Let’s start the new year by profiling one of the most innovative, exciting and successful social impact business models of the last few years. Sproxil, a Massachusetts-based company started in 2009 with operations in five countries; Nigeria, Ghana, Kenya, India and the US is revolutionizing the pharmaceuticals market and fighting back dangerous counterfeit drugs which kill approximately 700K people in developing countries a year. Sproxil is doing this through the empowerment of consumers to know what they are buying using their mobile phones. It is a novel idea, and it is working. Sproxil is growing quickly and gaining lots of recognition along the way including being named a White House Champion of Change and Fast Company most innovative healthcare company in 2013.
WHAT IS THE BUSINESS ABOUT?
The Sproxil core business is a mobile product authentication system. The system is really nothing more than a simple scratch card sticker attached to all retailed drugs. The consumer scratches off the sticker cover to reveal a unique number. He or she then sends a text message to a toll-free number and receives notification if the drug is valid and has not been stolen. This empowers consumers to use existing everyday technology – mobile phones – they carry in their pocket to be sure they are getting what they paid for and at the same time leave counterfeit manufacturers out in the cold without a market to sell to. The most logical application for this technology are drugs, and this is where the business started but it is also being successfully used for the sale of agrichemicals and sports drinks, both of which are commonly counterfeited. But the application could even be much broader. The technology also allows authorities to track where most counterfeiting is taking place so they can focus their efforts on those areas. Check out this TEDx video from Boston to find out more.
HOW DID IT START?
Sproxil was founded in 2009 by Ghanian born Ashifi Gogo who was a visiting PhD innovation fellow in the school of engineering at Dartmouth College. He was inspired to get started after the death of 84 infants due to tainted drug counterfeits in Nigeria in 2009. He founded the company with the ambition to make it harder for pharmaceutical counterfeiters to operate. He won some business plan competitions and then the watershed moment happened when in 2010 the NAFDAC, the Nigerian government agency overseeing food and drugs, endorsed the Sproxil platform leading to its rapid deployment across the country. Based on this success Acumen Fund invested US$1.8M to help expand its operations into India and Kenya. The rest is history as Sproxil continues to grow.
WHAT IS THE SOCIAL NEED IT ADDRESSES?
The focus is to combat the manufacture of counterfeit products. Counterfeit products pose a serious threat to public health and safety worldwide. According to the World Health Organization (WHO) the consequences of counterfeit pharmaceuticals result in at least 700,000 deaths per year just from fake TB and antimalarial drugs alone, yet the total fatalities that occur from failure to receive genuine medication are substantially higher. Counterfeiters often focus their efforts on developing countries, where resources and regulations are more sparse and the consumer have less recourse.
WHAT IS THE IMPACT?
Sproxil has set up Africa’s first national, mobile-based anti-counterfeit service in Nigeria, and has already has sold more than 5 million anti-counterfeit labels. Pharmaceutical companies GSK, Johnson & Johnson, Merck and Pfizer are all already customers or partners and many others are interested.
WHAT IS THE BUSINESS MODEL?
- Customers – Patented drug manufacturers who are in a constant battle with fake or counterfeit manufacturers
- Channels – the service is provided for free to drug users and governments using mobile phones and easily applied authentication stickers.
- Value Proposition – The value proposition to them is Sproxil allows them to take back market share from illegal manufacturers in some of the fastest growing drug markets
- Revenue Streams – Sproxil generates its revenue by selling pre-printed labels with authentication codes and SMS messages directly to pharmaceutical companies in bundles at a couple of US cents per item.
- Cost Structure – the beauty of this model is that it does not require a physical presence in the distribution channel so costs can be low. It sells the stickers to the pharma companies who then apply them to the products and are responsible for getting them to the final end users. So costs mainly are back office, people and technology.
- Key Partners/Resources/Activities – There are many partners; government regulatory authorities who authorize or obligate the use of the service; the telecommunication companies who are the key resource to verify the codes as well as host of international organizations who oversea global public health concerns.
WHAT ARE SOME CONCERNS I SEE WITH THE MODEL?
- Link to impact – It would be interesting to see if Spirolix could attempt to link the use of this technology in high TB and malaria prone regions to see if it is actually reducing death tolls. Otherwise while it is associated to the problem there is a lack of proof that it is addressing the key binding constraint. Also I would like to know that the counterfeit products it is most successful at defending are actually the ones that consumers most need in low-income markets/communities.
- Bargaining power – It seems to me that this product is of significant value to the pharmaceutical companies on multiple levels but that Spirolix has relatively weak bargaining power. How can they capture their fair share of the value when they don’t have a strong way to force the pharmaceutical companies to increase price.
- Competition – Even if the technology is patented the concept is simple enough that similar products could and will be developed and could be applied to other markets. What is actually to stop the pharmaceutical companies themselves from providing this authentication (other than government regulation). What happens if regulators allow big players to offer this service.
WHAT ARE YOUR THOUGHTS?