How To Start a Chemist in Kenya
In recent years, there has been an increase in the number of mushrooming chemists and drug stores around urban and rural areas in Kenya. This is not tied to disease hence demand for medicine but an entrepreneurial spirit among the citizens based on speculation on the margins in the pharmaceutical industry. So, this article on how to start a chemist in Kenya will help guide and propose ways on how to go about the whole process.
The Pharmacy and Poisons Act 244 of the Laws of Kenya mandates that everybody dispensing medicine and supervising any pharmaceutical business is to be qualified and registered as a pharmacist or enrolled as a pharmaceutical technologist. The Act establishes the Pharmacy and Poisons Board (PPB) which examines and registers pharmacist and enrols pharmacist technologists. The board also registers businesses involved in the manufacture, importation, distribution, wholesale and retail medicines. The board also does inspections of the quality and counterfeit medications.
NB: You CANNOT be enrolled as a pharmaceutical technologist as foreign diplomas are not accepted and you need to work for at least six (6) years after obtaining your diploma before being qualified to start operating as a retail chemist.
The PPB will give you two licences:
- Licence to operate (superintend) a retail chemist. Only given to pharmacist or pharmaceutical technologist.
- Premises registration where the board inspects and registers the premises from which you will run the pharmacy. The premise is supposed to tiles, a sink, a toilet, mirrors, though sometimes, a licence can be issued without meeting some of these rules.
The location of the PPB office is at Lenana Rod, between the Egyptian Embassy and Lenana Conference Center) Nairobi.
Registration of Company
A chemist can be registered as a sole proprietorship, partnership or company but not pharmaceutical technologists are allowed to run as proprietorship or partnership but not a company.
The law on registration makes sure:
- You provide a copy of the certificate of incorporation of the body corporate lodge with the board.
- The business is under the management of a superintendent who is a registered pharmacist and a member of the board of directors of the corporate body, and not an active member of any similar capacity for any other body corporate.
- The premises where the business is carried on, where it acts as a retail, it can run under a superintendent or be assisted with a registered pharmacist.
- On the business premise, the name and certificate of registration of the person in control of the business should be conspicuously displayed.
NB: Company registration is done at the Attorney General’s chambers. Registration can be done personally or assisted using lawyers from Kshs. 20,000 to 50,000 which ensures everything is done right with no loopholes.
Read more on: Starting a Business in Kenya – Procedure, Time and Cost
Single User Business Permit
This permit is issued by the county government to any businesses operating within the county. Its cost ill be dependent on the size of the premises, the county and location within the county. Budget about Kshs. 20,000
Key Bodies in the Pharmaceutical Business
- Pharmacy and Poisons Board (PPB): Description Pharmacy and Poisons Board (PPB) “PPB is a semi-independent regulatory institution set up through the Pharmacy and Poisons Act of 1957 (Chapter 244 of the Kenyan Laws). It has the mandate of controlling the manufacture, sale, advertisement and possession of medicines, developing provisions for trading, compounding, labelling and recording of the medicine sales, and determining fees chargeable for various licenses. PPB is a semi-autonomous agency capable of instituting or facing lawsuits, borrowing and lending money, and acquiring and disposing property” View their website
- National Quality Control Laboratory (NQCL): This is an arm of PPB whose role is to test drugs to ensure quality. Before drugs are registered, they have to be tested by the NQCL.
- Pharmaceutical Society of Kenya (PSK): This is the body representing the interests of pharmaceutical technologists. It promotes ethics and standards among its members. This is sometimes tricky because it has no legal backing, and depends on cajoling, goodwill and the occasional ‘arm-twisting’.
- Kenya Pharmaceutical Association (KPA): This is the body representing the interests of pharmaceutical technologists.
- Ministry of Health: This is the overall overseer of the matters of health in the country. The PPB falls under the Ministry of Health. Public health officials from the ministry are at times involved in the inspection of chemists.
- County Government: This regulates all the business within a county. And even if you get all the requisite license from the PPB, you still need a license from the county government to trade. County government health officials also inspect chemists occasionally.
Some major legislations that regulate the operation of chemists and pharmacy businesses include:
- Public Health Act
- Food, Drug and Chemical Substances Act
- Narcotic Drugs and Psychotropic Substances Act
- Pharmacy and Poisons Act
Type of Business
Wholesalers and Suppliers
Majority of medicines in Kenya is imported. Local manufacturers often just import active ingredients, formulate, brand and sell, or they import ready ingredients and formulae, and mix locally. Multinational manufacturers mostly sell antibiotics, antifungals, antibacterial and antivirals while local manufacturers mostly produce a limited range of over the counter and prescription medicines.
Most of the imported medicines come from India and Pakistan. Others like Belgium, Switzerland and Netherlands do export to Kenya. China is emerging as an alternative source.
Only qualified pharmacists can import but not pharmaceutical technologists.
The importer brings samples and supporting documentation to the PPB which takes the sample tot the National Quality Control Laboratory that tests and examines the medicine as per the required guidelines. PPB inspectors are supposed to visit the manufacturer but are incapacitated due to resources and proper procedures.
Once the tests are passed, the medicine is registered and importer given go ahead to bring larger quantities for distribution.
When importers bring the drugs, they distribute themselves or use wholesalers, who require special licences from the PPB. Ideally, wholesalers should sell in bulk but many engage in retail trade also.
NB: There are also those importers who can bring in drugs after registration on your behalf.
The best place to start to know the medicines to stock is to use the Kenya Essential Medicines List produced periodically by the government, World Health organization, doctors, pharmacists and other players in the health sector. It captures the most essential medicines by priority considering ailments, need and demand in the country. The medicine is classified as vital, essential and non-essential depending on how crucial they are.
Also, a good wholesaler can guide you on not only the essential medicine but those that are in demand in your area. The location is determined by geography, income and lifestyle.
Among the very basic medicines are various forms of painkillers both for adults and children, antibiotics both for children and adults, anti-allergies, antibacterial, antifungals, antiprotozoals, ulcers medicine, skin creams, disinfectants, antifungal, migraine medicines, disinfectants, contraceptives. In a chemist about 40% of sales will be over the counter medicine, with the rest being prescriptions.
There is also the issue of whether to buy generics or brand names commonly known as originals. Generics contain the same active ingredients as the brand name but could contain different inactive ingredients. Usually, generics are produced after the patent of the original brand name drug expires. They tend to be cheaper because unlike the brand name which is produced just by one company during the period when the patent is active, generics are produced by several companies. This competition drives the prices down.
Price is also a major consideration among these groups. Still, some of the middle class will at times insist on originals. Sometimes they want to know if there are significant price differences between the original and generics.
- PPB retail licence: 15,000
- Public health licence: 3,000
- Signage licence: 2,000
- Single user business permit: 10,000
- Company registration: 20,000
- Starting stock: 200,000
These include rent (at least 3 month’s), renovation, shelves and counter, equipment (chair, table, computer and POS, water dispenser, glasses, signboard, water and electricity bills and salary (for 3 months), and monthly pay to registration pharmacist technologist (3 months): 320,000
NB: These are estimates on a basic, estate chemist. With high area traffic like Nairobi CBD needs more than 3 times stock and but sufficient stocks. Also, if you’re a pharmacist/technologist, you don’t need to pay someone to register the business on your behalf. Others start out as sole proprietorship hence no need for company registration. Items like rent and county business licences will vary depending on location. Shelves and renovation could cost more depending on size and the state of the room.
Margins vary depending on where one gets their medicines and how the traffic in the area of business is and the competition. Different wholesalers price their medicines differently hence one benefits by researching and or buying from different wholesalers and distributors.
It’s a fact that the margins in the medicine business in Kenya are high. Sometimes obscenely high. But average margins are about 30%. However, this does not always translate to success in business. For as in every business if you don’t sell you don’t make money irrespective of how attractive the margins are.
With margins sometimes big then how to price could become a problem for the newcomer. There are no fast hand rules but if you have no proper idea then go with the trade price. Then if you are operating in location with a few number of chemists, and where it’s relatively easy for the consumer to move from shop to another then you need to find the common prices, or the price range for the most commonly used medicines. Consumers use the prices of the common medicines to form an impression whether a chemist is cheaper than the other.
Factors Influencing Revenue
- Suppliers: the significant differences in prices between the different wholesalers and distributors can dictate your overall margin. If your competition is buying cheaper than you, then you’re already disadvantaged.
- Related Items: to expand revenue stream, you can stock related items that customers may need like cosmetics, baby items.
- Management: have proper stock management systems as chances of actual employee theft cannot be dismissed. Make visits to check on how the chemist is being run on a daily basis if possible and check also on restocking, record keeping, opening and closing hours adherence. Dishonest and unprofessional staff can run your business to the ground.
- Location: this is all about the population and demographics. It also be based on income and education of the population too. It is all about accessibility and visibility hence convenience.
- Variety: have a variety of essential medicines based on local demand and demographics. Variety can also indicate availability of equivalents for each ailment and different compositions. You can also differentiate by stocking more expensive and rare medicines for diseases like diabetes and hypertension.
- Trust: trust is built around how knowledgeable one is in relation to the ailment and medicine. Also, some consumers self-diagnose and self-medicate as a first measure. Its same when dealing with prescription drugs, the presentation or alternatives that the chemist offers builds or kills the trust. How one talks, dresses, sobriety, friendliness, cleanliness, arrangement, branding and a general shop look signals professionalism.
Standard chemists in urban centres, as opposed to big and well-established pharmacies can report a monthly gross profit between Kshs. 15,000 and Kshs. 200,000 with an average of Kshs. 60,000. Daily sales range from Kshs. 1,000 to Kshs. 20,000 with an average of Kshs. 5,500. Lower income levels can be expected among small chemists in very low-income estates. Nairobi downtown reports the highest revenues and those domination high-end urban towns.
Reasons for Failure in the Chemist Business
- Lack of enough capital to sustain until breakeven point: Like any other business a chemist will not start making money on day one. It could take up to one year to get enough customers and understand the market proper to start making profits. If you don’t have enough money to keep the business going- pay salaries and rent then you will likely close down or sell your business.
- Location – Poor location means customers cannot see or access your chemist, there are not enough customers, there is so much cut throat competition resulting in downward price pressure or a big dominating player who attracts most of the customers, or customers don’t have enough purchasing power. This is coupled with the fact that there tends to be very many small chemists in such areas could make you struggle if you don’t have a proper strategy.
- Poor Stocking – This could mean having the wrong type of medicine for the demographics in your location, not having the most essential of medicine, not having enough variety, under stocking vis a vis the location and immediate competition, having slow moving fast expiring medicines. The latter leads to direct losses and some low capitalized chemists are not able to recover from it.
- Poor Sourcing – If you buy medicine at high prices relative to your competitors then your margins will be less, your prices probably higher and you will grow slowly. If you are
- tricked to buying counterfeits, medicine which is about to expire or substandard then it might backfire on you.
- Poor Management – This includes not having honest stuff resulting to theft and revenue leakages, staff stocking and selling their own medicine, poor recording keeping, staff who don’t inspire confidence in the customers, staff who don’t have the basic customer service skills, a casual attitude which affects things like opening and closing hours and even cleanliness of the chemist. All the above factors are enough to drive a chemist out of business.
- Operating Without the Requisite Licenses – If you don’t have the required licenses and PPB catches and impounds your stock, and perhaps takes you to court then you might never recover from that to reopen.
The average break-even point of standard chemists is about nine (9) months. This duration may be slightly longer or less depending on the other factors like location, competition and even management.
Consumer medicine buying processes can be dictated by:
- Convenience -This is where a consumer chooses to buy from the most convenient chemist in terms of location. Perhaps the chemist is near where she parks her car, workplace or on the way home. The consumer is looking at convenience before anything else.
- Referral - This is where the consumer is referred to a chemist by a colleague, friend or family member. The referring party has a positive experience with the chemist to an extent that she feels confident referring a friend. The good experience is based on service, price or just trusting the chemist.
- Reputation – At times you find that a particular chemist in an area has developed a good reputation. The origin of the reputation is sometimes not clear, but at other times it can be tied to price, medicine availability and genuineness. The reputation becomes part of the community and the reputed chemists become preferred in the area.
- Trust Signals – Consumers are sometimes looking for trust signals. This, depends on the customer, and could mean anything to make the customer trust the chemist. It could be simple things as the size of the chemist, the branding, name, the appearance of the attendants, location and anything that could make her trust the chemist.