African governments are collaborating with innovators to strengthen local health supply chains | TechCrunch

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Last year, global healthcare consulting firm Salient Advisory surveyed more than 80 companies across four African countries for a report emphasizing the growth of startups digitizing the continent’s health supply chain and distribution and regulatory frameworks governing e-pharmacy activities.

This time, the firm went deeper into Africa’s health supply chain segment, broadening the scope of its research and making some tweaks. For one, it searched for startups across 54 countries (compared to four from last year) and included companies with verticalized health supply chain offerings.

Tracking nearly 350 innovators across 27 countries, Salient Advisory’s 2023 report establishes that public health supply chains across the continent are embattled and overburned, leaving most Africans with little choice but to source products from private health innovators. The issue, however, is that private health supply is fragmented from manufacturing to distribution, ultimately impacting price, availability and quality (fake and substandard products are more available in open drug markets in Africa than global standard medicine, for instance.) As such, Salient Advisory’s report, funded by the Bill & Melinda Gates Foundation, looks to track innovators leveraging technology to digitize supply chain processes and solve these problems.

“One thing to consider that has happened since the pandemic in Nigeria, and globally to an extent, is several shortages we noticed in supplies like the personal protective equipment (PPE). Those problems existed because of gaps in health supply chains,” Yomi Kazeem, senior consultant for West Africa at Salient Advisory, said on a call with TechCrunch. “And so in light of that, it’s important to take a look at how health startups are using technology to try and improve supply chains on the continent to ensure that individuals in urban areas or in rural communities have better and safer access to health products.”

Salient Advisory findings also show how African governments (about 11 from the research) are working with health supply chain innovators on nearly 50 partnerships, leveraging their tech-enabled solutions to resolve long-term challenges around the availability, accessibility and quality of health products in public health supply chains. Roughly half of the identified partnerships focus on enabling governments to digitize ordering and inventory management to improve efficiency and minimize wastage, highlighting governments’ strong interest in adopting digital order and inventory management solutions.

In an interview with TechCrunch, Kazeem dissects Salient’s findings, touching on the importance of innovators working in partnerships with governments, loopholes that need to be filled despite the commendable efforts, disparities in funding across health supply chain innovation ecosystems and an update on the Investing in Innovation (I3) initiative geared toward female-led startups.

TechCrunch: Salient’s report from last year strictly contained innovators in the private health supply chain segment. But this year’s report includes B2B e-commerce platforms like Copia Global. Why’s that?

Yomi Kazeem: Primarily, the way to think about this is to think about the segments of companies, and the way to categorize them is in what they offer. Despite being an e-commerce company, Copia Global, for instance, was included because over-the-top medication is one of the products it offers in Kenya, where it operates.

Since we’re looking to track startups and innovators that use technology to improve access to medicines, large e-commerce operators, not just Copia, but others like Glovo, Jumia and Konga, also feature. Although health products are not the only thing they distribute and are probably one of their smaller verticals, it’s essential to highlight them because these are significant channels and platforms that could be pivotal to ensure greater and broader access.

What other new categories were introduced in this research?

When you’re thinking about supply chains, you have to think broadly. It’s not just about who’s running an online pharmacy allowing individuals to order products. It includes platforms enabling pharmacies, clinics and hospitals to order products directly from a manufacturer or distributor and getting those products delivered to them, providing retailers with financing and credit solutions. It includes those offering solutions around transport, warehousing and reverse logistics because those are also key supply chain processes and that’s where drone delivery operators like Zipline, which works with governments to deliver essential medical supplies to public health facilities, come in.

The selection also goes beyond this to include other solutions, like those ensuring product protection and visibility, which solves the massive problem of fake and substandard medicines. You have companies like Chekkit building solutions around that. Another interesting subset that we saw, even though there aren’t a lot of these types of companies out there, are those that are involved in supply chain data analytics, trying to figure out what products are being consumed and also helping government agencies in charge of distributing medicines to better plan their demand and understand consumption trends.

Doesn’t the funding raised by these larger companies like Zipline and Glovo skew the numbers reported in the research?

It does. Large U.S. and Europe e-commerce companies and medical drone delivery operators accounted for about 77% of the money raised by the innovators in our research. Although they skew the data a bit because their operations are not just health, it’s something we were super clear and upfront about in the study.

Aside from the intricacies of introducing new innovators to the research, what other exciting trends are worth highlighting from the report?

The more exciting bits lie in core health supply chain startups that are building solutions being adopted by the governments. It’s a huge thing to see in these ecosystems where government agencies or governments, either at national or sub-national levels, are leveraging these solutions to improve public health supply chains. There are several examples of this in Kenya, where Maisha Meds, an inventory management and digital marketplace startup, has partnered with as many as three different county governments in the country, and those county governments are using their inventory management solution in public health facilities.

In terms of real-life impact, for example, by using that technology solution, the public health facilities can manage their stock better or minimize waste because they now have a clever sense of what products are available or when the following stock-up is likely to happen. Without such a tool to give them all that information upfront, they might have many expired products in their inventory without being fully aware of it. So that’s just an example of how these solutions solve real problems for governments. Across the service categories, solutions provided by the order and inventory management category are the most adopted by governments across the continent.

Now, we identified nearly 50 partnerships where governments have or are working with innovators, basically using their solutions to improve the public health and supply chain. This is incredible because one key thing to note is that in the context of health across Africa, if these companies are going to achieve scale, working with large public purchasers is essential to that journey. And so if governments are ordering services from these startups, that’s a pathway to scale. Beyond scale, the benefit to the government or the people is that the benefits of using that technology solution will translate into public health impact.

The report states that these partnerships require support. Is this support from the government or a third party? What’s the context behind this?

Speaking with government officials and startups, the reality of executing partnerships can be challenging, especially regarding funding. For example, a state government asked a startup to source a particular type of product; the order size was worth about $250,000. The startup couldn’t access the credit finance required to fulfill that order because the government would not pay upfront. And so what ended up happening was that the state government had to reduce the size of that order by up to 80%. And in doing that, it cut off essential products, including surgical supplies and consumables.

With that context in mind, our recommendation here is a role for donors and global health agencies to play in designing trade financing solutions and mechanisms and providing that directly to innovators working with large businesses and governments. Those early-stage innovators can access the financing required to fulfill large orders and prove their service’s validity or use case, and can then build the long-term possibility of working together with the government at a level where there’s a better rapport and flow in terms of providing the service and getting paid.

The other thing to point out regarding our recommendations for global health actors is also in continuing to understand the role of grants. So, one of the things we uncovered in the research is that if you look at the funding section, equity is the most common source of funding. But when you disaggregate for companies founded by men and women, you realize that equity is not as equally available to women as it is to men. We have a reality where startups founded by women rely heavily on grants and debt compared to those founded by men. To put this in perspective, of all the money that startups founded by men have raised, 96% is equity, 3% grants and 1% debt. For women, it’s 50% equity, 35% grants and 15% debt.

We spoke with women founders and stakeholders and included an agenda-focused case study in the report where we explored some of the systemic reasons driving the barriers women founders in health supply chain ecosystems face. A few reasons jumped out, like unequal access to funding, embedded gender bias in selection committees and women-led businesses being perceived as riskier when investing compared to men, even though they’re operating businesses at similar levels.

Fundamentally, grants are still critical in terms of creating more equitable innovation ecosystems because, ultimately, there’s an important role to play for companies that women found.

That’s one of the reasons why the $7 million pan-African health tech initiative Investing in Innovation (I3) was launched last year, right? What’s been the progress on that front?

The first year just wrapped up and 31 different startups were selected and got grants. We are now rolling into the second year, where another 30 companies across Africa will also get selected. The initiative reinforces our point because when you look at the funding sources for these innovators, the Investing Innovation Program, launched just last year, is at the top of that list. It’s the most common source of funding for health supply chains on the continent because they participated in 31 deals, essentially providing grants.

And then, of course, the other grant programs like the Bill & Melinda Gates Foundation (investing directly) and a few equity folks, also stand out. Plug and Play Ventures and Launch Africa are at the top of the list in terms of sources of equity funding. But it highlights the role that grants play and the program itself is designed to place an emphasis first on African founders but also, of course, pay particular attention to startups that women found. In the first cohort, about 48% of the companies selected were founded by women founders and I believe that that same intentional thinking is in place for this year; perhaps it might be taken to an increased and higher level.

What lessons about early-stage startups and partnerships with the government does the research drive home?

Companies that are nascent and early typically focus on serving consumers, but as they grow and achieve more maturity, they have a bit more bandwidth to be flexible. And we see greater diversity in who they serve as they mature, which is why we see many partnerships with government. The I3 program is also striving to introduce startups to governments and, in some cases, to other industry stakeholders, including manufacturers. All of that is important to ensure that the startups can go from where they are early or early at the growth stage to establishing themselves and businesses.

The benefit goes both ways, especially working with governments. One thing we’ve often wondered about or looked at is the government’s disposition to innovation. It’s often perceived as adversarial. That’s the thinking. But here, we see governments by themselves seeking solutions and adopting them.

The general feedback when we engage with government actors was that there’s a lot of interest in how governments view partnerships. It’s still early days. And so the hope and expectation is that over the coming months and years, we’ll see many more partnerships. One thing that’s important to emphasize, in addition to scaling startups, is the real-life benefit and impact of governments using technology in public health systems to ensure safer access to quality medicines. That translates to better positive health outcomes for individuals and jobs, which is fantastic in this ecosystem.

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