One word best describes the pharmaceutical industry in the Philippines: fragmented. On one end of the spectrum are a handful of big pharmacy chains that dominate the market revenue-wise, and on the other are hundreds of mom-and-pop shops spread in rural areas.
For drug companies, this has been problematic. Many mom-and-pop or independent shops keep track of inventory the old-fashioned way – by hand. They don’t have a system to monitor which products are actually being sold, to whom, and at what volume. Thus, drug companies have no clear picture of the market to base critical business decisions on.
For consumers, it’s a different problem. Medicine prices are high and growing at a faster rate relative to incomes. The gap is undeniable.
Consumed by this dilemma, 28-year-old Farouk Meralli – who had built a career working for multinational pharmaceutical companies – thought of a way to help both the pharmaceuticals and patients. “I wanted to do something good for the world and good for business. I asked myself, ‘what can I do to marry the two?’”
That’s how he got the idea for his company mClinica.
The way it works
mClinica uses mobile technology to connect drug companies, their distributors, pharmacies, and patients. It currently has 1,400 independent pharmacies with access to over 20 million customers on its platform.
It works this way: patients who visit any one of the pharmacies on the platform can get discounts for medicines by simply providing their mobile phone numbers. Pharmacies must then send the transaction details to the platform to get reimbursed by the drug companies. The pharmacies also enroll the patients into a program that helps them better understand their health conditions and reminds them to refill when they’re running low on supply.
In the Philippines, where the poor have limited access to health care and often must choose food over medicine, the discounts are a big help. The discounts also act as incentive for them to adhere to their doctors’ prescriptions.
The rest of the supply chain benefits too. The platform allows drug companies to devise programs to improve patients’ health while boosting their sales – to levels high enough to offset the discounts. It gives them access to market insights that have never been available before, and that they can access real time.
For their part, independent pharmacies, which tend to have lower margins than chain pharmacies, are able to widen their consumer base. Meralli says they’re working to include chain pharmacies in their network as well. After all, their goal is to reach as many patients as possible.
The man behind it
Meralli’s heart has always been in healthcare. He took up biomedical sciences at McGill in Montreal, Canada, and then went to Harvard to get a masters in health policy.
After graduating from Harvard, he worked for pharmaceutical heavyweights Roche, Johnson & Johnson, and Pfizer.
Throughout his career, he says he noticed the same problems. “In emerging markets, these pharmaceutical companies didn’t have access to the same kind of data that they did in mature markets like the US, Western Europe, and Canada where pharmacies are very consolidated and data is easy to access. From a societal perspective, in many of these markets, the price of medicine is incredibly high and health literacy is a challenge.”
Meralli says a technology like that of mClinica is the most economically viable and sustainable way to solve the problem because it has massive impact.
All he had back then, however, was an idea. He had no entrepreneurial background and no funding. “When I started this, I literally had 13 slides, there was no technology, no team – just me and the slides.”
So he went and pitched his idea to the head for emerging markets of Merck, one of the world’s biggest pharmaceutical companies. By sheer luck and a lot of perseverance, Merck agreed to a pilot, Meralli recalls.
They introduced the business in the Philippines and India first. It got good traction in the Philippines, but they felt India was more of a long-term play.
They decided to focus all their resources on the Philippines, put together a research and development team and grew from there.
“It was very fortunate but also a bit scary because you’re betting on an idea, on yourself, taking a complete gamble. That’s what startups are.”
He says it helped that he was totally okay with moving to an entirely new country. “I kind of, from a very young age, traveled all around the world. I’ve been very fortunate to have traveled to over 80 countries which gave me great cultural perspective.”
Meralli says it was difficult setting up in the Philippines though. “The process was not exactly straightforward. In the US, if you start a company – set it up, open a bank account, get the licenses and permits – you do it in about two to three days. Here, it took two and a half months to get the full thing done.”
Nevertheless, the Philippines presented them with a lot of opportunity. Given that the market is fragmented, the business was immediately commercially viable.
It was also attractive in terms of cost. “If I were to hire a developer in Silicon Valley, I’d be spending about US$14,000 a month. Here, it’s just US$700 to US$800. In terms of skills, there’s no difference. They’re both exceptionally good,” he explains.
From L to R: Koichi Saito, Director, IMJ Investment Partners; Farouk Meralli, CEO & Founder, mClinica; Dave McClure, Founding Partner, 500 Startups; and Minette Navarrete, President, Kickstart Ventures. Behind them are (L-R) Christian Besler, Vice-President, Kickstart; Kaspar Zhou, Principal, 500 Startups; and Khailee Ng, Managing Partner, 500 Startups.
Regional expansion
While the Philippine pharmaceutical market is fragmented in nature, this characteristic is not really unique, according to Meralli. Other emerging markets are the same – some are even worse. These are the markets they intend to enter next.
To jumpstart its regional expansion, mClinica recently moved its headquarters from the Philippines to Singapore and raised an undisclosed amount from 500 Startups, IMJ Investment Partners of Japan, and Kickstart Ventures of the Philippines. It will use the fresh funds to make forays into Indonesia, Vietnam, and Thailand.
In terms of innovations, the company has several in the pipeline. “The smartphone app is one. We’re releasing that very soon.”
Meralli says mClinica doesn’t have all the answers regional pharmaceutical markets are looking for. It just hopes to make a difference – one store and one patient at a time.
See: 10 new Philippine startups to watch out for
This Harvard graduate’s startup is making a difference in Philippine health care
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