It is not easy for Karim Khashaba to explain what his company does. Pharmacy benefits managers (PBMs) rarely make front page news or pop up during coffee table conversations.
PBMs started off as administrators for prescriptions on behalf of medical insurance companies, but have since expanded their role to provide everything on the pharmaceutical supply chain, from operating prescription gateways to hospitals and doctors all the way to automating approvals until actually delivering the medications to patients.
“This is kind of the opportunity we saw in Egypt, but we also generally saw across multiple emerging markets or markets that do not really have a super-developed benefit management or insurance landscape together with a fragmented pharma landscape,” explains Mr Khashaba, who co-founded PBM company Yodawy in Egypt in 2018.
“It's very difficult for a pharmacy mom and pop shop to develop complex capabilities, and if the country is dominated by mom and pop shops, then they need help to bridge the gap.”
While PBMs provides access to medications for those with e-prescriptions, supporting patients by saving them time, they also save money for insurance companies, because there's a lot of waste and fraud and abuse of medications, he says.
Having returned to Egypt after living abroad, Mr Khashaba identified the gap in the market between pharmacies and insurance companies as well as the lack of automation and digitalisation in the sector.
Thanks to his family business that dealt with medical equipment distribution, he got a chance to see hospitals and clinics across the country, and found the need for change in the market.
A computer scientist by education, Mr Khashaba spent 10 years as a management consultant for Booz and Company before he put on his entrepreneurial hat.
“I'm not a healthcare professional by education or experience, I just had to learn it along the way,” he says.
Yodawy, which means “to heal” in Arabic, started off as a side business by Mr Khashaba — its chief executive — along with Sherief El-Feky and Yasser AbdelGawad. It landed its first funding a year after its launch, raising $1 million from Egyptian venture capital funds Algebra Ventures and C-Ventures.
That was the “defining point” when they were able to quit their jobs and actually start to build the company, he says.
It serves 200,000 patients per month and has a network of about 2,000 pharmacies across the country.
As part of its medical insurance infrastructure, it has built an automation engine that basically allows anyone to enter a prescription with the system confirming whether it is approved, rejected, partially approved or routed to a specialist to review.
Yodawy has also built a supply chain for chronic prescriptions.
“We were very interested in chronic patients specifically because we felt this [was a] magnified pain-point because they have to basically repeat this process on a monthly basis,” Mr Khashaba says.
The company caters to more than 50,000 recurring chronic patients every month and saves them more than 100,000 monthly hours of queuing to receive essential medication, it said in February.
While it took Yodawy two years to convince the first insurance company to come on board, it now works with 35 providers in Egypt.
“So we've become kind of the de facto partner for anything related to prescriptions, we've integrated with hospitals, we've launched our own e-prescription gateway. So now about 20 per cent of prescriptions here in Egypt within the private health insurance are digitised or e-prescriptions from the onset,” he says.
“And as the concept grew, we became more sophisticated, we started to generate data analytics for insurance companies to identify fraud and abuse. And now we're basically integrated into the pricing of the medical policy.”
Egypt’s healthcare technology market is growing as it seeks to meet booming demand in the sector.
The revenue of the sector, spanning digital health applications, digital health devices, telehealth and online pharmacies, is expected to reach roughly $498 million this year, the Egyptian Cabinet's Information and Decision Support Centre (IDSC) said in a report this month.
It is further forecast to rise to $677.6 million in 2024 and $885.7 million in 2025.
“Despite the global economic crises, Egypt continues to implement the universal health insurance system. It is considered … a presidential priority in the path of human development,” the IDSC said.
Following its initial funding, Yodawy raised $7.5 million in 2021 from UAE-based Global Ventures and Middle East Venture Partners, along with Algebra, as part of its Series A round.
In February, it further raised $16 million in the first close of its series B funding round which was co-led by Delivery Hero Ventures — the venture capital arm of food delivery platform Delivery Hero, and Global Ventures with participation from a Japanese fund AAIC Investment and Jeddah-based Dallah Albaraka.
Its existing investors including MEVP, C-Ventures and P1 Ventures also participated in the round.
The latest funding has brought the company’s total capital raised to $24.5 million.
Yodawy, which said its revenue increased 400 per cent in the 18 months between its Series A and Series B funding rounds, currently has multiple income streams.
These include software as a service (SaaS) fees from insurance companies on its digital services and automation services, and a commission from pharmacies for routing orders to them.
“And we have our own supply chain for chronic medications where we are basically also a pharmacy and selling medications directly to the patient and to the insurance. [So we have a] full supply chain that delivers across 38 cities in the country,” Mr Khashaba says.
At present, Yodawy doesn’t face much competition despite the mushrooming of HealthTech platforms across the region.
“If I'm to be very specific about Egypt, I see little competition in what we do at the moment. You have a lot of online pharmacies, but very few benefit management platforms,” Mr Khashaba says.
Running a PBM business is extremely “tough” due to the nature of operations.
“To be honest, if you asked me to go back and do it again, I wouldn't,” he jokes.
“But I think competition is great for the market. It's not good for the market to have a single player … even from an investor's standpoint. There need to be good returns … I don't want the healthcare sector or MedTech in general to be seen as niche.
“And in my view, there's a massive need — it's something that affects almost everyone. It's not isolated to a specific subgroup of people, everyone will need to take medication sooner or later, everyone would want a dignified, simple experience. And so, I think, what would be great is for there to be a lot of start-ups that are working together, because healthcare is very complex,” he says.
Not surprisingly, a big part of Yodawy's operations is driven by technology.
“Technology is kind of our primary advantage — if we did not have technology, we'd have 4,000 people [instead of 500 at present],” he says.
“So it's really a product-first or tech-first company.”
Looking ahead, the start-up is planning to expand internationally, with an immediate focus on the GCC region.
“The GCC is very interesting because we're familiar with it … There are a lot of synergies. It's a matter of finding strategic partners to execute with and a matter of starting with the right market. Some of the North African countries are interesting as well. So we don't see a problem being in 10 to 15 markets in three to five years.”
Q&A with Karim Khashaba, co-founder and chief executive of Yodawy
Who's your role model?
Jurgen Klopp, the coach of Liverpool. In terms of his management style and what he's created with the team and just kind of philosophy. I'm a football fanatic. So I like him a lot.
If you could start all over again, anything that you would do differently?
Yes, I would. I would have focused on the B2B concept from day one. And I would have built the supply chain for chronic medications from day one. I think it took us a bit longer to get to what is obvious.
What new skills have you learnt while setting up the company?
For starters, managing people at scale. That's a skill that I did not have before. I never thought of myself as a salesperson, I was kind of the nerdy engineer type. So that was new to me.
Also, learning more about HR at scale as well. I suppose it's always easy to manage people you can see, you can talk to every day, but beyond a certain scale, you cannot basically have that personal touch with everyone. How to then build the culture? At scale that can be tough.
What is your advice to other entrepreneurs?
Don't start a company because you're bored with your job, I've seen way too many people do that without much thinking in advance.
Being very thoughtful about the company you're about to start is very, very important. It's not just a matter of being part of the hype, you have to actually create real value for customers and investors.
Also, picking the right people start the company with — the early team is everything, they make or break [the company].
What's your vision for the company? Where do you see it headed?
I try not to think too far in advance ... but I really want the company to complete international expansion this year. And I always dream of the future where we are in 10 plus countries and not only in our side of the world. I see big opportunities on the European side as well where there is no player that's offering this.
We are currently serving about 200,000 customers [per month]. The idea is if we keep going at the same pace, I think we want to be serving more than a million customers a month within the next two to three years. That's kind of our aim.
