THE POTENTIAL OF THE POTENTIAL OF FRANCHISING ESSENTIAL DRUG FRANCHISING ESSENTIAL DRUG

OUTLETSOUTLETS

SEAM 2001 ConferenceTargeting Improved

AccessDenis Broun

SEAM 2

What are the main issues?

Public sectorPublic sector No ownership /

responsibility Few incentives for good

management Wastage, thefts Irregular supplies Inappropriate procurement Lack of customer

orientation Opening hours inconvenient

Private sectorPrivate sector High prices Pushing products instead of

serving the public. Inappropriate dispensing Sale of non essential

products Unethical practices No control or monitoring Little respect for

regulations: untrained sellers.

SEAM 3

Applying the franchise concept to the distribution of essential drugs

It is believed that a private franchise for It is believed that a private franchise for public health can successfully address many of public health can successfully address many of these issues, which are associated with poor these issues, which are associated with poor access to essential drugs in the private sector.access to essential drugs in the private sector.

The purpose of the franchise is to distribute The purpose of the franchise is to distribute essential generic drugs, harnessing the essential generic drugs, harnessing the incentives of the private sector to achieve incentives of the private sector to achieve public health goals.public health goals.

SEAM 4

What is a Franchise?What is a Franchise?

a network of privately owned facilities,

operating under a single brand,

to replicate a uniform operating model,

under supervision and monitoring,

for a predictable high level of service,

exploiting economies of scale to streamline operations.

SEAM 5

What is a franchise? (2)

A business model that is safer for managers than an individual enterprise (in the US 2% failure in the first 3 years against 80%)

A set of constraints and incentives

A powerful group organization, with guaranteed learning from other members

Systematic training from experts, and management assistance

The fastest growing form of retail business

SEAM 6

What are the requirements to be called a franchise?

A contractual relationship

A right granted to the franchisee to operate under a system prescribed by a franchisor

The operation of the franchisee’s business associated with the franchisor’s trademark

The payment by the franchisee of a franchise fee (financial relationship)

SEAM 7

Terminology

Franchise: the network and the brand (for instance Exxon, Century21, McDonalds), different from “chains” (CVS, RiteAid).

Franchisee: retail outlet owner, who signed a franchise agreement with the franchise.

Franchisor: owner of the franchise, who invented the concept, and supervises the performance of franchisees.

Master franchisee: a “wholesale franchisee” with a special agreement with the franchisor, by which he controls a network of franchisees in a defined market (geographic area, in general)

SEAM 8

Typical OrganizationTypical Organization

FRANCHISORHQ

RegionalSupervisor

RegionalSupervisor

Outlet Outlet Outlet Outlet

SEAM 9

Privately Owned Facilities:Privately Owned Facilities: The essential drugs model The essential drugs model

Franchisees have a direct incentive to the success of the distribution of essential generic products

Opening hours and location have to be convenient to the public for the success of the business (improves accommodation and geographical access).

Stock-outs are avoided, as they reduce turnover and destroy customer confidence

The franchise can provide low-interest loans, participate in micro-financing schemes, etc. to help finance part of the franchisee’s investment.

SEAM 10

Operation under a single Operation under a single brand:brand:

The essential drugs model The essential drugs model Branded medicines are often preferred to medicines sold under generic name: brand name associated with quality.

Organizing a national social marketing effort for essential drugs around one branded concept is efficient. Other forms of communication are also made easier.

Easy repackaging and customer recognition with a specific brand.

Brand may be revoked from franchisee if violations are observed.

SEAM 11

A single operational model:A single operational model: The essential drugs model The essential drugs model

• A uniform system of display and retail management

• Standardized core product list of essential drugs.

• Service orientation (counseling and health information) is guaranteed. Good dispensing practice compulsory.

• Stock management, sales reporting, patient monitoring identical in all outlets.

• Transparency: products clearly displayed, price lists available

SEAM 12

Supervision and monitoring:Supervision and monitoring: The essential drugs model The essential drugs model

Outlet managers trained initially and regularly

Drug outlets inspected at least every month for appropriate drug management, reporting and dispensing practices.

Quality control organized by the franchise, guarantees that only bona fide drugs are sold by the outlets.

Dispensers who do not abide lose their franchise, and are replaced by better franchisees.

SEAM 13

High level of service:High level of service: The essential drugs model The essential drugs model

• Service orientation of the franchise: drug dispensing considered to extend beyond simple sales.

• Patients helped in their language, with appropriate explanations on product names, dosages, side effects, etc.

• Patient information taken and recorded, prescriptions and sales recorded, books kept.

• Interaction with health system organized (local health authorities, prescribers, referral facilities)

• Health information and promotion undertaken. Participation in public health initiatives (de-worming, micro-nutrients, etc.)

SEAM 14

Economies of scale –1Economies of scale –1 The essential drugs model The essential drugs model

Pooled procurement

Prime vendor agreement

PBM

Appropriate information technology

National communication

Specific packaging at low costs.

SEAM 15

Economies of scale –2Economies of scale –2 The essential drugs model The essential drugs model

Development of a customized training course for dispensers justified by numbers.

Sophisticated logistics justified by the size of the network.

Significant public health statistics gathered by a network of outlets

Significant contribution to alleviating the burden of disease through participation in large programs: bednet re-impregnation, family planning supplies, DOTS, etc.

SEAM 16

CHANGE PROCESS IN A CHANGE PROCESS IN A FRANCHISEFRANCHISE

Suggestions for change can come from the franchisor or the franchisees. Decision by the franchisor (for instance, introduction of a new product).

No change can be implemented by individual franchisees

Change requires a process of planning, training and supervision

Implementation is made by all franchisees (changing standard treatment guidelines).

SEAM 17

Why join an essential drugs Why join an essential drugs franchise?franchise?

Training is one of the strongest incentives

Access to high quality cheap essential drugs through the franchise procurement

Logistical support, regular supplies

Management support, assistance with stocks, accounting, credit availability

Supervision and monitoring, perceived as an advantage, more than a constraint.

SEAM 18

Why stay in the franchise?Why stay in the franchise?

In spite of limitations and constraints, business grows and is safer than an individual enterprise

The service to the population is valued, and recognized

There is always someone to answer questions and support the outlet manager, when needed

Loosing the brand is so costly (loss of credibility, access to supplies, management support) that it is worth abiding by the franchise rules.

SEAM 19

Experience with franchising drug outlets

Essential drugs: CFW

Branded drugs: Medicine Shoppe, Korea Medipharm

Family planning supplies: Green Star, other experiments

Reproductive Health: FriendlyCare

SEAM 20

SEAM 21

What we know about What we know about financing essential drugs financing essential drugs

franchises.franchises. With a limited list of 25 to 85 drugs, the investment per

outlet is about $1,500

Each outlet becomes profitable in less than two to three years

Financing headquarters and regional facilities is difficult and expensive (cash flow).

However, with 100 to 200 outlets operating, the franchise becomes self sustained in less than five years.

SEAM 22

What Problems of Access Can a Franchise Address?

  Physical Availability

Affordability Geographic Accessibility

Acceptability(Satisfaction)

Quality of Products and Services

Can a Franchise address this component?

Yes Yes Yes Yes Yes

How Stocking drugs based on EDL, STG, epidemiol. profileStrong logistics

Buying direct, strong negotiating capacity of network. Only essential generic products, limited margins

Opening outlets in underserved regionsStrengthening outlets in difficult areas through regular supplies and logistical support.

Training dispensers, ensuring presence of health care professional, publicly display prices, “private sector” opening hours, etc.

Screen suppliers, test products, attractive packaging, educate dispensers, simple diagnostics

Limitations

limited drug inventory for outlet (e.g. Ghana Chemical Shops, Kenya CHW)

Ensure that margins are sufficient to ensure profitability.

Large enough target population to ensure profitability limits implementation in very remote areas.

Local acceptability vs appropriate treatment (e.g. inj., short course antibiotics)

 

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THANK YOU !THANK YOU !