Establishing pharmacies in low-income communities 
Student observations on Mi Famacita Nacional’s dual-mission, franchising model

In late 2010, a small team of MIT students took a look at the organization from the outside and, as a course assignment, prepared an executive summary aimed at its board of directors. This article presents their overview and assessment of the organization, and their thoughts on challenges and opportunities. Keep in mind that this a class assignment drawing largely on publicly-available materials and in some cases direct, though limited, interaction with the organization. We share the student’s work in the hopes that others will build on it in keeping with the creative commons license.

by Pamela Basto, Paul Millerd, Lia DiGiovanna, Elana Fiekowsky

Overview of organization

Launched in 2003 in Tijuana Mexico, Mi Farmacita Nacional is a for-profit business that offers a variety of generic and patented medicines at a lower cost for the lower. Services include doctor consults, medications, diapers, milk, filtered water, and telephone service.  Mi Farmacita has a joint partnership with Grupo Farmacéutico and Laboratorios Collins, who are well-established distribution and generic medicine manufacturing giants respectively, that allows Mi Farmacita to scale up quickly and sell generic drugs at low cost through wholesale pricing. Mi Farmacita delivers their products through national distribution through Grupo Farmaceutico and procures the majority of generic medicines from Laboratorios Collins.

The initial focus for Mi Farmacita was to focus on the poorest of the poor in Mexico and to do so profitably.  Their mission reads:

“Deliver drugs and special services to the ones with the greatest need in Mexico, providing affordable health, welfare and communication to the vast majority of households”

Accounting for success

The organization has been moderately successful, with over 90 sales transactions daily, 2,400 monthly transactions for services, doubling number of franchises yearly and $2.9 million in sales in 2006. As of 2007, there were 57 franchises in 11 states. More recent statistical information was unavailable from the company.

57 Local franchises are located in the cities of Mexico City, Tijuana and Puerto Vallerta. Through their franchise system, owners of individual shops have the liberty to control pricing schemes, marketing, and Mi Farmacita provides a two week training and an initial “starter kit” of medications consisting of analgesics, antibiotics, and antihistamines, marketing materials and inventory management systems, but each store can subsequently tailor additional products to target local demographic demands.

Location has been stressed as a crucial factor for success.  Franchises must be located in community centers where there is heavy foot traffic notably focused in areas of population of 10,000+ or 2,500+ families and nearby community centers such as schools, churches, and clinics. Further, by providing additional services, such as doctor’s consultations, purified water, internet and phone service, in a clean and friendly environment brings in a large volume of sales beyond medication.

Strengths

Mi Farmacita has several notable traits that help differentiate the company from its competitors. First, they offer only generic and patented medications and not “similar” drugs, which are offered by many competitors in Mexico.  Similar drugs are drugs that do not have the same bioequivalency as the drug they are marketed for.  Secondly, they take advantage of an online digital inventory system, eMaksimus, which allows franchisees to track inventory, adjust prices, and track sales for all franchisees. eMaksimus also has an integrated instant messaging system providing technical and care support from the headquarters to the franchisees and between outlets to share business strategies. Another strength that sets Mi Farmacita apart is in-house reasonably priced doctor consultations at around US$2 that are offered for patients that qualify. This allows patients to receive a consultation and get the appropriate medications all in one stop similar to the Minute Clinic operation offered in CVS franchises in the US.

Challenges

We identified two key challenges for Mi Farmacita:

1. How do you communicate the value that a generic has over other “similar drugs” in Mexico? This is key for its long-term success. The former CEO stated that 200 franchises are needed for the model to breakeven.
2. What is the leadership vision? The founder and CEO of the original infrastructure recently left the organization due to a disagreement with how the company would move forward and there is no publicly available information to determine what the vision is of the organization.  What is their aim: to help the needy in Mexico or to purely approach future direction as a profit opportunity?  The new thrust needs to be clearly communicated to the company, public and franchise owners.

Looking ahead: student thoughts

We propose the following three action areas for improvement:

1. Define the expansion strategy: Mi Farmacita needs to establish a clear plan for expansion and communicate this throughout the organization. It should set a clear goal of 205 total franchises to profit and to become a sustainable entity within its partners. We advise to solidify partnerships with participating banks to allow Mi Farmacita to become a guarantor for loans that provide highly qualified low-income entrepreneurs the initial start-up capital to open new franchises in high population density epicenters. Providing incentives to physicians such as allowing part time clinical rotations in hospitals and managing their own clinic upon franchise expansion will decrease turnover and ensure a constant stream of available physicians. It also needs to determine if there are additional services that provide value to the target consumer.
2. Education of the public– Mi Farmacita can indirectly pressure the government to enforce regulation on removal of similar drugs from the market through education of the population to drive the demand for generics. They can embrace their role as a public health enterprise to add value to the Mexican healthcare to the government. Enforcing physicians and pharmacists at each franchise to educate its patients on the value generic drugs offer over similar medicines in addition to education about other prevalent Mexcian health issues: obesity, HIV, and pesticide use would provide value to customers as well as eliminate competition.
3. Entente: Partnerships with the Ministry of Health – Formation of an alliance with Mexcio’s Ministry of Health can provide a side stream of revenue and strengthen its longevity. Mi Farmacita can leverage the eMakismus system, which is capable of maintaining an online medical record database of its unique demographic, to pull statistics to help quickly identify and control the spread of epidemics and locate specialized populations for clinical trials. It can also provide value to its customers by automatic prevention of contraindications with previous prescriptions. The online database will also allow Mi Farmacita to partner with Oportunides/Progressa, Mexico’s conditional cash transfer program against poverty, as regulated sites for clinical check-ins.

To conclude, Mi Farmacita has a strong foundation for success with the franchise business model and strong partnerships. With renewed vision and focus on their core values, Mi Farmacita can serve its dual mission of profit and serving the poor in health care in Mexico.

Download the accompanying student presentation on MiFarmacita Nacional (pdf).

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