Are Care Networks the Future of Nigerian Healthcare?
Acquisitions leading to consolidation and scale in Nigerian healthcare is leading to the creation of care networks that can increase efficiency and improve health outcomes.
“mPharma acquires healthplus” is the headline we woke up to on the 15th of September, 2022. Healthplus, a leading retail pharmacy chain with over 50 stores had been going through a rough time with its PE investor, Alta Semper. mpharma having acquired Kenya’s second-largest pharmacy chain in the past seemed like a natural fit to bail healthplus out of its PE woes and restore it to its former glory. This acquisition brings significant scale to mpharma in Nigeria and the retail pharmaceutical sector as a whole. Consolidation leading to scale and the creation of care networks might just be the evolution that Nigerian healthcare needs to help resolve the expensive fragmented care that currently abounds.
I’d predicted this acquisition in my 2021 annual review of healthtech. The headline was thus not a surprise to me. It was only a matter of time before mpharma did a Nigerian retail acquisition as mpharma has always pursued scale as a key part of its strategy. This scale leverages the aggregation of pharmaceutical demand to extract better deals when negotiating with manufacturers and wholesalers. This creates an opportunity for them to offer lower prices for medicines to consumers, and confers on mpharma/ healthplus, a significant competitive advantage in a price-sensitive market.
During healthplus’ woes, Medplus, some would say took pole position in the retail pharmacy race. They grew their footprint and attracted PE capital from Verod in March of 2022, signifying their ambition to continue to dominate the retail space. With healthplus now in the mpharma rocketship and medplus on the other side with verod’s capital injection, there’s set to be significant competition in the retail space. Whether this translates into lower prices for consumers is yet to be seen due to the current positioning of these 2 leading chains.
Medplus and Healthplus style themselves largely as upmarket brands and have less than 200 stores between them. Despite this small number, these stores have largely saturated the high-brow areas where people have the income to afford the relatively higher prices that these upmarket brands charge. Here are 2 tweets highlighting the expensive nature of these 2 brands:
As these 2 chains seek to gain even bigger scale and market reach, they will have to consider going down market, a departure from their current upmarket branding.
Downmarket is no blue ocean however with a sea of existing players. Worthy of note is that the next biggest retail pharmaceutical chains have less than 10 stores. This means that the vast majority of the around 4,000 pharmacies in Nigeria are independent pharmacies. These independents don’t have the scale to rival the purchasing power of a Verod driven medplus or mpharma owned healthplus. They are thus at the mercy of the inventory and list prices they get from wholesalers and manufacturers. Inventory supply and financing startups like field intelligence, drugstoc, Rxall and Medsaf are attempting to level the playing field for the independents, but the scale of the bigger players will be a significant advantage compared to the independents. The caveat is their ability to successfully navigate the tension of serving 2 opposing market segments.
Fragmentation in Diagnostics and hospitals
This fragmentation and predomination of small providers is a huge bane for all aspects of healthcare in Nigeria. It’s evident also in the diagnostics space where small independent labs abound. These small labs struggle to invest in the best equipment and the required maintenance and quality assurance processes that ensure result accuracy and reliability. Larger entities such as Mdaas, Synlab and clina lancet have more leverage due to their size and can afford to invest in more quality assurance processes. Consumables and reagents are the key materials in the clinical diagnostic business and these big entities have the scale to reduce the cost and bring more quality to testing.
There’s no place where this fragmentation hits the hardest as in the hospital and clinic space. In Nigeria, there are over 39,000 health facilities according to the official register. About 2/3rds of these are public where mostly primary healthcare centres predominate. On the private side, while the official register specifies whether the facility is primary, secondary or tertiary, many private facilities often don’t bother with this demarcation in practice. Many mushroom 2 - 3 bed ‘hospitals’ exist that attempt to provide all types of care in order to extract as many fees to keep the lights on. As a result, they end up out of their depth, needing to refer patients to a bigger centre at too late a stage than is often ideal.
The folks at R-jolad are attempting to solve some of this hospital fragmentation by taking over facilities, renovating them and professionally administering them to provide great care. They have 3 facilities across Lagos and are exploring a hub and spoke model where they have (their own) mini-clinics that can offer primary care and refer to their secondary centres as needed. [1] Evercare a tertiary centre in Lekki is also reportedly in favour of this route. After opening to much fanfare, the usual ‘malaria and typhoid’ crowd seem to be bugging them down. This largely primary care burden ties down their expensive resources that should ideally be reserved for higher acuity or more complex cases. Creating spokes to connect to smaller clinics to the larger Evercare hub enables care to be provided where it’s most appropriate. Basic uncomplicated care goes to the small clinics that can refer on to the Evercare hub for more complex care.
Over time, this consolidation and defragmentation of care providers can help create healthcare networks that extract even more efficiencies and direct patients to the most appropriate care location. So an mpharma can go on to tie their healthplus pharmacies with a diagnostic chain such as mdaas and then add on a clinic layer via working with a retail clinic partner such as EHA clinics for instance. The final piece then would be a financing arm via an HMO partner. This would provide a one-stop shop for the majority of the care needs of patients. From financing to diagnostics, clinics and pharmaceuticals all will be connected and aligned to reduce the cost of care, improve value to patients and improve outcomes. Reliance Health is a startup that’s implementing this model with their HMO, family clinics and telemedicine service bundled together. They are thus able to provide a lot of care within one network and work closely with partners for services outside the network. The future of healthcare to my mind is in tightly connected care networks. The early steps we now see with Reliance Health, R-jolad and with mpharma acquiring healthplus is a herald for that future.
Footnote
I took a tour of the R-jolad facilities in Agege Lagos recently and posted snippets of it on my Instagram as a reel. Check it out
Well written and insightful