DAVID KNEALE Chief Executive Officer RMB MORGAN STANLEY BIG FIVE INVESTOR CONFERENCE 2010
AGENDA Demographics - driving healthcare spend The political agenda Clicks Group s healthcare offering Can SA become world class at retail healthcare? 2
DEMOGRAPHICS INCREASE IN LIVING STANDARDS In the past 10 years, a significant portion of the middle class population have increased their living standards LSM changes, % of total population* 100% 90% In 2001 only 1/3 of the adult population would have been a formal retail target customer Today less than 20% would not be considered formal retail shoppers due to LSM upward shift, and larger access and acceptance of formal retail 80% 70% 60% 50% 40% 30% 20% 10% 0% 2001 2005 2009 LSM8 10 LSM6 7 LSM4 5 LSM1 3 * Population over 16 years old Source: SAARF 3
DEMOGRAPHICS AGEING POPULATION Population by age, 2005 and 2030 (m) 70-74 60-64 50-54 40-44 30-34 20-24 10-14 0-4 6.0 4.0 2.0 0.0 2.0 4.0 6.0 2005 2030 Source: UN Population Division 4
DEMOGRAPHICS HIV PREVALENCE Source: The Lancet Health in South Africa series 5
HEALTHCARE SPEND In 2009, South Africa spent R200bn on healthcare 58% was spent on private healthcare The growth rate of private healthcare in South Africa from 1997-2007 was 5% higher than CPIX Healthcare expenditure forecast, 2004-2014 (US$bn) e = BMI forecast Source: WHO, Hospitals Association of South Africa (HAS), Department of Health (DoH), BMI 6
PRIVATE PHARMACEUTICAL MARKET The pharmaceutical market was worth US$2.43bn in 2009 BMI predicts it will grow to US$4.15bn by 2014, equating to a 11.27% CAGR, and US$5.10bn by 2019 OTC drugs were 11% of the market in 2009 and will increase to 19% in 2019 demonstrating a strong consumer healthcare drive Pharmaceutical market forecast (US$bn) e = BMI forecast Source: IMS Health, NEDLAC, FNB, BMI 7
AGENDA Demographics - driving healthcare spend The political agenda Clicks Group s healthcare offering Can SA become world class at retail healthcare? 8
HEALTHCARE IS A NATIONAL PRIORITY Health is one of the ANC s 5 top priorities Department of Health s strategic plan focuses on: 1 Create a health framework 6 Revitalise infrastructure 2 Implement NHI 7 Control key diseases 3 Improve quality of service 8 Support healthy lifestyle 4 Overhaul the system 9 Review drug policy 5 Fix health HR 10 Start R&D Goal is to improve affordability and accessibility 9
NATIONAL HEALTH INSURANCE NHI key tenets 1. The right to health individuals have the right to free health care at the point of use 2. Universal coverage this right should extend to all citizens and legal immigrants 3. Social solidarity funding to the cost of this right should be mandatory by South Africans according to their ability to pay NHI timing In Dec 2007, ANC Government states NHI will be phased from 2009 to 2014 In Nov 2009, DoH announces a 25 person NHI Task Team to manage the NHI transition process Announcements are made that a White Paper was to appear in April 2010 Minister of Health requested an implementation plan proposal from his NHI Task Team by June 2010 To date, no dates have been set 10
4 KEY HEALTH PRIORITIES SHORTER-TERM 1. Increasing life expectancy 2. Combating HIV and AIDS 3. Decreasing the burden of diseases from TB 4. Improving health systems effectiveness, by strengthening primary health care and reducing the costs of health care South Africa has a predominantly curative health system that places less emphasis on disease prevention and health promotion. Over the last 10 years, there was an inadvertent shift of emphasis from primary health care, which was adopted by the first democratic government as the foundation of our health service delivery system, towards a predominantly curative health system. - Health Minister Motsoaledi Source: Motsoaledi Budget vote speech by the Health Minister, National Assembly, 13/04/2010 11
AGENDA Demographics - driving healthcare spend The political agenda Clicks Group s healthcare offering Can SA become world class at retail healthcare? 12
CLICKS PHARMACY 250 pharmacies in 370 stores Target of 500 Clinic built in all pharmacies 12% pharmacy market share at Feb 2010 Target of 30% 1.4m scripts per month 450 pharmacists, 900 professional staff 1.7m ClubCard holders on pharmacy database 13
CLICKS DIRECT MEDICINES Courier pharmacy - national coverage Unique offer to medical aids 2% market share at Feb 2010 500 000 scripts 14
UNITED PHARMACEUTICAL DISTRIBUTORS Only national full range pharmaceutical wholesaler 40% share of private wholesale market Link banner buying group 250 members Operation in Botswana services SADC region Distribution agency capability 15
OUR HEALTHCARE AGENDA Promote pharmacy as the gatekeeper to primary healthcare Wider pharmacist / nurse practitioner prescribing Improve access to self medication Down schedule to international standards Liberalise advertising rules 16
AGENDA Demographics - driving healthcare spend The political agenda Clicks Group s healthcare offering Can SA become world class at retail healthcare? 17
WORLD CLASS RETAIL HEALTHCARE SA has the right combination to create world class retail healthcare 1. A significant health need in the country, specifically around primary health care 2. Corporate pharmacy still only 6 years old 3. A growing number of accessible and affordable formalised retail consumer nodes across the country 18
1. Primary healthcare need example: HIV testing HIV persists 2008-2009 HIV prevalence continues to rise in specific communities and areas, in the face of a new Government administration 2009 President Zuma declares a war on aids and announces a commitment to combat South Africa s worst health problem Government actions Minister of Health creates a comprehensive, multiphase HIV strategy to reach millions South Africans The first phase of the programme must focus around HIV testing and education to stop the spread of the disease In March 2010 the Minister of Health reaches out to the private sector to help find complimentary solutions to the planned strategy With private sector solutions Solution identified by Clicks Group to use over 250 retail pharmacies across the country to provide comprehensive HIV screening and education with pharmacists and nurses State provides the testing kits and the retail pharmacies provide the testing for both medical aid (reimbursed) and uninsured patients (for free) In the first 4 months of the programme (May-Aug), Clicks has tested twice as many people for HIV than in 2009 2/3 of those tested have been uninsured patients 19
1. Primary healthcare need example (continued) 20
2. Corporate pharmacy still young Corporate / chain pharmacy - 2009 market share Pharmacy, which is a primary healthcare delivery point, is still fragmented in South Africa 64% 52% 25% ** 2006 Source: Verdict, IMS Health, CBO 21
3. Potential for retail clinic development Clinic model based in local drug store chain CVS Provides basic primary care health services during retail trading hours Accepts cash payment, as well as payment through insurance payers including Medicaid Pricing is deeply discounted when compared to other health service providers 22
3. Potential for retail clinic development (continued) 23
WHAT WILL MAKE SA RETAIL HEALTHCARE A SUCCESS? Government creating the appropriate regulatory environment 4 key success drivers Examples in action 1. Government has committed to action 2. Government has taken action to increase accessibility and affordability 3. Health of the nation needs improvement 4. Current government decentralised structure does not allow for quick and efficient action 2008 ANC 10 point strategic health plan 2009 HIV focus and plan 2010 Primary Healthcare pronouncements Pricing regulation Deregulation of the pharmacy industry GEMS (Government Employees Medical Scheme) 5m HIV infected individuals 61% of South Africans overweight Clicks participation in the HCT campaign Private facilities providing state services and medication (e.g. family planning or baby immunisations) 24