Understanding the chain store pharmacy debate By Pharm. Nelson Okwonna
There are many ways to look at issues like the one we are about to consider. One is from the view point of national development – that is, of increases in the productivity of firms within our geographical entity. The other is from the prism of inclusive national development – that is, of increases in the productivity of Nigerian firms that assure that all the stakeholders achieve sufficient representation.
Another perspective is from the perspective of professional development – that is, of increases in the competitiveness of the Nigerian retail pharmacy space in such a manner that professional development can more easily happen.
Now, to the second issue, which is the relatively vague one. There is the question of what defines “inclusiveness?” The debate, to the best of my knowledge, is not whether there ought to be increased retail pharmacy store density or increases in the quality of care delivered, or even of professional development. The debate I believe is if it would augur well with all of us as presently constituted, if we allow foreign interests to provide leadership in the Nigerian pharmacy space.
It is really a question of interests, of inclusiveness. Personally, I believe it is right that we consider national interests in all issues of national development, considering that the stakeholders already have personal interests to consider.
Of national interests
By national interest, we refer to the interests of the citizens of a particular nation. Nigerian pharmacists believe they have a duty to protect their interests, which in this case include their dominance and leadership of the retail pharmacy space in Nigeria. There are some legal provisions that have helped maintain such dominance and leadership.
Of late, serious attempts are being made to change this status quo and increase the scope of participation to include anyone who can muster the financial and managerial capacity to provide retail pharmacy infrastructure – a capacity sufficiently demonstrated by international chain pharmacy brands. The focus here is ownership, not practice. The provision of pharmaceutical care is still the sole preserve of the pharmacist professional.
Arguments in favour of the need to open the gates to newcomers include:
- Increased access to finance
- Managerial competence
- Quality service and increased professionalism (outcomes)
Arguments against this new order point to the fact that the above can be achieved without changing the current state of things, or rather that they can be achieved without making it an all-comers affair.
Both sides of the argument have their point. One, business is essentially a game of interests and it is understandable if certain individuals – in this case, Nigerian pharmacists -seek to protect a particular industry subsector for our own good. The challenge with that, some say, is that with the kind of legislative protection the retail pharmacy industry-subsector is enjoying at the moment, the industry is non-competitive and therefore suboptimal, which I must say is very true.
However, the challenges of the retail pharmacy sub-sector are not only due to the barrier-to-entry induced non-competitiveness but also for the non-competitiveness that exists within the Nigerian business environment. This scenario is fast changing and the major catalysts are foreign entrants (Shoprite, etc.)which are stimulating the trade arena in Nigeria with huge financial and managerial capacities by shaking up the system. These new entrants are forcing Nigerian business people to also rethink the market opportunities and invest more.
The challenge is that the competition is not even; the access to financing for Nigerian players and that of our soon-to-be competitors are not similar. The managerial and technical competences are also not at the same level; hence the conundrum for policy makers is to decide what bests serve the interests of all the stakeholders.
Paucity of existing chain pharmacies
We have retail pharmacy chain stores at the moment in Nigeria. The concern is that we do not have enough. With a population of over 170 million, the less than 3,500 retail pharmacy operations are grossly insufficient.
According to the FIP workforce report (2012), Nigeria has 15,377 licensed pharmacists, 3,365 community pharmacies and 14 schools of pharmacy. Phillipines, with a population of less than 99 million has an estimated 49,000 licensed pharmacists, 5,800 community pharmacies and 45 schools of pharmacy. It is clear that it is not only community pharmacies that we need but also more pharmacists.
The limit on the number of pharmacists in the country has led to the need for patent medicine vendors – creating a competitor in a market where the majority of medication sales are OTCs. The absence of a pricing system implies that patent medicine vendors selling at lower prices are more competitive. This state of competition shouldn’t have been a problem if not for the poverty rate in Nigeria – the best price and not necessarily the best service wins. This explains the dominance of successful chain pharmacies only in affluent locations and the concern for existing players would be that an influx of other international players would further constrict their operating space, even if it makes the industry-sub sector more competitive.
A question raised by proponents of the maintenance of the status quo is that since the big chains would eventually seek to make the space more profitable by eliminating other low-cost alternative, would it not be better to first resolve the price-induced non-competitiveness of the industry subsector, particularly in resource-poor settings?
Size of the opportunity
The Nigerian market is growing, at present, our GDP stands at above 500 billion USD, the largest in Africa, and growing. Trade accounts for 22 per cent of the growth in GDP in the 2013.Increased formalisation of the informal sector of our economy, specifically trade, would further lead to increases in GDP and the pharmaceutical industry is one area that is generating sufficiently attraction.
By 2030, some 160 million Nigerians (out of a projected population of 273 million) could live in households with sufûcient incomes for discretionary spending. That would be more Nigerian consumers than the current populations of France and Germany put together1.
Are we competitive?
Assuming that there is a competition of interests, do the local interests have the wherewithal to hold their own considering that the limits of competition are not only those of finance and managerial capacity, but also that of human resource inadequacy? Do we have the capacity to create structures that allow for massive foreign investment in partnership with foreign brands for technical know-how (if necessary) and in a manner that can attract expatriate and diaspora returnee labour force? Would opening the doors for other newcomers stimulate such capacity? Will the influence of the new-comers be so overwhelming that before we recover, the grounds are lost irreversibly? Do national interests make for competitiveness or can a balance be found?
I believe the job of policy makers would be to find that balance and the challenge for business owners would be to see how best to seize the moment, regardless of whichever policy is finally adopted. I say so because considering the market opportunities, it will not go untapped for long. Nigeria has become the subject of so many powerful board-room meetings and proposals, and thus, we cannot remain uninfluenced.
The way forward
This article is written from a lovely hotel room in Dubai, UAE. We are at Dubai for the Pharmanews International workshop on Health Care Leadership, Innovation and Financing. One thing is common from my experience designing and leading health care management education courses at Pharmanews – there is a great lack of management education for potential and current health care executives. I say so, because, if Nigeria possesses the right knowledge base in sufficient amount, we could answer affirmatively to the questions above.
The government of Dubai achieved the four things which we need in the industry – flow of capital, flow of human resource, flow of technical competence and substantial ownership. To do same, the best bet would be to develop structures that allow indigenous organisations to receive huge investments. Considering that such investments are usually equity investments and not loan financing, it is easier for existing global brands to attract such financing – which has informed their quest to see substantial modifications in the existing legal structures regulating ownership of retail pharmacy premises.
However, without tinkering with the legal structures, the above could be achieved through achieving greater degree of organisation. Should existing players organise themselves better to weed out inefficiencies, optimise management capacity, logistics inefficiencies and garner more regulatory influence in dealing with completion, we will see a more competitive local structure that can attract investment.
This therefore is a challenge to pharmacist entrepreneurs to partner more, be more creative within the legal structure in finding finance, and to organise themselves more. Sole proprietorship-led pharmacies would be very much ill-prepared to face the future of health care delivery in Nigeria.
An example of such financing structures could include participating loan agreements by pharmacy-focused investment vehicles that articulate brand ownership as distinct from practice ownership, structured in a manner that engender pharmacists manager/entrepreneur–led chain propagation. Such a structure, I believe can attract finance, human resource and technology. Should the government help us achieve this degree of collaboration and organisation, that would be CHANGE indeed.
- McKinsey Global Institute, 2014. Nigeria’s renewal: Delivering inclusive growth in Africa’s largest economy.
- Fédération Internationale Pharmaceutique, 2012. FIP Global Pharmacy Workforce Report.