The African Startup Using Phones to Spot Counterfeit Drugs
Drug Lane runs through a market in the heart of Accra, Ghana. It’s past the office towers going up to the east of the central business district, past the pushy vendors with fake Louis Vuitton luggage, and past the women selling trays of raw beef under the midday sun. The alley bristles with signboards for pills, powders, and other substances. One store is packed to the rafters with boxes of painkillers and antibiotics. On the wall are two posters: One is for Coartem, a malaria treatment made by the Swiss drug company Novartis, and the other advertises something called Recharger, supposedly made from the male silkworm moth. The notice is vague about specific uses, but it does advise using condoms.
The man behind the counter, Yaw Frempong, can’t recommend either drug—at least not formally. Like 85 percent of the people selling medicine in Ghana, he isn’t a pharmacist. Most of his stock comes from China, India, and Malaysia, imported by Ghanaian distributors who supply everyone from “licensed chemical sellers” like him to actual pharmacies and hospitals. It’s a system so porous that as many as one in three medicines sold on Drug Lane could be counterfeit, according to the U.S. Centers for Disease Control and Prevention, compared with about 1 percent in the U.S. and Europe. The fake drugs often have no active ingredient at all, or just enough to pass quality-control tests, and visually they can be indistinguishable from the real thing. One study, published by the American Journal of Tropical Medicine and Hygiene, found that in just one year, fake and poorly made malaria drugs contributed to the deaths of more than 100,000 children across Africa.
Nongovernmental organizations, international agencies, and other groups have tried to address the problem. A Ghanaian entrepreneur thinks he has an answer. Bright Simons announced the creation of his company, MPedigree Network, at a news conference on Drug Lane in 2007. MPedigree sells software that manufacturers use to label individual packs of medication with a random 12-digit code hidden under a scratch-off panel on the packaging. When a person buys medicine, she can text the code to MPedigree for free and get an instant reply telling her whether the product is authentic. Today, MPedigree says it has labels on more than 500 million drug packets. Clients include the drug companies AstraZeneca, Roche, and Sanofi.
As it’s grown, MPedigree has kept its identity fluid—adopting the startup label to attract attention and court investment, and other times emphasizing that it’s a social enterprise, the better to work with large multinationals with corporate responsibility mandates. The data MPedigree is collecting on African consumers has opened business possibilities that are strictly for-profit. Today the company authenticates a variety of commonly faked goods, from makeup to electrical cable.
It’s an unorthodox path for a startup, but then nothing about starting a company in Accra is conventional. MPedigree’s labels are printed in China and India, and its data centers are on three continents. Very little of this Ghanaian company’s business actually happens in Ghana. It’s a tough place to work. Blackouts can last 24 hours. The cedi was for most of this year the worst performing currency in sub-Saharan Africa. “We don’t keep infrastructure locally,” says Simons. “It’s virtually impossible at a reasonable cost.” He outsources critical services, such as Web hosting, to companies in places with regular power supplies. MPedigree puts up with it all, Simons says, in part to observe consumer behavior that outsiders never could—but mostly because it’s home.
Simons, 33, shuttles among the company’s offices in Egypt, Ghana, India, Kenya, Nigeria, and Tanzania and scouts for new business in Bangladesh, Rwanda, Sierra Leone, South Africa, Uganda, and Zambia. One evening in May, he’s in the lobby of the charmless, glossy Fiesta Royale Hotel in Accra. He keeps breaking away from an interview to read e-mails about a single authentication code that’s been checked 1,500 times over the past few days. Somebody has taken one genuine code, made thousands of copycat labels, and attached them to counterfeit morning-after pills somewhere in Nigeria. MPedigree is calling everyone who’d tested the fake code to find out where they got the drug and alerting regulators and law enforcement. A similar thing happened in March, Simons says; MPedigree was able to use its data to track down a warehouse full of fake malaria medication.
Simons is deeply geeky, apt to digress into topics such as the lives of galley slaves and obscure characters in Mad Max: Fury Road. He grew up in Sunyani, a small city about 250 miles from Accra. He played on his own until he was 8 because his parents, worried about the consequences of Ghana’s last coup d’état, wouldn’t let him go outside. Simons studied for a time in the U.K., then bounced around Europe on a research grant. In 2004, watching as Facebook was born and Google became a behemoth, he decided to start an enterprise in Ghana. He’d caught startup fever.
In London, Simons had seen organic food sell at a premium, and he realized Ghanaian farmers were missing out. Their produce was organic, but they couldn’t afford the inspections to prove it to wholesale buyers. What if there were a cheaper way to determine the origin of a head of cabbage? While still in Europe, he enrolled in business plan competitions and recruited Ph.D. students to do coding. The software they wrote assigned random codes to vegetables, printed on their labels; the idea was that buyers would go to a website, enter the code, and gain access to a webcam feed of the specific farm it came from. It was a hazy concept, more about trust than ironclad proof of origin, and it “failed spectacularly,” Simons says, when few farmers were able to afford webcams.
Simons looked for other ways to use the idea. One target seemed especially worthy: Bootleggers were flooding West Africa with fake drugs. Simons found it was a lot easier to convince people that pharmaceuticals needed to be traced to their source than cabbage. With money he earned from a consulting gig, he and his coders started building a product that actually worked: software that created unique codes, stored them in a database, provided instant verification by text message, and sent alerts to buyers if a code was bogus and to manufacturers if a code was used more than once. Simons incorporated MPedigree as a nonprofit in 2007 and called his news conference.
The need was urgent. In an especially grim case, in November 2008, children in Nigeria started dying after unexplained fevers and vomiting. After three months and 84 deaths, officials traced the outbreak to a painkiller. The manufacturer had replaced the harmless propylene glycol—a faintly sweet compound used as a solvent in medicines—with diethylene glycol, a faintly sweet industrial solvent sometimes used in brake fluid. The latter attacks the central nervous system and causes liver damage and kidney failure. In Nigeria, three-quarters of the children who took spoonfuls of syrup from batch 02008 of My Pikin Baby Teething Mixture died.
MPedigree’s first labels went on 3,000 bottles of a similar drug in Ghana that year. Parents checked every last code, Simons says. He trumpeted the response rate to government agencies and drug companies but found few people willing to take a small nonprofit seriously. Ghana is littered with failed attempts at charity. Simons discovered that pharmaceutical companies weren’t likely to do business with them; venture capital firms wouldn’t fund them; regulators would ignore them; and talented developers wouldn’t work for them. MPedigree’s chief engineer quit to start a for-profit rival. In 2009, Simons reclassified MPedigree as a social enterprise—a hybrid organization that “owe[s] equal duty to our consumer clients, pharmaceutical clients, impact investors, and regulatory allies.” (A nonprofit division remains, mostly to work with governments.)
Funding remained a problem. Startups in Africa raised just $27 million in 2014, according to Venture Capital for Africa, a company that connects entrepreneurs and investors. Most of it went to founders in Kenya, Nigeria, and South Africa. Ghana has had few obvious startup successes. One, a customer service tool called Dropifi, moved to Silicon Valley to join an incubator there; another, Saya Mobile, was bought by an Indian company. The lack of big “exits”—acquisitions or initial public offerings—is part of a self-reinforcing cycle that keeps investors cautious, says Leticia Browne, head of investor relations at the Ghana Angel Investment Network. Most new ventures are either self-funded or bankrolled by high-net-worth individuals who know a company’s founders personally, she says.
Simons reinvested early profits and paid staffers with grants from Ashoka, a network that funds social entrepreneurs. MPedigree struggled in East Africa, pulling back because it couldn’t invest in call centers. “I started to realize that we couldn’t do this as a little startup,” says Simons. He had to figure out other ways to grow. He knew that as a social enterprise, MPedigree could appeal to large corporations that had budgets for projects with humanitarian (and PR) appeal.
MPedigree’s two biggest needs were cloud servers to manage data and partnerships with major cell phone networks. Simons made calls until he got a meeting with Hewlett-Packard and sold them on his company’s technology and mission. He spent months taking red-eye flights from Accra to London, changing into a suit at Heathrow and taking the tube straight to the offices of a law firm that was giving MPedigree pro bono legal advice “to deal with all these fire-powered lawyers that HP had lined up,” he says. “We had one interest to protect: our intellectual property.” In December 2010, HP announced it would run the data centers that host MPedigree’s codes—saving Simons $10 million, by his estimate, in infrastructure costs. He also persuaded Safaricom, a Vodafone subsidiary; MTN Group; and other mobile carriers to subsidize the cost of text messages.
With its technology upgraded, MPedigree was able to expand to India and other markets. A successful 2012 trial with Nigeria’s National Agency for Food and Drug Administration and Control was a breakthrough. “Once Nigeria endorsed it,” says Simons, “a bunch of companies started to take us seriously.”
Today, MPedigree’s headquarters is a pastel-colored townhouse in a neighborhood between central Accra and the sprawling suburbs. There’s a diesel-powered generator about the size of an SUV in the driveway. The building looks like an abandoned show home, until you get to what—judging by the built-in wardrobe—was supposed to be the master bedroom. This is where the engineers work, mostly on stuff that doesn’t require reliable access to the Internet: coding, design, strategy. One morning in May, they’re examining text messages. One, presumably from a frustrated counterfeiter, simply reads, “You guys are naughty.” MPedigree’s second-in-command, Selorm Branttie, is looking over call data from the company’s helpline. Users have started asking for basic medical advice.
Occasionally, people call about a product that’s not even supposed to be on the market. One drug distributor didn’t know that its warehouse manager was selling batches of a new malaria treatment until MPedigree started getting calls and texts. “That is one of the biggest problems with local [drug companies]—they have very little control over their own supply chains,” Branttie says. “That is how counterfeits are able to thrive.”
Like other startups, MPedigree has been frustrated at how difficult it can be to get its digital product into the real world. “It’s not just a new technology; it’s a new industrial system,” says Simons. “Companies literally have to change packaging.” It takes months, sometimes years, to figure out how to efficiently get the labels onto products, and companies have balked at adding another step to production lines. Some clients print the codes onto packaging, some have MPedigree print them, and some use stickers. MPedigree tells potential clients it can keep costs within 1 percent of a product’s wholesale value. That limits its own margins.
“If we want to solve counterfeiting but the solution makes prices go up, it will just increase counterfeiting,” says Simons. “That’s stupid.” It looks like the startup is leaving money on the table, but charging more, he says, would reduce the number of clients using the system. There are only four countries—Egypt, Ghana, India, and Nigeria—where enough companies have signed up to make MPedigree’s solution profitable, according to Simons. He won’t give specifics about how much revenue the company has, beyond “in the millions of dollars globally.”
MPedigree could grow faster if regulators push for stronger chain-of-custody rules. In California, an e-pedigree law will soon require drugs sold in the state to come with a record of every step between factory and consumer. In Nigeria, scratch-off codes are now mandatory on all malaria drugs and antibiotics. MPedigree has a number of competitors using similar scratch-off codes or technologies ranging from holograms to radio-frequency identification chips. PharmaSecure, based in Lebanon, N.H., says its labels are on 1.5 billion packs of medicine, mostly in India. Kezzler, based in Oslo, has worked with Pfizer in Hong Kong and Royal Dutch Shell in Kenya. Then there’s Cambridge (Mass.)-based Sproxil, the company co-founded by Ashifi Gogo, MPedigree’s original chief engineer, which has attracted an undisclosed amount of venture capital.
MPedigree is betting that being based in one of the regions worst hit by counterfeit drugs is a competitive advantage. “African entrepreneurs, African startups, African companies, of course are the first and the best to find a solution to local problems,” says San Francisco-based entrepreneur Jorn Lyseggen. He founded the marketing company Meltwater, which backs the Meltwater Entrepreneurial School of Technology, a startup incubator in Accra that’s invested up to $200,000 in more than 20 technology companies.
Being in Africa certainly exposes MPedigree to new frontiers of counterfeiting, allowing it to expand beyond medicine. On the other side of Accra’s market district from Drug Lane is a textile store, stuffed with bolts of brightly colored “GTP” cloth, made by a subsidiary of the Dutch luxury fabric company Vlisco. The company says that pirated versions of its products, sold nearby for a fraction of the price, have cut its market share from 50 percent to just 15 percent in the past decade. It adopted MPedigree’s system in March and uses the data to send text-message advertisements to customers.
MPedigree thinks such data can become its most valuable asset, and it plans to turn the millions of text messages it receives into a massive trove of information about African consumers. “Brand owners in the past, especially in Africa and Asia, have had to rely on unreliable and low-quality market research,” says Simons, who plans to offer companies data about their position in the market. “The long-term vision is to be the most trusted repository of information about consumer goods. What would people pay to get access to those analytics?”