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The Pharmaceutical Business to Benefit from the AfCFTA

According to a new report by the World Economic Forum, “AfCFTA: A New Era for Global Business and Investment in Africa”, the pharmaceutical industry is likely to be among the prime beneficiaries of the introduction of frictionless trade in Africa. The industry’s high product complexity means there are tremendous opportunities to invest in local value chains for goods such as packaged and unpackaged medicines, vaccines, medical instruments and bandages — all of which have high local valued added potential — and the AfCFTA will open the possibility of meeting local demand locally as well as make it easier to overcome production barriers in a short time frame. The AfCFTA will also help overcome the challenge of small fragmented markets in order to create a positive cycle of increased regional manufacturing, research and local talent. At present, the small markets made it impossible for African countries to compete with Asian, US or EU manufacturers.

As an example, Ethiopian startup Medstore has launched a digital marketplace to allow users to sell and buy medical equipment online and publish and subscribe to medical equipment tenders. Founded in 2020 but only launched this month, Medstore is a match-maker for manufacturers and distributors of medical equipment. Medstore’s CEO  said the startup is bootstrapped and makes money through seller subscriptions and commissions from sales made through its platform. Once the AfCFTA opens up trade with Ethiopia’s neighbours, Medstore will be poised to grow beyond the national market.

Meanwhile, online pharmacies such as MyDawa, AddPharma, and myMedicines, as well as online storefronts of many brick-and-mortar pharmacy chains like DisChem, Clicks, GoodLife and HealthPlus, have brought traditional pharmacy retail into ecommerce. Significant funding has flowed, with MyDawa leading the pack at over $9m raised to date. Investors are hoping to cash in on the 34% of Africans who are active ecommerce users. African e-pharmacies have resisted discriminating between low-dollar urgent treatments and higher value medicines for chronic conditions. The strategy of Amazon Pharmacy to focus solely on long-term medications promises maximized profits but misses the larger customer need, one that is critical for customer acquisition. Building an online pharmacy business in Africa is undoubtedly simpler than in the US, with its healthcare industry complexity. Pharmacy benefit management middlemen, manufacturer discounts, insurance formularies and competition from existing mail order pharmacies introduce plenty of distractions from the premise of moving pharmacy transactions online.

Alastair Tempest

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