Pharmaceutical

We seek to participate throughout the pharmaceutical value chain to reduce medicine and related costs in our efforts to improve access to affordable, quality healthcare.

Highlights		Challenges
Launch of MMed's first medical scheme direct member procurement initiative		Price volatility from local suppliers linked to multi-nationals and the push back from suppliers around price negotiations
Impressive growth in Scriptpharm business		Protecting employees during the COVID-19 pandemic while ensuring the various business units were able to operate efficiently and deliver as an essential service provider
Enduring volume activity in Pharmacy Direct		Managing stock levels in anticipation of possible supply chain interruptions as a result of COVID-19-related restrictions

Revenue (R’m)	Operating costs (R’m)	Operating profit (R’m)

Overview

AfroCentric is a diversified healthcare business with growing exposure across the healthcare value chain in South Africa. The diversified nature of the Company is aptly demonstrated by the fact that the pharmaceutical cluster now generates 49% of the Group's revenue.

AfroCentric has a presence across the entire pharmaceutical value chain, which provides risk mitigation due to revenue diversification for the Group but also enables the Company to deliver on its ambition to reduce the cost of healthcare.

Unpacking our performance

Activo Health

Activo Health specialises in importing and marketing pharmaceutical products and trades in all sectors of the pharmaceutical industry.

Activo Health managed to achieve 243% growth in operating profit compared to 2019 (part of AfroCentric Group from March 2019). This success can be attributed, in part, to the business's diversified basket of products.

While specific product categories suffered as a result of COVID-19 – for example, demand for anti-malaria medication dropped significantly due to limited travel – other products such as immune boosters grew in demand over this time. The business focused on broadening the range of medication we are licensed to distribute. As a result, our oncology basket increased dramatically, diversifying revenue sources and supporting AfroCentric's ability to increase the value of each healthcare spend.

Curasana

Curasana is a speciality pharmaceutical wholesaler that procures and supplies pharmaceutical products to Pharmacy Direct, and distributes for Activo Health to other major wholesalers in Gauteng. During the year, the business developed its distribution capability to extend its service offerings within the value chain.

Pharmacy Direct

Pharmacy Direct distributes and delivers medicine to urban and rural areas for medical scheme clients and government's CCMDD programme. During the year, the business, despite the challenges presented by the COVID-19 environment, was able to achieve positive growth in operating profits.

Pharmacy Direct was, however, challenged by the necessity of remaining operational and continuing to package and distribute medication during the pandemic. With this in mind, we are planning an automation project for the new financial year intending to fully automate our private facility, which serves medical scheme members in South Africa, filling approximately 155 000 scripts per month.

Our second facility fills approximately 700 000 scripts per month on behalf of government's CCMDD programme.

This function became particularly relevant in our current context, alleviating congestion in high-risk, public healthcare facilities, while also improving treatment compliance and reducing the cost of delivering chronic medicine. Pharmacy Direct also assisted the NDoH in communicating critical messages to patients through an SMS delivery initiative to assist in disseminating information to all CCMDD patients during the COVID-19 pandemic.

The business was further challenged by disruption in its supply chain due to the COVID-19-related restrictions and faced increased airfreight expenses. As a result, we increased stock levels of certain product categories to ensure we were able to fill patient scripts. However, as restrictions eased, we began normalising stock levels.

During the year, special legislation was passed that any script up to schedule four could be automatically renewed for 12 months. This assisted the business in enabling better planning and continued service delivery as a result of reduced gaps in treatment for these patients. However, schedule five and six patients were required to renew scripts as per usual. We were, therefore, able to focus our efforts on supporting these patients to ensure continuous care.

The business also benefited from further integration with the larger AfroCentric value chain through applications such as VirtualCare^TM, which enables Pharmacy Direct to deliver medication to scheme members by following the VirtualCare^TM pathway.

Scriptpharm

As a national pharmacy network, Scriptpharm manages chronic and acute medicine through a capitation arrangement, where healthcare providers are paid a fixed amount per scheme member to incentivise efficiency, cost control and preventative care. During the year, we saw impressive growth in our Scriptpharm business, with it outperforming budgetary expectations.

MMed

During 2020, MMed, which reduces hospital costs by eliminating third-party suppliers, grew its client base to eight new hospital contracts and clinics and increased its monthly sales value to R228 million.

MMed was able to make inroads in repositioning the basket of goods on offer through its supply chain, focusing on offering improved cost efficiencies to clients supported by better margins to the business. Efficiency baskets targeting areas of mutual focus by our healthcare facilities and schemes alike took shape and supported the improvement in the business's overall gross profit margin, as well as delivering savings to the end-user.

2020 also saw the launch of our first medical scheme direct member procurement initiative, whereby the procurement capabilities of MMed are utilised to source and supply surgical and medical devices directly to medical scheme members to achieve significant savings and prevent out-of-pocket expenses, where possible. The in-hospital component of this sourcing and supply initiative will be launched in the new financial year.

Outlook

Looking ahead, digitisation and automation will be critical areas of focus to address changing consumer needs that have either been triggered or accelerated by the COVID-19 pandemic.