effect, as the more pharmacies use it the more medicine availability and selling trends data mPharma is able to capture, rendering its medicine dispatch forecasts all the more precise.

“We use Bloom to deploy predictive analytics and insights from the data generated from our operations, i.e historical consumption and dispensation data, to forecast future demand. This allows us to stock drugs and prepare adequately for future demand, ultimately ensuring a steady supply of inventory for our customers which helps reduce the risk of stock-outs.” - Daniel Shoukimas, mPharma Head of Product

Bloom is the cornerstone of mPharma’s business. From a purely economic vision, its software nature makes it more scalable, less risky, and more unit economic friendly than asset-heavy programs such as QualityRx. From a strategic point of view, the data mPharma recuperates from Bloom can prove extremely valuable to policymakers, companies, and evidently mPharma itself. The company’s recent mission with the Gabonese government is a case in point.

Mutti

In its constant effort to reach all stakeholders of the African healthcare system, mPharma’s attempt at reaching African patients is embodied by Mutti. A “health subscription service”, Mutti provides patients with “heal-now pay-later” capabilities, enabling them to pay for the medicine they need at a discounted price, in multiple installments. The Mutti program also confers members with rewards and cash-back programs.

Through the recent launch of Mutti Doctor, mPharma has aptly ridden the telemedicine wave. By equipping its partner pharmacies with technology enabling in-depth telemedicine consultations, the company is doing its small part to solve the abysmal doctor-to-patient ratio on the continent.

Smart growth: acquisitions, expansion, and strategic relationships

In early 2022, mPharma announced a $35M Series D led by a plethora of investors from different backgrounds, ranging from Tinder’s founder’s VC to an Indian billionaire’s family office. Its fundraising history and the people it brings on to the adventure seem to be a conscious effort to build a diverse network of strategic relationships, that could all serve the company at one point or another.

“mPharma enjoys expertise backing from well-experienced professionals in the pharmaceutical industry, including Helena Foulkes, former president of CVS, the largest pharmacy retail chain in the U.S.; and Daniel Vasella, ex-CEO and chairman of Novartis; both are members of the board. The startup’s other investors include U.K.’s development arm CDC Group, Breyer Capital, and Golden Palm Investments” - TechCrunch

To facilitate its geographical span, mPharma has also relied on multiple acquisitions to enter new African countries without needing to start from scratch. Its pharmacy-centric model provides mPharma with a relatively straightforward choice when it comes to deciding who they want to acquire: local pharmacy chains.

It has replicated that model multiple times over, through the acquisitions of Haltons (Kenya), Vine (Uganda), and partnering with Belayab Pharmaceuticals in Ethiopia, putting a foot in the door of one of Africa’s most closed economies. mPharma’s most imposing move however occurred at the end of 2022, when the company announced it had acquired a majority stake in HealthPlus, Nigeria’s leading pharmacy chain.

Through such an acquisition, mPharma seeks to kickstart its myriad of products through a ready network of pharmacies, in Africa’s biggest market.

“Powered by mPharma’s proprietary Bloom software, HealthPlus will provide patients access to affordable primary care services within its pharmacies, in addition to affordable and quality medications it currently retails across 12 states in Nigeria. The HealthPlus pharmacy chain will also launch mutti®, mPharma’s health membership program, which will provide both existing and new customers with discounts, interest-free “heal-now-pay-later” plans, free health screenings, and other primary care services” - benjamindada.com

Potential risks and plans for the future

As pointed out in another fantastic Afrobility podcast, the high degree of involvement mPharma is taking translates into a high level of risk. Apart from Bloom, many of the other mPharma services are asset-heavy and inherently risky. The QualityRx program implies an upfront capital commitment from mPharma, as well as mPharma taking on the risk of unsold medicine as it only charges its partner pharmacies for the medicine they sell. The Mutti membership and its promise to let patients pay for medicine in multiple installments are accompanied by the obvious risk of default.

On the competition side, mPharma’s first competitor is apathy. Patients and pharmacies that are stuck in their ways may not want to change their routine, a problem faced by some e-commerce players in India who are unable to break the population’s preference for mom-and-pop corner shops, known as kiranas.

Linking back to my first point, the mPharma competitors that are solely focused on software do indeed decrease their potential points of failure, but their fully-digital nature limits them in solving some of the thornier issues mPharma is after, namely infrastructure and medicine affordability.

As for its plans for the future, mPharma seems adamant about better monetizing the swaths of data it is recuperating from Bloom and the pharmacy-generated insights it yields. During Covid, Rockson explained that his team was able to predict where spikes of infection were happening by simply identifying where people were buying medicine for covid-like symptoms.

This data could be extremely valuable to governments, NGOs, and private companies needing real-time intelligence on these trends. The relatively riskless and asset-light nature of that business model could allow mPharma to double down on its high-impact, high-risk ventures such as patient medicine financing.

Conclusion

The problems mPharma set out to solve are arduous, and mPharma’s constant fight is finding ways to streamline and scale the solutions to said issues. Its focus on pharmacies as the centerpiece of its operations gives the company grounding and structure, as well as a physical place to start building from.

The risks mPharma takes through programs such as Mutti are notable, and the company’s monetization and risk-mitigations strategies for such programs are still quite blurry. From an outsider view, it seems that mPharma is able to balance out those risks with the potential cash-cow that is the data recuperated by the pharmacies using Bloom.

The monetization of such data, and who mPharma sells it to, has moral implications. For example, if mPharma sells that data to big Pharma companies, will those companies advertise medicine that isn’t necessarily needed, leading African patients to get into debt through Mutti for an irrelevant cure? While the problem seems to be less prevalent in Europe, the way big Pharma operates in the US and its responsibility in the opioid crisis should be considered before selling off African patients’ data.

“OxyContin approval is one example—Purdue Pharma was later shown to have presented a fraudulent description of the drug as less addictive than other opioids. The profit motive of the pharmaceutical industry remains ever-present.” - Harvard School of Public Health

The hyper-growth motive a VC-backed startup such as mPharma is inevitably bound to will lead to a need to diversify revenue streams. It will be essential to scrutinize whether mPharma keeps its initial philosophy while doing so: focus on the patient.

The Realistic Optimist provides weekly, in-depth analyses of some of the most relevant stories in our now-globalized startup world. Subscribe below to receive it directly to your inbox and don’t hesitate to share it with your colleagues :)

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