Talking Micro Pharmacies in China

Micro pharmacy clinics are starting to become my favorite private health care idea for the Asian healthcare context.  And, the question that I want to answer is how they can be made profitable in China.

I think the business model that nails it in China will be some combination of developing world micro pharmacy and developed world micro clinic  – something that can be operated in a developing country while earning developed country profits.

Below I have laid out some information about what I believe are two models that when combined could make the above described, China profit juggernaut

I would really like to get some discussion going on this (because otherwise this is a waste of a post), and you should join in by writing in the comments section. Feel free to bash the idea to pieces, as long as you add something constructive in return. But, if you can find the time, give this a good think and offer up an outline of a viable model.

Kenya Micro Pharmacy

The term ‘micro pharmacy’ is a broad term that describes a model of healthcare delivery that purposes to provide basic, primary care to select under served markets in a way that is cost efficient to the provider, and both affordable and convenient for a majority of the markets consumers.  Because a micro pharmacy is a function of its market and environment, models and missions of micro pharmacies vary greatly across the world, and their function often overlaps the function of micro clinics.

In rural Kenya, an NGO called Sustainable Healthcare Foundation (SHF) operates a network of 65 micro pharmaciess called HealthStores (formerly known as CFWshops – ‘Child and Family Wellness Shops).

Franchisees buy into the franchise with an average deposit of U.S. $300 with the balance of start-up costs, approximately $1,700, financed through a micro-loan. Once accepted, franchisees receive extensive initial and ongoing training in CFWshops standards and procedures. CFWshops personnel ensure quality and franchise standards through regular oversight and analysis. High-quality, generic medicines are purchased in bulk by the CFWshops head office, which are then distributed regularly to all franchisees. Each outlet benefits from the buying power of the full network and those savings are passed on to the rural patients for whom the average cost of treatment is less than US $1.00.

…Using the buying power of the full network provides sufficient savings in unit costs that each outlet can provide medicine at an affordable cost. In 2006, the average transaction cost for a CFWshops clinic was U.S. $0.72.

…

The average number of clients seen per clinic in 2006 was 6,300. The top-performing clinic served over 23,000 people. Overall, the CFWshops network served over 450,000 people in 2006, continuing to increase its reach every year.

The CFW model is not very profit driven.  If their average profit is Us $0.28 per patient, multiplied by 450,000 patients per year, the net revenue is a little less than  130,000 USD per year.  As a result, CFWshops are still dependant on private donations and there is a good deal of moral hazard associated with this dependance when the funds come from government sources.  Nevertheless, the model is socially responsible and has garnered fine praise from many around the world.

US Micro Clinics

The Convenient Care Clinic (CCC) in the United States was pioneered by a chain that started in Minnesota,  MinuteClinic.  The concept behind this is to provide base level care quickly through clinics located in areas that one would go anyway.  For example, one of the MinuteClinic’s organizational goals is to see all patients in under 15 minutes.  The average costs are 40-70 USD per visit.

Hopes for this model are high, and there are currently more than 200 outlets (different chains) across the United States.  To find out more, go here, and here.

Now…you should go comment on how we could combine the two….