1. THE POTENTIAL OF FRANCHISING ESSENTIAL DRUG OUTLETS SEAM 2001 Conference Targeting Improved Access Denis Broun

2. SEAM 1 What are the main issues? Public sector  No ownership / responsibility  Few incentives for good management  Wastage, thefts  Irregular supplies  Inappropriate procurement  Lack of customer orientation  Opening hours inconvenient Private 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.

3. SEAM 2 Applying the franchise concept to the distribution of essential drugs  It is believed that a private franchise for public health can successfully address many of these issues, which are associated with poor access to essential drugs in the private sector.  The purpose of the franchise is to distribute essential generic drugs, harnessing the incentives of the private sector to achieve public health goals.

4. SEAM 3 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.

5. SEAM 4 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

6. SEAM 5 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)

7. SEAM 6 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)

8. SEAM 7 Typical Organization FRANCHISOR HQ Regional Supervisor Regional Supervisor Outlet

9. SEAM 8 Privately Owned Facilities: 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.

10. SEAM 9 Operation under a single brand: 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.

11. SEAM 10 A single operational 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

12. SEAM 11 Supervision and monitoring: 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.

13. SEAM 12 High level of service: 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.)

14. SEAM 13 Economies of scale –1 The essential drugs model  Pooled procurement  Prime vendor agreement  PBM  Appropriate information technology  National communication  Specific packaging at low costs.

15. SEAM 14 Economies of scale –2 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.

16. SEAM 15 CHANGE PROCESS IN A FRANCHISE  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).

17. SEAM 16 Why join an essential drugs 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.

18. SEAM 17 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.

19. SEAM 18 Experience with franchising drug outlets  Essential drugs: CFW  Branded drugs: Medicine Shoppe, Korea Medipharm  Family planning supplies: Green Star, other experiments  Reproductive Health: FriendlyCare

20. SEAM 19

21. SEAM 20 What we know about financing essential drugs 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.

22. SEAM 21 What Problems of Access Can a Franchise Address? Physical Availability AffordabilityGeographic Accessibility Acceptability (Satisfaction) Quality of Products and Services Can a Franchise address this component? Yes How Stocking drugs based on EDL, STG, epidemiol. profile Strong logistics Buying direct, strong negotiating capacity of network. Only essential generic products, limited margins Opening outlets in underserved regions Strengthening 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 Limitationslimited 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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24. SEAM 23 THANK YOU !