Private pharmacies in Kenya and Africa in general have traditionally been the first point of contact for healthcare for the general population.
For the longest time now, private local pharmacies have relied on strategic location as their key differentiator or competitive advantage in addition to selling branded drugs, vis-a-vis generic drugs.
Furthermore, the profitability of private pharmacies in Kenya has been fuelled by low cost, driven mostly by sale of fake drugs, fueling a false sense of high profitability by some unregulated and unqualified industry players. The sector faces other myriad of challenges such as stock pilferage, inefficient operations systems, and unsupportive, outdated and inconsistent policies.
The entrance of well funded players in the sector such as Goodlife Pharmacy, which has the backing of private equity and venture capitalists, may well be the beginning of the end for local pharmacies.
Such well funded pharmacies automatically develop competitive advantage that local pharmacies may not match. Such advantages are the ability to purchase drugs in bulk, more so generic drugs, which are cheaper and are increasingly gaining acceptance compared to branded drugs. This would give them economies of scale, and with prudent cost management, would have them get decent profit margins, driving local pharmacies out of the market due to their inability to match such prices, being cognizant of their overheads.
Similarly, new players can adopt global best practice in areas of operations, establishing technology based systems that can monitor stock movement not only within stores but across different stores in real time, stopping stock pilferage on its tracks.
Local pharmacies must therefore adapt quickly else they will not exist in the next decade. Part of the adaptation to the silent evolution would be to review their existing business model from just being a drug store to viewing their stores as platforms for other related products. This will have the effect of diversification of income, providing critical shock absorbers.
Moreover, local pharmacies may need to consolidate their businesses either to leverage and sell, or to match the financial muscle of their much larger competitors.
Consolidation may mean group purchasing or consolidation of supply chain to enjoy economies of scale, shared branding, development of basic shared quality standards and collective lobbying for policy improvements.
Failure to recognize the silent evolution by local industry players may mean imminent death of home grown pharmacies.
Victor Otieno is Director, Research and Innovation at Wylde International