THE POTENTIAL OF FRANCHISING ESSENTIAL DRUG OUTLETS

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THE POTENTIAL OF FRANCHISING ESSENTIAL DRUG
OUTLETS

• SEAM 2001 ConferenceTargeting Improved Access
• Denis Broun

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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.

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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.

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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.

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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

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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 franchisees business
  associated with the franchisors trademark
• The payment by the franchisee of a franchise fee
  (financial relationship)

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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)

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Typical Organization

FRANCHISOR HQ
Regional Supervisor
Regional Supervisor
Outlet
Outlet
Outlet
Outlet
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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 franchisees investment.

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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.

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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

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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.

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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.)

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Economies of scale 1 The essential drugs model

• Pooled procurement
• Prime vendor agreement
• PBM
• Appropriate information technology
• National communication
• Specific packaging at low costs.

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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.

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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).

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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.

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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.

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Experience with franchising drug outlets

• Essential drugs CFW
• Branded drugs Medicine Shoppe, Korea Medipharm
• Family planning supplies Green Star, other
  experiments
• Reproductive Health FriendlyCare

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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.

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What Problems of Access Can a Franchise Address?
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THANK YOU !