Before writing this article, I called my mother. Shortly after exchanging Christmas pleasantries, I quickly got down to business (she said that she was playing Monopoly with the family and that she needed to get back to Euston Road) and asked her bluntly:
“Is the pharmacy business profitable?”
You see, at one point in his business career, he ran a pharmacy and supported 7 children at the time. Drug names like Magnesium Tricilicate and Penicillin V therefore rolled off my tongue easily from early childhood. Therefore, I believed that she would help me.
His simple answer (in my mother tongue):
“Yes, but pharmacies are always playing cat and mouse with the authorities and you have to be on the lookout for medicine theft.”
In his layman’s terms, and without a pharmacy degree or formal training, he had laid out the key risk factors to consider if investing in this business.
Why invest in pharmacy business in Uganda?
The title of the article highlights the double risk of this sector.
Cat and mouse: Government vs hospitals, where are the drugs?
You cry (or cry) for our beloved country because it seems that many reports indicate that while the Government is constantly allocating money to hospitals to buy medicines, when you arrive at the hospital the doctors tell you that there are no medicines in stock and you will have to buy them in other site.
Thus, hospitals in Uganda appear to have been transformed into diagnostic clinics that identify patients’ underlying health problems and then send them off for medication. Doctors claim that there are no drugs in stock. Therefore, it is common for patients in Uganda to go to government hospitals, receive a diagnosis of their illnesses, and leave without even the basic medication of painkillers. The government claims that it sends the drugs to the hospitals, but the hospitals claim that they never receive the drugs, so the big question is where do the drugs go?
The pharmaceutical sector: More crying.
According to the Pharmaceutical Society of Uganda, the body responsible for the sector, there are currently 465 qualified pharmacists, of which 70 are abroad, leaving some 395 practicing within the country.
With a population of approximately 34 million people, this represents a pharmacist-to-population ratio of 1:88,000, which is well below the World Health Organization (WHO) recommended ratio of 1:2,000.
The chronic shortage is being addressed by the pharmaceutical society in conjunction with the universities to, among others, increase the number of pharmacists who are trained, but meanwhile, illegal pharmacies continue to emerge, the game of cat and mouse with the National Authority of Drugs (NDA), the regulator, continues and meanwhile the population suffers as a result of the imbalance.
Thus, this presents an opportunity to invest and thus harvest (while weeping over the sad state of affairs).
When I looked further into the state of the pharmaceutical sector in Uganda, I noticed a number of key things to consider:
1. While many press reports put the number of clinics in the country at over 10,000, there are only 414 registered pharmacies in Uganda (registered with the regulatory body).
2. Of these 414 registered pharmacies, more than 292 are located in Kampala, the capital, and in the Central region. This is a huge imbalance considering that Uganda’s population is almost 25% equally distributed across the four regions (North, East, West and Central).
3. Therefore, the opportunity is to invest in a franchise or network of pharmacies that target cities in the interior.
However, before investing, there are some key considerations:
1. Drug license. You must be licensed and your approved pharmacist must be regulated by the pharmaceutical society.
two. Retail business considerations. Like any retail outlet, you need to consider retail business risks such as location and stock controls (as my mom alluded to). Many medications come in tablet or pill form, and as such the amounts can be difficult to control. Therefore it is important to first understand the classes of drugs (in Uganda this is mainly class B and C) and then understand how to ensure that proper controls are in place.
3. Return of investment. According to my estimates, the profitability of investing in this sector is an income of Shs. 187m and a Return on Investment (ROI) of just 0.87 months.
last word
In a country characterized by limited availability of medicines in public hospitals, more and more pharmacists and entrepreneurs have seen the opportunity to open independent pharmacies. They do it because of the unsatisfied demand for medicines by patients who do not obtain them in hospitals.
It’s a business where we all weep over the state of our country, and then those who see an opportunity to help create change (while making money) reap (perhaps with a bit of gnashing of teeth).