The fragmentation in Africa’s drug distribution network. (The mPharma Experience).
Mac Krzyzewski, my colleague at mPharma, prepared this data visualization of mPharma’s supplier network across our 3 countries of operations (Nigeria, Ghana and Zambia) at our leadership retreat this week. The graph shows the number of suppliers mPharma has to work with to purchase drugs for our provider network. I found this data very fascinating because it brings to life the complexities in the drug supply chain in Africa.
To provide some context behind this data, mPharma is a prescription drug manager for providers and payers in Africa. We purchase drugs on behalf of our members and provide it to them as consignment stock, meaning they only pay mPharma after they dispense the drug to a patient. This eliminates the need for providers to have working capital to purchase their inventory. Through our group purchasing cooperative, we are able to centralize procurement and reduce the price of drugs for our members. We are currently focused on building and managing a chronic drug formulary for our members. In Nigeria and Zambia, we have over 200 chronic drugs on our inventory. In Ghana, we have close to 400 drugs on our inventory. We manage a network of over 20 providers and had over 10,000 patient visits last quarter.
We have the largest number of suppliers in Nigeria followed by Zambia and Ghana. In Nigeria, we have to work with many small scale suppliers who carry 2–4 unique drugs that don’t have huge volumes but are still needed by patients who visit our provider network. The lack of huge volumes makes it commercially unattractive for the big distributors to supply. However, as a drug benefits manager, we need to ensure that all our patients get the drugs they need when they need. This increases the operational cost and complexity on our side to source for and purchase these drugs. Another big issue in Nigeria is the variance in the supply of generic drugs. Lets pick a drug like Amlodipine. Due to the difference in preference of our providers, we sometimes need to carry more than 5 brands of the same molecule. This fragmentation in brand choices makes sourcing for them not only difficult but also reduces our ability to aggregate larger volumes to get better prices.
Research has shown that the excessive fragmentation and margin spread across the drug supply chain can add as much as 100% in markups to the FOB price of a drug. The graph below shows the different touch points of a drug from a manufacturer to the patient in most developing countries.
As we continue to expand our provider network and centralize procurement, we hope to be able to use our consumption data to better forecast the drug needs of our patients so we can cut out a lot of the middlemen/women in the supply chain and bring our provider network closer to drug manufacturers.
