From Dispensary to Diagnosis: How Nigerian PBMs & Pharmacies are Bridging the Gap in Primary Care
Pharmacists are usually the most accessible healthcare professionals in Nigeria. For most people, a pharmacist is the first point of contact in the primary healthcare system, especially for treating common conditions such as malaria, typhoid, and the common cold. Only 13% of the Nigerian population attend public hospitals when ill, and according to Dr. Faisal Shuaib, the Executive Director of the National Primary Healthcare Development Agency (NPHCDA), 70% of Nigerians rely on primary health facilities, with pharmacies making up 50% of these facilities.
Despite this, Nigeria does not have enough pharmacies to meet the needs of its population. With almost 3,800 registered retail pharmacies and a population of 218 million in the country, Nigeria has one retail pharmacy per 57,000 people. But when compared to similar Sub-Saharan African countries like South Africa (~1 per 19,000), Kenya (1 per 15,000), and Ghana (1 per 32,000), Nigeria needs to catch up.
Like other African countries such as Tanzania, Ethiopia, Sudan, and Ghana, Nigeria also has a disproportionately higher number of pharmacies in cosmopolitan areas. For example, while almost 30% of retail pharmacies are in Lagos State and 12% in the FCT, some states, such as Jigawa, Yobe, and Zamfara, have fewer than five retail pharmacies each.
Consequently, existing pharmacies deal with many customers/patients and are also concentrated in densely populated areas. And due to recent legislation, pharmacies have been given even more responsibilities in the country. As a result of the growing burden of disease in Nigeria, the Ministry of Health published a WHO National Treatment Policy in 2015 that expanded the capabilities of retail pharmacies beyond dispensing over-the-counter medications to diagnosing and treating minor ailments and providing medication-related services for both acute and chronic illnesses. The combined responsibilities of dispensing essential medications and providing primary healthcare services to the public place a burden on pharmacies.
This article is part of a series of thought pieces that aims to dig deeper into the pharmacy benefit manager (PBM) space in Nigeria, the different hurdles faced by each stakeholder within the pharmaceutical supply chain, and the impact of PBMs at each step. In this part of the series, we dive deep into the relationship between PBMs and pharmacies.
Before diving in, it is important to distinguish between retail (community) and hospital pharmacies. Both pharmacy types share key similarities and differences and face unique challenges.
As the name suggests, hospital pharmacies are usually found within a hospital. They typically stock a larger range of drugs than would be feasible in retail pharmacies, including more specialized and investigational drugs (drugs being studied in clinical trials but may not be approved yet). Hospital pharmacies primarily serve hospitalized patients and usually do not offer prescription services to the public. Still, some hospitals have retail pharmacies that provide over-the-counter and prescription drugs to the public. Retail pharmacies (or community pharmacies) are independent, chain, supermarket, or mass merchandiser pharmacies that are licensed by the government and dispense medications to the general public at retail prices.
As a result, pricing points differ between hospital and retail pharmacies, with hospital pharmacies typically on the higher end. Studies in the US have shown that drugs administered in hospitals averaged $7,000 more than drugs purchased through specialty pharmacies, and trends in Nigeria mirror these findings. Given strained hospital budgets and the surge in healthcare costs in Nigeria, hospital markups are usually higher to produce higher reimbursement rates and payments from HMOs and individual patients. For instance, the difference between the tariffs offered by WeFill, a Nigerian PBM, and those of hospitals can range anywhere from 4% to 81% per quarter, depending on the types of drugs, volumes, and locations across Nigeria. Retail pharmacies, on the other hand, are independent businesses and are more likely to price their medications to stay competitive in the market as patients usually have the choice of what pharmacy to patronize and price is a huge factor that influences this decision.
Retail pharmacies are increasingly able to stay competitive as they have received cash injections from investors through acquisitions that allow them to expand their services and provide more primary care options to patients. These recent acquisitions in the retail pharmacy space provide increased opportunities to leverage PBMs.
One of the most notable acquisitions is mPharma’s acquisition of HealthPlus. In September 2022, mPharma, a health tech company, acquired the majority stake in HealthPlus, one of the largest pharmacy chains in Nigeria. In a press release, Rockson, the CEO and Founder of mPharma, stated that one of their main goals was to transform community pharmacies into primary care centers while capitalizing on an existing platform to expand their pharmacy retail footprint in Africa. By integrating existing brands and tech platforms (mutti®, QualityRx, etc.), mPharma plans to equip HealthPlus retail chains with the tools to provide patients with primary care services in addition to affordable and quality medications.
In March 2022, Verod Capital also acquired a minority stake in MedPlus, another large retail pharmacy chain in Nigeria. This investment provides the growth capital needed to accelerate MedPlus’ expansion plans, including the provision of ancillary care such as nutritional and wellness services.
Aside from these acquisitions, there are several organizations, such as Wellahealth, that offer pharmacy investment options such as working capital and stock in Nigeria. Despite these investments in the retail pharmacy industry, pharmacies still face considerable challenges with dispensing medications in the country. Some of these include the unwillingness of doctors and patients to try generic formulations when specific brands are not available - patients are especially cost insensitive when their medications are covered by their HMO and not out of pocket. Coupled with the lack of government policies that enable generic substitution at pharmacies, this dynamic places the financial burden on pharmacies to stock expensive drugs despite the availability of cheaper options.
Another major issue is the pervasive problem of counterfeiting and adulteration, with fake drugs readily available in the open market and sometimes even on the shelves of licensed pharmacies. Differentiating between counterfeit and authentic medicines is a difficult task that requires skill, efficient regulation, and drug analysis. Retail pharmacists, in particular, must be cautious in sourcing drugs to ensure they are dispensing authentic and effective medications.
Another significant challenge is the ineffective regulation of Nigeria's pharmaceutical industry. This lack of regulation limits the ability of pharmacies and pharmacists to carry out their duties effectively. Concerns arise regarding the quality, accessibility, and cost of pharmaceuticals. The unreliable pharmaceutical supply chain in Nigeria frequently causes shortages and stock-outs, making it difficult for pharmacies to maintain adequate inventory levels of crucial medications.
The infrastructure deficiencies in the pharmaceutical sector also pose a considerable obstacle for many pharmacies. Basic amenities such as electricity and running water are often lacking, making it challenging to store cold-chain medications safely. Furthermore, low health literacy among Nigerians contributes to medication errors and poor therapeutic outcomes. Many individuals struggle to understand how to take their medications properly, whether due to illiteracy or a lack of awareness. This lack of understanding hampers the effectiveness of pharmacists' instructions and leads to suboptimal health outcomes for patients.
While technology could provide solutions to the multitude of challenges faced by pharmacies in the country, the lack of widespread adoption of automated prescription software across the country means prescription dispensing is often undermined by avoidable human error (e.g., illegible doctors’ handwriting). And even when software is available, the absence of a standardized prescription format makes analyzing prescription data difficult.
These fundamental prescription dispensing problems in Nigeria manifest in pharmacies across the country. A 2021 study conducted in eight hospital pharmacies in North-Western Nigeria revealed that information about the name(s), medical condition(s), side effect(s) of medications as well as the importance of adherence was only provided in less than 5% of patient counseling encounters. Additionally, attempts to verify ownership of prescriptions were only conducted in 35% of encounters.
So how can PBMs help?
PBMs are responsible for reimbursing pharmacies for dispensing patient medications. To do this, they determine in advance how much they will reimburse pharmacies for each drug covered under an HMO’s health plan. PBMs are able to create a network of pharmacies that fill prescriptions for health plan members by negotiating reimbursement rates and contracts with pharmacies. PBMs can also control costs by developing drug programs (e.g., programs to substitute more expensive drugs for lower-cost options).
WeFill, a PBM operating in Nigeria, is able to identify the best prices on medications for their customers by leveraging their software and tech solutions to compare pricing options across all their pharmacy partners and as well as hospital tariffs. WeFill is also able to secure discounts on orders from pharmacies based on existing relationships that enable their pharmacy partners to stay competitive while protecting their margins.
Key Takeaways from TC Health: There is huge potential for PBMs to influence the pharmacy space in Nigeria, given the increased capital injections into the retail pharmacy space and the wide range of challenges pharmacies face with drug dispensing. Automating the prescription dispensing process and analyzing prescription data to lower drug costs could allow pharmacies to remain competitive and offer affordable services to patients. The tech solutions that PBMs offer could potentially reduce the burden on pharmacies, allowing them to expand their primary healthcare service capabilities sustainably.
