A dose of the right medicine

Eye-catching branding

Yesterday saw the official opening of the first branch of Afghanistan's first pharmacy retail chain. ABIF has awarded a grant towards this major investment project that will eventually see 20 shops operating under the 786 Pharmacy brand across Kabul.

Counterfeit medicines are a huge problem in Afghanistan, costing money and lives, particularly for poorer consumers. While the Ministry of Public Health has been working to try to stamp out the sale of counterfeit medicines, a survey by a French NGO showed that something like 40-50% of the medicines being sold in licensed pharmacies are not genuine. Our estimate is that our target beneficiaries are spending US$10-20 million per year in Kabul alone on counterfeits.

In the absence of effective implementation of regulation, one of our Round 1 grantees spotted the commercial advantage in becoming a trusted retailer of genuine medicines. The business model is based on the simple unique selling point that consumers will be attracted to a recognisable brand that they know that they can trust. Targeting poorer customers would be achieved by locating the pharmacies close to public hospitals where these people go to receive free health care.

The applicant, Al Hadi Ltd, had a long history in importing and distributing medicines in Afghanistan, and saw the commercial potential for modernising the pharmacy retail sub-sector. Based on our own market analysis that had identified serious problems at the retail end of the pharmacy value chain, we immediately spotted the game-changing potential of their concept. We worked with them to develop their business plan and based on an example from Nigeria, we seeded the idea of a product verification system using mobile technology.

Apart from financing the significant investment, two things stood in the way of realising this project. First the pharmacy regulation prevented shops from being sited within 200 metres of another pharmacy outlet. This meant that (on paper at least) pharmacies could claim prime sites and prevent competitors from opening nearby. Secondly the same regulation only allowed one pharmacy, one license, one name. This regulation prevented the emergence of pharmacy retail chains - a key market development witnessed elsewhere in the developing world, allowing investment in the retail sector, upgrading skills and providing better quality assurance for consumers.

The applicant, with the support of ACCI, lobbied the Ministry of Public Health and earlier this year the Minister instructed officials from the Pharmacy Directorate to change the regulation to remove the anti-competitive restriction on locations and to allow multiple branches. The 200 metre rule has already been changed and the Directorate is currently working on the multiple branch regulation.

Interior of the first branch

As indications of their commitment to selling genuine medicines, 786 Pharmacies offer an SMS verification service that allows customers to check the barcode of their purchases against a central database, receiving an automated reply that confirms that their medicines are genuine. The shop also has an electronic receipting system that shows the exact product, the relevant batch number and expiry date. The receipt is stamped at the point of purchase as the 786 guarantee that the medicines sold are what it says on the packet. All of this is backed up by staff training for the pharmacists employed by the company. The SMS verification system is still in the testing phase, but the plan is that it will be rolled out along with the other branches over the coming months.

The design of the branding and the interior of the shops all adds to the sense that this is a modern, reliable retailer. The contrast between 786 Pharmacy interiors and a typical Kabul pharmacy is striking. Already the owner has been approached by one pharmacy license holder who wanted to take a franchise and open his own 786 store.

Despite this being early days, the word of what Al Hadi Ltd has done through the 786 brand is already out. The Ministry says that some other pharmacy license holders have approached them to apply for multiple licenses with the intention of setting up similar chains. This potential for crowding in by competitors was one of the main reasons that we were so excited about the market development impact of this investment. The benefits to our target beneficiary consumers will be enormous as the private sector imposes self-regulation driven by commercial interests. Eventually our small investment could end up benefiting millions of people in Kabul and across the country.