African medical technology startups in the supply chain segment are showing rapid growth, spurring a $7 million investment initiative.

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While Africa’s health systems are still reeling from the effects of the COVID pandemic, digital health services have stepped up in some countries. Telemedicine, a preeminent offering, has gained massive momentum during the pandemic, and in the last five years, no other service has more have been launched healthcare startups.

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However, a certain segment has achieved faster scaling over the past year. These startups are digitizing the supply chain and distribution among suppliers. And according to a new report from Salient Advisory, a global healthcare consulting firm, this is the segment that has seen Africa’s most impressive healthcare growth in the last 12 months.

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Companies in this segment work with community pharmacies and lower level providers such as pharmacies to help stock groceries. Some of these include mPharma, Lifestores, Shelf Life and Maisha Meds.

“We’re seeing the fastest growth in those who help vendors — those who interact with customers, such as pharmacies, clinics and hospitals — digitize delivery to the consumer. That’s where the biggest pull happened,” he said. Remy Adesondirector of Africa at Salient Advisory, in an interview with TechCrunch.

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Salient surveyed more than 80 companies in Ghana, Kenya, Nigeria and Uganda, up 25% from the number in the last 2021 report.

The models of these B2B companies mirror those of their retail e-commerce counterparts such as Wasoko and TradeDepot as they use technology solutions to digitize drug distribution in underserved pharmacies, pharmacies, clinics and hospitals.

So their growth has been rapid, says Salient. Lifestores, for example, increased its number of outlets from 85 to 600 in Nigeria; Maisha Meds has grown from 400 to 900 outlets in Kenya and Nigeria; Shelf Life has over 1,630 outlets in Kenya and Nigeria, up from 400 a year ago.

The report states that 36% of all funding reported by healthcare supply chain startups was received in the past 12 months. However, the segment has yet to record the type of investment that has been made in B2B retail e-commerce over the previous two years.

For example, medium to large scale players such as Marketforce as well as Vasoko raised between $40 million and $130 million in a single round (some including debt). And save from mPharma, which has Mutti pharmacy network and recently raised $35 million to build its telemedicine and e-commerce offerings, funding for B2B medical technology distribution startups has been negligible.

“Companies like Wasoko and other B2B e-commerce and FMCG companies are raising larger amounts. But in the context of medical technology and the narrower context of our study, we conclude that these B2B companies are growing the fastest. They have also raised larger sums of money over the past four months,” says Yomi Kazim, Senior Consultant for West Africa at Salient Advisory. “And, of course, medical technology funding tends to be low. Therefore, we do not expect them to collect large sums yet. But there’s every chance that as they grow, that could change.”

Adeson believes this could happen if retail B2B e-commerce platforms show interest in pharmaceutical and healthcare products. But he argues that since most of these startups have not scratched the surface of the vast FMCG space, it will be a long time before they invest in B2B drug distribution.

Adeseun also mentioned two developments that could increase funding for this segment. “We think one of the things that will also spark investor interest is when the scale matches their appetite. Many startups operate in one or two countries, so expanding the geographic coverage will attract more effective funding.” The second is clearer and far-sighted rules.

But Salient notes in its report that the legal and regulatory framework governing this area, especially the activities of electronic pharmacies, has changed since last year. Internet Pharmacy Regulations have been put in place in Nigeria and Ghana and are under development in Kenya and Uganda. The report states that all regulations currently require online pharmacies to have a licensed physical location under the supervision of a licensed pharmacist.

“Uniquely, Ghana is moving beyond imposing regulations on online pharmacies to embark on a broader digital transformation of pharmaceutical care with a government centralized e-pharmacy platform that will host all online pharmacy transactions across the country,” she writes. the authors.

“This could change the availability of product data and provide end-to-end visibility into the movement of products in the online pharmacy space. Once fully established, the platform’s capabilities could be expanded to include health products currently distributed through offline models and serve as a model for similar initiatives outside of Ghana.”

The study found that while many startups, retail pharmacies and e-commerce players such as Jumia and Copia continue to actively digitize distribution, there are few customers ordering OTC products through their online channels.

In terms of competition between these platforms, Adeson said some of the current pharmacy chains, such as MedPlus and HealthPlus, are pursuing a digital strategy by adding telemedicine capabilities, thereby responding to the innovations presented by startups. However, the direct route to multinational telemedicine scale through these networks is not clear, the report argues.

In terms of how they influence their market, 94% of the companies surveyed said they influence drug supply. 60% said quality was their goal, and 43% of innovators said they were cutting prices on pharmaceuticals and medicines.

Last year, a Salient report talked about two themes: the need to raise capital from African investors and increase the flow of money to startups led by women. In the first case, there was an improvement: 58% of innovators who raised funding in the last 12 months indicated African investors as their source of funding. But nothing has changed for the latter category, as female-led startups are still not getting the funding they need. According to the report, startups led by women with black CEOs account for 2% of the total funding raised by healthcare startups featured in this report. In 2021, they received just $1.6 million.

Inspired by the findings, a consortium of global and continental organizations, funded by the Bill & Melinda Gates Foundation, is about to launch a $7 million pan-African health technology initiative. Adeson said the initiative, dubbed Investing in Innovation (I3), will focus on women’s access to finance: supporting and funding 60 African early- and growth-stage healthcare startups over two years, and providing access to skill development.

“Women founders are at a disadvantage,” the director said. “And that’s one of the things that investment in innovation will try to solve: take a lens in terms of gender and disadvantaged African founders and prioritize them when choosing potential beneficiaries who will participate in the program.”

The Pan African Initiative will have four centers in eastern, northern, southern and western Africa. This will give these startups access to and showcase market opportunities to influence investors and venture capitalists. After two years, additional funding is expected to come from development partners who have already shown interest but want proof of success before committing, Adeseun said.

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