Pharmacies and medical clinics

While the government of Sri Lanka has an impressive record of health provision, there is still a thriving private sector healthcare market in Sri Lanka (and even more in other developing countries such as India - click here for more details).

There are few government pharmacies and these are all located in larger towns. Outside of these towns, everyone, both rich and poor, buys medicines from private retailers.

These retailers also often provide diagnostic services - doctors from the government hospitals have private surgeries behind the pharmacy where they work in the evenings. People often prefer these services to the government hospitals, since they are more convenient and faster. A visit to a general doctor costs Rs80-100 ($0.80-$1), a visit to a specialist costs up to Rs350 ($3.50). Even poor often use these services, as they may not be able to lose a day's pay to see a government doctor.

In Ambalantota, there are a number of private pharmacies and medical clinics along the road that leads to the government hospital. According to the manager of the local SANASA Bank branch, these are good customers - they have a good and growing business.

Suwa Setha Pharmacy - Ms Samanthi

Current business

Ms Samanthi has a successful pharmacy. It has been going for about 3 years, her turn-over is about Rs3m per year ($30k) and her business is growing.

Social service is clearly important to Ms Samanthi. She went into training as a pharmacist so that she could serve the community and she tries to assist the poor through her business. She says that she offers 'at-cost' medicines to people who clearly cannot afford the normal retail cost. Although she is not a Christian, she also donates medicines to a local church which distributes then to the poor who attend the church clinic. Most of these people were made destitute by the Tsunami - Ms Samanthi's own mother was also killed by the Tsunami.

Plans for future business

Ms Samanthi has a bank loan, secured by her building. Once she pays that off - which should be in about a year, she hopes to get a new loan to convert the back-rooms of her shop into a 'Channelling Centre' - she will let out the rooms to independent doctors who run private surgeries. This is a good business - a number of other pharmacies have done this and she is confident she can cover the investment.

She is concerned, however, that the doctors who work in the Channelling Centre are good and registered. She asks us if we know how to check if a doctor's certificates are real.

Another business opportunity, which she is less certain about, is to hire medical equipment on a daily basis and offer, for example, ECG scans and x-rays one day per week. ECG machines can be rented for Rs600 per day ($6) and people with heart complaints often ask her if she can give them a check-up. This is popular in Hambantota (a larger nearby town) and Ms Samanthi has the required training - but this is a longer-term plan.

Suwasala Pharmacy - Mr M. G. A. Nilantha Surada

Current business

Just 50m away from Suwa Setha Pharmacy is Suwasala, a similar pharmacy with two doctor's rooms behind. When we visited there is a long line of people waiting to see the doctor - mostly with infants. Business at the pharmacy was brisk.

Mr Surada runs the pharmacy with his wife. He has been going for about 3 years and his turnover is already Rs6m per year ($60k) and is growing fast. However, he also says that he started the business as he wanted to do something that supported his community.

Plans for future business

Mr Surada already has plans to expand. He has bought land and has approached banks to get a loan to build a larger pharmacy, which will cost Rs1.5m - 2m ($15k-$20k). He is confident that he can get a loan, he has collateral and good relationships with the banks. He says that there is a good market and, since Ambalantota is growing, it needs more pharmacies.

He also would like to offer better service, perhaps by buying an x-ray machine. As the local area is agricultural many people come to him with suspected broken bones, but he cannot help them at the moment. Again, this is a longer-term plan and he would like some advice on how to operate these machines, and if it is good business.

Social investing

Lending

The lending needs of the pharmacies appear to mostly be met. They already have good relationships with banks and are able to cover their loans. In any case, the business is not capital intensive and borrowing needs are low.

Funding support

Private pharmacies, in Sri Lanka and many other developing countries, are the primary source of healthcare outside of the major urban centres. Both the rich and the poor depend upon them. This alone is justification for working with the private sector to improve healthcare access and quality. The fact that many of these private enterprises are already providing social services at their own cost gives further justifies external support.

Subsidize business expansion loans on the condition of good quality provision

As seen above, pharmacies want capital to expand and at least some also want to ensure their provision remains high quality. Providing lists of recognized doctors, conducting regular audits of quality and providing guidance on best practice would help maintain quality. Pharmacies would be willing to comply with these tests if they received lower interest rates on loans in return - provided through a local partner bank. Equally, subsidized loans could be provided for a particular purpose, such as to fund outreach to remote villages. This subsidy could make such services economic, so greatly increase provision.

Promote partnerships

Sri Lanka has a long tradition of Ayurvedic (herbal) medicine. Many villages have practitioners, as well as local midwifes and nurses. A program could create a referral system between these informal practitioners and the pharmacies, so more serious cases were referred rapidly to medically trained doctors. This program should increase volumes of business for the pharmacies and, in time, may be self-financing.

Voucher schemes

Where there is a clear target group, for example people impacted by the Tsunami, people over 70 or pregnant women, it may be possible to give then a voucher which could be used in partner pharmacies to obtain free medicine, with the pharmacies then re-claiming the costs from a funder. Similarly, some organizations may want to subsidize certain medicines that 'self-target' to the neediest, for example children's oral re-hydration tablets or inoculation. Further funding may allow pharmacies to do free diagnosis for simple medical conditions, for example simple eye tests or testing for nutritional supplements.

Advice

To help pharmacies enter new markets, a funder could provide business and technical advice. Both enterprises interviewed asked for advice on new medical machinery.