Episode Twenty Six
The Future Pharmacy:
Farouk Meralli of mClinica
1 December 2020
Welcome back to Indo Tekno. This marks episode number 26 of our series. Selamat datang kembali semuanya! My name is Alan Hellawell. I'm founder of startup consulting from Gizmo Advisors and Venture Partner at Alpha JWC Ventures. The ancient Greek philosopher Plato once stated, "Necessity is the mother of invention." This principle indeed drives a lot of the progress that we have seen in Indonesian tech, whether it's offering financial services to the unbanked, or helping mom-and-pop stores operate more efficiently. Nowhere does this aphorism apply more than to Indonesia's health care system, particularly in the COVID era. The country for instance had just 4,000 hospital beds for seriously ill patients at the outset of the pandemic, this in a country of 270 million people. Indonesia's national healthcare system was thus quickly overwhelmed when the pandemic hit. We are extremely pleased to feature Farouk Meralli, a founder whose startup mClinica is a leading digital solutions provider to the industry, with a specific mission to solve challenges facing the region's fragmented pharmacy channel. mClinica connects to over 170,000 pharmacy professionals from 40,000 pharmacies, reaching over 150 million patients. Thanks a lot for joining us today Farouk.
FAROUK MERALLI 1:29
Thanks, Alan. Great to be with you, and I'm a big fan of the podcast.
Very pleased to hear that. Thank you. First a little about yourself, if you don't mind. Before founding mClinica, you had worked with pharmaceutical giants such as Roche, Pfizer, and Johnson and Johnson. Fill us in as to how you developed an interest in this space.
FAROUK MERALLI 1:49
Sure Alan. Happy to. So I'm actually from Canada originally and went to school in the States and had a background in public health. And following grad school, I worked for very large pharmaceutical companies, the likes of Sanofi, Pfizer, Johnson & Johnson. And then I was posted at Roche in San Francisco. And one of the persistent themes that I kept seeing across all of the pharmaceutical companies that I worked for was that pharmacies in emerging markets were very fragmented. They were small, independent mom and pop shops that lacked any sort of technology and were largely run on pen and paper. How do you connect all these pharmacies together using mobile technology? So I left a very "semi-charmed" life in San Francisco. I left the nice pharma exec job, got on a plane and came out to Southeast Asia to start it.
Now Farouk the mClinica story begins in the Philippines, I believe. How did you end up there? And urban legend has it that you were under immense time pressure to get an MVP or, "minimally viable product", up and running for your first committed client. Can you tell us about this?
FAROUK MERALLI 2:52
Sure. It was quite an interesting story,. It was maybe one of the most scary times of my life. But it was a very fun time as well. As I mentioned, I was living in San Francisco working for Roche, and I had this idea to do this startup, I had pitched it to the head of emerging markets at a very large pharma company in New Jersey, but operating globally. And the solution was a broad emerging market solution. It could have worked in any emerging market. But the head of the pharma company said "Hey, look, I'll be your first client, but do it in the Philippines." And when life gives you an opportunity like that, and when you can start a company with a client, it's a very lucky way to start. It tells you you have a product, you have a client, you have that fit, and you have revenue from Day One, which is great. So I actually left San Francisco. I got on a plane to the Philippines, a country I'd never been to with no team, with no technology. And we actually had 60 days to get the first pharmacy onboard. So it was a pretty scary time, but luckily I was able to find a great team, build the technology and get the first pharmacy onboard. And then from there, we just grew. We grew within the Philippines, and then across Southeast Asia. It's quite funny how I ended up there. If he had said, for example, "Go to Kazakhstan," maybe I'd be there right now. But it just so happened that I landed in Southeast Asia. And that became the region that I very much clearly saw the opportunity in, and still see it today.
Very interesting backstory Farouk. To help our audience better envision what mClinica does, can you list some companies that do similar work to what we do within the pharmacy channel, whether it's offline or online, whether it's in-region or in other markets?
FAROUK MERALLI 4:26
Alan, I think the difficulty is that there's not really a comparable to mClinica. And the reason why is that a lot of what we're doing is building fundamental infrastructure that largely was created in more mature markets, but really didn't exist in Southeast Asia. And so the best way to look at this is, if you look at the United States maybe 50-60 years ago, you would see many of the same things you see in Southeast Asia today. That's fragmentation in distributors and wholesalers, fragmentation in retailers, the absence of technology connecting them all and the absence of negotiating contracts. All those pieces didn't exist. And so, we had to build that digital infrastructure to connect the back of the supply chain. And I think if you look at it today, in the US context, you're looking at companies like McKesson, AmerisourceBergen, Cardinal and Upstream. You're looking at perhaps the prescription benefit managers like Express Scripts, Caremark and Optum. You're looking at essentially the retail players: the CVS', the Walgreens, the Boots' of the world. So really, what we're doing is stitching together very large, consolidated industries that exist in the US, but doing them all in a digital first way, and trying to do it in essentially years, as opposed to decades. That's the big goal we have at mClinica. And in doing so, we hope to massively change access to health care across the region.
So, let's continue on that line of discussion. Now, we mention on the website that in emerging markets, pharmacies are highly fragmented. That creates a big challenge for private and public sector organizations to efficiently access pharmacies, the patients that buy from these pharmacies and the data that arises from that transaction. How exactly do we attack this problem Farouk?
FAROUK MERALLI 6:05
If we take a step back, pharmacies are really critical because they serve the end-patient. And actually, in Southeast Asia, patients visit pharmacies almost 12 times a year, when compared to physicians, whom they visit 1.2 times a year. So you can see this is a very critical access point to the end patient. And that's interesting, not only from the vantage point of pharmaceutical companies, but for governments and NGOs that are solving other public health areas. So, what we do at mClinica is really connect all these pharmacies together on a common platform. The way we do this is through this all-in-one app for pharmacy professionals called SwipeRx. And through this channel, we basically put one in every three pharmacists in the entire region on the app. And that gives unprecedented access to these stakeholders to reach pharmacies and influence the end-patient health. And this is really a key infrastructural aspect to what we built and what we rolled out across the region. Through that network, pharmacy professionals are able to get educated, get access to information, ask questions and get answers. It's a veritable super app for pharmacy professionals. And now even within it, they can do their purchasing for inventory, helping them make medicines more available, affordable and accessible to that end-patient. So it all comes down to giving these key stakeholders better access to a very key public health channel to access that end-patient.
That's very useful. Farouk, what is our business model, and what are likely to be the main revenue contributors, for instance, in two years' time?
FAROUK MERALLI 7:33
Sure, Alan. Pharma companies, governments and NGOs; they contract us to access the pharmacy channel and run things like digital education, digital awareness programs, digital research & data collection and digital patient programs. We focus on everything around reaching this channel digitally, and the patients that buy from this channel. We also work a lot on the supply chain side. And here, with distributors and wholesalers who are also looking to access that pharmacy channel; we generate revenue from them as well. Going forward, we continue to see growth across all of these revenue streams. And we've seen this actually accelerate with COVID as well, as more of these stakeholders want to go digital-first, but don't have the right technology in place to do so. And that's really where we come in. By aggregating this network and providing them a very easy route to get digital fast, we help these stakeholders improve their business and their objectives as organizations.
Understood. So, a few different revenue sources. Would you say that the main business model is to take a commission on some of the activities you've outlined? Or is it more of a subscription or SaaS based model? What's the big driver?
FAROUK MERALLI 8:41
We have two lines. One is a SaaS-based line, which is providing clients access to the network and various activities that the network does. And the second is really transactional, which is taking cuts across the supply chain as products move and flow through our network.
Very clear. I believe that mClinica operates in six different markets in Southeast Asia. Would you say that there's more difference, than similarity, in how the pharmacy industry is structured from country to country? And do the problems we're trying to address differ significantly across these markets?
FAROUK MERALLI 9:16
From the get-go, the vision of mClinica was to be a regional player. We think that the problem that we are solving is large enough. The patient population who needs our services is spread across all of these markets. And we think for long term realization of value, building a regional healthtech player is very important for that. In terms of how we actually work regionally, we operate, as you mentioned, in six different countries. We're headquartered out of Singapore, but we have teams in each country. And the way we look at healthcare is not a one-size-fits-all situation. We look at it more as "pattern recognition." So every time we look at a market, we look at what are the similarities between one market and the other. And it turns out, if you have good enough "spotters;" which our team, I believe is; you're able to find these common patterns and then bring solutions to them. While these markets are very disparate, the problems are actually very similar in terms of access, availability, and affordability of medicines. And if you start at that problem, and you actually are able to understand the patterns across these markets that lead to those problems, then your best position to actually solve them.
Very clearly expressed. Now Farouk, in Indonesia, is this an area that has a lot of regulatory definition and oversight to it?
FAROUK MERALLI 10:31
It certainly does Alan and, actually with good reason. Ultimately, it is about public health. It is about safeguarding the health of the end-patient and the citizens of that country. So there should be regulation. And what we do at mClinica is make sure that we're always working very closely with the Ministries of Health and its related agencies. And we want to essentially enable the ecosystem, rather than disrupt it completely. That in itself is in its own way, its own disruption. How do you enable these stakeholders that all are really serving very key problems in the healthcare industry and help them to accelerate forward and faster?
Gotcha. Now Farouk, is onboarding a new pharmacy an extremely costly and laborious process?
FAROUK MERALLI 11:13
So I think what's really interesting about the segment that we focused on is that the pharmacy professional has largely been neglected. I think there are lots of innovations in healthtech that apply to the end-patient directly in direct-to-consumer (DTC) methods. There are ones that go after hospitals, clinics, and doctors. But if you really think about innovation for the pharmacy, the professional at the pharmacy, there's not much. And I think when we started going after this particular vertical, our approach was to actually be the partner to all the pharmacies. That is who we work hard for every single day, because we know that they're critical in helping the health of the communities that they serve. And as a result, we actually were able to come in and fill a space that was very unoccupied. And as a result of that, we grew very, very fast. And we captured incredible market share across the region. And the simple way to look at this is: we gave love to an audience that nobody really thought about or gave love to before. And we put them first. And we continue to do that every single day. And our team is full of pharmacists, and pharmacy professionals, all of whom believe that this is a key stakeholder in improving public health across the region.
Gotcha. Farouk, I'll ask you a question that I've asked across nearly every past Indo Tekno podcast. And that is: is a lack of digital literacy in this segment - whether it's amongst pharmacies or even between distributors and pharmacies - is that lack of digital literacy of bottleneck to growth? And if so, how do we address this challenge?
FAROUK MERALLI 12:41
We don't actually see this as a bottleneck in our particular segments that we deal with. And the reason why is we're very much in the B2B space. So the demographic that we are targeting tends to be very highly literate. They often have to be graduates in order to practice pharmacy. So we look at the business-to-business segment. And that segment behaves very differently than the general consumer population. And within the segment that we serve, we're looking at a very highly educated, highly literate, and essentially high income earner segment. These are pharmacists, pharmacy professionals and pharmacy owners. And so when it comes to digital savviness, if you will, they're very much literate. They all have smartphones. They all have data, they use it for their banking, all the way down to their purchasing. And so we actually focus on the demographic that's already primed for digital.
That's very encouraging. Now Farouk, your client list seems to include the "who's who" of the pharmaceutical world; from your former employers mentioned above to Bayer, AstraZeneca, Novartis and many others. How exactly do we work with these partners?
FAROUK MERALLI 13:47
These pharmaceutical companies have a real challenge in terms of accessing pharmacies. If you look at Indonesia, for example, there are 20,000 pharmacies spread across all of the many islands of Indonesia, for example. And it becomes very difficult to constantly reach them, educate them, detail to them and provide them the information and also the products that they need in order to better serve the end-patient. And that's what they all care about. And so we provide this digital pathway that pharmaceutical companies now, instead of sending out a sales rep and having to do that sort of in-person visit, can now do all of what they need to in order to educate the pharmacy professional completely digitally. And that's game changing for them. And as you can imagine, during COVID, where there's been even more restriction on in-person visits, the necessity of a platform like this has become even greater. And we've seen a great uptick. We pretty much work with all the big pharma companies now, all of whom are trying to access this pharmacy channel digitally and help that end-patient at the end of the day, which is their true goal.
Now, we also work with leading governments NGOs and academic institutions to access the pharmacy channel, its patients and data. Which of those many relationships are the most consequential and enabling to mClinica?
FAROUK MERALLI 15:02
We're very proud of the work we do with public sector organizations. In fact, in every single country that we work in, we work directly with Ministries of Health. We work with them in many ways, using the same methods that we do with pharmaceutical companies who are looking to engage the pharmacy channel digitally. The difference is that governments and NGOs really care about the public health programs that may not be commercially interesting for pharma companies; for example, tuberculosis, HIV AIDS, maternal and child health, even COVID-19. These are clearly in the remit of the public sector. And so if we solve this fundamental problem of fragmentation, and the pharmacy and digital access to it, not only do we solve the problems of pharma companies and their commercially relevant disease areas, but you solve the problems of governments and NGOs who also are trying to target these more public health areas as well. And so recently, we've been doing work with the Ministry of Health of Indonesia, the Department of Health in the Philippines and the Ministry of Health of Cambodia on COVID-19. In fact, we did much of the digital response for COVID-19 at the pharmacies. We've worked with the Gates Foundation, the WHO, USAID, and many other organizations, all of whom are targeting specific programmatic public health areas that now they can actually address through this digital pharmacy channel that never existed before.
That's great. We describe our flagship app, SwipeRx as the "super app" for pharmacy professionals. Which one of the eight or ten features is far and away the most popular?
FAROUK MERALLI 16:32
SwipeRx is really about helping pharmacy professionals get everything they need to better serve patients and manage their pharmacies in one app. And it has everything from education to information to Q&A. It's a very rich app with lots of value for the end-user, and it really makes the pharmacy professional the center of care in their community. I would say that the number one used feature is education. Pharmacists every year need to take a certain number of credits to renew their licenses. And this was largely driven offline. They'd have to travel very far, take time off work, pay for these courses, often in order to get enough credits to renew their license to continue to practice. By working very closely with the pharmacy associations, and sometimes directly with the ministries of health, we actually provided the first online channel. In fact, in many of the countries we're in, we literally had to build the regulation to allow for online regulation for education. And I think what's incredible about that is we've now become the largest education provider for pharmacy professionals in the region. And I think that goes to show you what the power of technology can do in terms of giving great access to individual pharmacy professionals on the latest health information that they need to better counsel patients.
So content consumption, and for lack of a better term, the educational aspects of the app are some of the most prominent use cases, is that correct?
FAROUK MERALLI 17:59
Gotcha. Now, the core functionality of the app allows pharmacies to order drugs and to access direct credit facilities. It's also underpinned by digital payment capabilities and direct delivery. Can you give us a few words as to how you pull off each of these tasks on your own or through partnership: 1) buying on discount, 2) credit services, 3) payments and 4) direct delivery?
FAROUK MERALLI 18:27
Taking a step back, let's look at how small independent pharmacies do their purchasing. And the reality is that they spend multiple hours a day calling different sellers, comparing prices, payment terms and delivery dates for the exact same product. And this is largely done offline. Orders are made through sales reps. Phone calls are made. Whatsapp messages are sent. And this can be a very painstaking experience for the pharmacy. So the first thing we really solve is the issue around availability. How do you make sure that the pharmacy in one simple place is able to get all the inventory that they need to stock their pharmacy and help that end-patient? The second really is on affordability which is: how do you decrease the price that a pharmacy has to pay. You see if you're a small pharmacy, you have low volumes, you're effectively a price taker. Whatever you have, and whatever the market sells, you need to take. By rolling up all these pharmacies together and aggregating demand, we actually are able to negotiate better prices for these pharmacies. And along with that is credit. Pharmacies often receive or don't receive credit. And if they do, it is largely relationship-based. And so what we do is we provide an independent credit line to the pharmacies to do their purchasing and manage that credit line so that they're able to really purchase, increase their stock and again, help that end-patient. And finally, it becomes a very seamless experience for the pharmacy. They have one app that exists within SwipeRx as well (the super app) and they're able to actually do their purchasing, track their deliveries and really have this very amazing e-commerce experience for a very routine, almost daily activity of purchasing. And so we've taken an experience that was very broken, that took hours of pain, and brought it down to a very quick, amazing experience that pharmacies really do rave about.
Excellent. And so on the logistics side, do we partner with the leading third party logistics, or 3PL companies, in a market like Indonesia?
FAROUK MERALLI 20:24
That's correct. I think there are amazing 3PL providers. Indonesia is quite advanced at the stage, and many other Southeast Asian countries are as well. And so we partner with them to do the delivery side. And we've had very good results with that.
Now for what will your average pharmacy operator look forward to most as a new feature or function from us going into 2021? And longer term, what's our vision on that front?
FAROUK MERALLI 20:50
The number one principle we have it mClinica is to be "pharmacy-obsessed". They are who we fight for every single day. They're who we work very hard for, and they're who we want to enable and empower to better serve their communities. And so for us, we're in the unique position where a lot of how we have built our technology is there. But every day, we work at improving features and improving the experience to make sure that the pharmacies not just use us, but love using us. And I think that's really what we will see, which is more and more depth in terms of the feature set that we're offering to make it even faster, even a more amazing experience for the pharmacies. And I don't think we'll stop until every pharmacy is using us, loves us, and that they because of the technology and tools that we provide, are able to really make a meaningful difference in the end-patient's life.
Now I'm saving the best question for last. Let's assume Indonesia gains timely access to COVID vaccines. From your perspective, how can we expect the process to play out?
FAROUK MERALLI 21:49
It's a great question, and it's a question we think a lot about. Because I believe there's a role for us to play just like earlier in the COVID-19 cycle. The way we think about how Indonesia is working on this is they have actually done a great job in terms of negotiating with almost now four different vaccine suppliers for advanced commitments. They are really making a very, very strong push in making sure vaccines are available. So I think that's really going quite well. And we've seen amazing policies in terms of pushing that forward. I think where it's going to get very difficult is actually distribution. This is a logistics effort like we'd never seen before. You're trying to cover 270 million people across all of Indonesia. Some areas are very hard to reach. And then you have particular distribution constraints. Some of those are cold storage, which is often required for certain vaccines that are coming out. And that brings its own inherent challenges. You have the other issue where some vaccines are not just a single dose. They may be multi-dose, so you have to have them after different time periods. So there's not only making inventory available, there's making inventory available at exactly the time that the patient needs it. So I think what we're going to see is logistical challenges. And I think given our experience in this particular front, there's certainly a role that we're looking at playing in that, to really ameliorate this situation from a public health perspective.
What a very deep and expansive mission that mClinica has taken up, and clearly one that is absolutely critical to people's well being. Thanks so much for joining us today Farouk.
FAROUK MERALLI 23:22
Thanks a lot Alan. It was a pleasure.
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