EPISODE 01: STEVE GARCHOW, PRESIDENT, FORESIGHT BUSINESS CONSULTING

Episode’s transcript

Julio Martinez: 0:00

Welcome to the LATAM Medtech Leaders Podcast. This is a weekly conversation with medtech leaders who have succeeded in Latin America. Here, we deconstruct their past experiences in the Latin American region and formulate best practices for other leaders to follow. We do this in the interest of solving one of Latin America's most pressing needs: closing the life science innovation gap between the US, Europe and patients in Latin America who needs faster and easier access to innovative and breakthrough medical technologies. Today, our guest is Steve Garchow and Steve is an accomplished life science business executive with a proven track record in helping companies formulate strategy. Steve is also the President of Foresight Business Consulting, a Chicago based marketing firm. Steve is obsessed with making a difference in the way companies commercialize medical products. He also believes that any company can significantly improve performance through marketing. Steve helps clients by serving as a clarifying lens for marketing performance. Steve has been Vice President, Global Marketing for Baxter Healthcare, Chief Operating Officer for Avocet Polymer Technologies and Vice President Sales and Marketing for Analogix, Inc. Steve is also the author of the best-selling book Stratification: How Strategic-Decision Processes Will Create Sustainable Competitive Advantage. Steve earned a Masters in Hospital and Health Services Administration degree from The Ohio State University, and a Bachelor of Science degree with honor in Medical Technology from Michigan State University. Steve and his wife Marie have three children and reside in Libertyville, Illinois. Steve, welcome to the show. Thank you for having you here.

Steve Garchow: 1:58

Thank you very much, Julio. I appreciate it. Happy to be here.

Julio Martinez: 2:01

Excellent, Steve. it's really an honor, I mean, after going through your background, I am very pleased to have you on the show today. I'm sure listeners will learn a lot from past experiences in Latin America. So, Steve, could you please briefly tell us about your journey to Latin America? How do you get involved with the region?

Steve Garchow: 2:25

Sure. Well, I've always been involved with global marketing groups in the companies that I've worked for, now I'm going back, but in the eighties, our division at Baxter was the first one to go global and naturally we were initially most focused on Europe and North America and Japan. This was because they were large markets and we had direct sales and marketing organizations there. However, Latin America also received focus because there was a structural and economic reasons that our products, these are renal products, you know, products that are set up to take care of patients who need dialysis. So, there were structural problems that prompted, our products being right for certain countries. So, for the most part, we focused on Latin American countries where we already had a direct sales force and marketing organization and let me explain briefly by structural. Our company was, we were promoting a form of dialysis called peritoneal dialysis. Now, the most common form of dialysis is hemodialysis and in order for hemodialysis to happen, you need to have physical building, you need to put in water, you need to have machines and things like that. So, when I say structural, a lot of Latin American countries had difficulty finding the resources to build these large structures to handle hemodialysis patients. Our peritoneal dialysis products, which was our focus, was a home based therapy. So, you didn't need to worry about building new kinds of things. So, when you look at Latin America at the time, the fact that these not having the structures to do hemodialysis made our products perfect for many Latin American countries. So, it's not like there was some sort of structural issue with the country. It's just the way that the therapies were delivered that that's what I mean by structure. So, we didn't deal much directly with the customers, but what we did do is we were responsible for making sure that the company personnel were trained, either business activity or on the clinical side of things. So, that was my role at that time.

Julio Martinez: 4:56

Fantastic, and were you dealing with regulatory approvals in country or how it will work?

Steve Garchow: 5:07

Yeah, our organization certainly did, but since I was on the marketing side of things, it was really, our regulatory groups that were responsible and the way that it was structured was obviously our regulatory group had already pulled together the 510 k and each of the countries that we participated with in Latin America had their own regulatory affairs group. Now, I'm probably being very generous when I say group, it was probably almost always one person, you know, so what would happen is there would be dialogue between the US, or the global regulatory group and then the local country regulatory first manager to make sure that the product got approved. And it really, at that point time, the 510 k carried so much weight that I don't recall that there was a terrible flat of a additional information that we needed to provide in order to get approval in any given Latin American country.

Julio Martinez: 6:10

Yeah. In most countries, as long as you have FDA approval, you should be good to go and the approval should be pretty straight forward, also CE Mark approval. So, I kind of gather from your answers, Steve, that your company sold indirectly in every country. I mean, he had a direct sales force or was it dealing with through distributors?

Steve Garchow: 6:36

Well, for the most part, for the renal products, we almost always, we stayed out of a country where we didn't have direct salesforce. Now, later on, what would happen is when I moved to a different division, that was probably not as globally organized. We would deal with distributors in some of those countries, especially in some of the smaller Latin American countries. I mean, you know, places like Mexico, Argentina, Brazil, we always had direct representation, but some of the smaller countries, we did not and so we were responsible for dealing with distributors. Now, I never had a role in picking distributors and the reason for that is that, while we were the global group for the business in order to manage the Latin America region, we had a separate Latin American organization. They were based in Miami, but basically what they were responsible for was a lot of the business aspects. In fact, the country managers and all of the people who worked directly in that organization did not report to the global business unit, they reported to the Latin American group. So, we were never involved in setting up distributors. We were actually never even involved in, in hiring staff within the Latin American countries. Our responsibility was making sure that the people who are responsible for our therapeutic area were knowledgeable and capable of selling it to the customer base.

Julio Martinez: 8:24

Did you have do any special tweaking in your marketing strategy in Latin America?

Steve Garchow: 8:31

Well, the way things worked in our organization is that the global group was responsible for developing what I would call a global marketing plan. Now, this would lay out the features and the benefits that were important to sell. We would make connections with the thought leaders in the scientists who would be willing to go to Latin America and talk about things with the customer base and then we were also responsible for developing the sales and marketing collateral for the sales training materials for the clinician training materials and in general, we only gave like general parameters for pricing and now the local companies who we would then work with, they would be responsible for all of the field activity. They would be responsible for translating the collateral, into the local language and we relied on them to make sure that a lot of the imagery and things like that, were culturally sensitive; because obviously if we're sitting in Chicago, we don't know if we're stepping into some sort of cultural insensitivity. So, we would rely on the local groups to do that and then the other thing that we did was: we tried to be flexible on pricing because obviously the price of our products in the US would be different than the price of our products in Mexico or wherever. So, what we tried to do, we tried to be smart about this, so let me give you an example: Okay, one of our products was actually a drug product called, peritoneal dialysis. So, it's the key product that pulls the toxins out of the kidney patients body to keep them healthy. So, what happened was, every country had a base price for this standard dialyzate and what would happen is that if we came out with a new kind of dialyzate, something that's new and improved, what we would do is we would price it as a global group as a percentage of what each country's based product is. So, we would say, Oh, if you're going to come out with this amino acid solution, we recommend that, we never forced, we recommended, they price it each bag 20% higher than their base product bag. So, that way then what happens is we're not forcing them to charge a US price in Mexico, you know and that then allowed them to be price competitive within their market. Now, what I will say is we had enough margin to be able to do that. Now, sometimes, you know, especially when you're talking about instruments, you've got a high standard costs that you have to deal with and just taking that approach might not actually be successful cause you still might be pricing it at an unprofitable rate if you just take that approach that we did. But like I said, where we could, that's what we tried to do is to give the individual country pricing flexibility. Now in order to do that, you really have to be able to trust your country people that they're good business people and all that and in our case we had quite a bit of trust in our folks.

Julio Martinez: 12:07

Do you have any specific instances where demand generation was an issue in Latin America? I mean, there was not enough demand for your products. Do you have specific instances or specific case where you remembered that demand generation was an issue? I mean, there was no demand for your product from patients or from end users in general.

Steve Garchow: 12:35

I wouldn't say no demand, but when I was dealing with, one of the other divisions I worked with was the infusion pump business and the challenge there was originally what would happen is that we would just try and take our high end pump, you know, as we got refurbs we would send them down to Latin America and then we would sell them at a discount and that worked okay for some of the higher end customers, you know, the, hospitals in Latin America that have the resources be able to afford that. So, our demand problem really was in the area of the low cost pumps because in many countries, and just to give you an example, like our high end pump was probably costing$3,500 US, that was The US price. And the market, especially for what we would consider the low end, we're talking probably$1200 or$1300 US. So, obviously in this particular case, sorry, I don't really remember our standard costs, but at a minimum, 12 to 1500 would be really close to our standard costs and nobody could really make any money. So, the challenge was trying to identify a product that met Baxter's quality standards, that we could sell at that price point. So, our demand issue was finding a low cost pump that could meet customer needs, and quite honestly, we never actually developed one in house. We took some attempts to try and do it, but we ended up having to try and find a local manufacturer and help them bring up their quality standards to what our standards were. So, don't get me wrong, I'm not saying that Latin America company had poor quality standards, but what I'm saying is that when you're a big multinational and you've set probably higher quality standards, your bar is raised because you've got to deal with so many different groups and you've got the FDA breathing down your back. So, what I'm saying is they didn't meet our company's quality standards and what we had to do was to negotiate what we thought would be acceptable for every country, and acceptable within our global quality organization.

Julio Martinez: 15:21

What about reimbursement? Who was paying for your product?

Steve Garchow: 15:27

Well, the hospitals would pay for the product and quite honestly, I can't actually talk a lot about how that worked because that would have been a local country decision. We were more of the upfront sales and marketing folks where we'd give them the clinical principles and the business principles and I think I said earlier that they were responsible for all field activity. So, they would be the ones who would be negotiating with the hospital administrators or if it's a government payer, they would be the ones that would be negotiating with them.

Julio Martinez: 16:11

And this question is important, Steve, because, every country in Latin America has its own healthcare system. For example, in Mexico you have five different health care systems. So, it's really difficult to navigate the waters of every system. Whereas in Colombia and Argentina, you have one single payer which is the universal health care system that is organized by the government. So, it's a lot simpler to penetrate.

Steve Garchow: 16:41

And quite honestly, that's why I think what we were doing was the right thing. if you're a global group, you can't possibly understand all the nuances of all these different countries. So, we rely on the local marketing and sales organization to be able to do that. Now, we might, and I can't actually recall an instance where we did this, but I know we would have that if an organization was having trouble connecting with the right people in a local country, we might send someone down who has experience dealing with other regulatory people, other, you know, government payers and try and help them through that, but we would never kind of try and take that over and require a country to follow any particular model that we developed because, you know, our philosophy was think globally but act locally and that's my mantra today, you have to push decision making as close to the customer as you can and a global organization just can't do that.

Julio Martinez: 17:59

Absolutely, yeah, makes sense. Well, Steve, another question that I have is, in terms of the market access plan for every country, was there a market access plan or a business plan for every country, I mean, in other words, was it a very proactive approach that the company had in Latin America or was a reactionary approach?

Steve Garchow: 18:22

Well, we did a proactive approach and we planned entry into Latin American countries and there's actually a kind of a two prong plan, so our global group was responsible for creating this global marketing plan. I think I mentioned that earlier, now, this would lay out all of these things, but the Latin American group was actually the group that was responsible for putting together annual plans. So, the way the setup would work, I spent time in Australia, I was actually a business unit manager for Renal in Australia and surprisingly or maybe not surprisingly, Australia reported into the Latin America global group, so the way it would work is, me as the business unit manager for Renal in Australia, it was my responsibility to pull together what our sales goals would be, what are our expenses would be, you know, just putting together a full business plan for my unit. I would roll that up to my country manager and then the country manager would then take my plan together with a plan from all the other business units. They usually go over to Miami and make a presentation to demonstrate what it was we were going to be doing in the ensuing year and of course Miami would always say that's not enough; but you can see it was a very planful approach, now, I would work with the global group to figure out what new products are coming down the pipe and then if I felt it was appropriate for my market, I would incorporate it into my new business plan and I try and negotiate for resources. But as far as getting my target sales number, my target profit number approved in my expense budget approved. That all went through the Miami groups.

Julio Martinez: 20:38

Did you ever have the opportunity to travel to specific countries in the region?

Steve Garchow: 20:44

I spent time in Mexico, Mexico is the only place that I actually spent any time at all and part of that is, you remember I had talked about how I was in the global marketing group in the 80s for Renal, part of what had happened was when we set that up, we actually set up and I'll call him a global sales support group. So, and then within that group, several people were responsible for handling different countries. So, there were probably two people who were responsible for facilitating sales in Latin America. So, my responsibility would be to take these global plans for the products and then make sure that the each individual geographic sales manager knew enough and then they would be the ones that traveled down and then worked with the individual countries, now, we involved a little bit later so that there was more direct input, but I actually only ever got into Mexico.

Julio Martinez: 21:55

How do you like the country? What do you remember about it?

Steve Garchow: 21:58

You know, I don't remember the country so much because it was one of those things where I'm spending all day in the business office and then we might go out to dinner, but I do know our people were so gracious and they were so worried about us. I mean, I don't know if this was a particularly challenging time in Mexico or not, but they would not allow me to go walking outside unintended. They insisted that they picked me up at the hotel and they take me there and drew. So, I'm not stupid. I'll do whatever the locals told me. So, my biggest memory was how well they took care of me when I was there.

Julio Martinez: 22:54

Mexicans are very friendly, I've had good experiences in Mexico myself. Alright, moving along, Steve, in your experience with corruption or bribery in the region, in light of the Foreign Corrupt Practices Act, did the company have a specific policy about it? How was a company's position?

Steve Garchow: 23:17

Every company I've been with has had strict rules on corruption and bribery and if anything ever happened, the employee was immediately fired on the spot. There was never any question. So, quite honestly, I think everybody knew that and I do not recall a single instance where any employee got in involved in any sort of bribery or corruption kind of a problem and then the other thing you worry about is that if you have a distributor network set up, are they doing something that you wouldn't want it? Of course, that's harder to tell, but I must admit, I don't even remember hearing about any of our distributors doing that kind of thing. I mean, when you look at Baxter in particular, they had such an ethos about doing the things the right way, you really had to have a different person, you know, someone who didn't kind of agree with that whole ethical kind of a stand to get involved, and I just never saw people at Baxter that taking those kinds of this.

Julio Martinez: 24:37

Steve, so from these experiences, what could you say that is a best practice in Latin America? I mean, what did you learn to do or not to do?

Steve Garchow: 24:54

In my mind, I know I'm repeating myself a lot. The thing that I think is most important is you've got a global group and what they are going to be responsible for us, understanding the product and how you can sell that price. What are the important things? What are the things that customers really no one feel? Now, I will say this: our philosophy, you know, was that kidney in The US is the same as a kidney in Colombia, you know, and so I must admit we didn't spend a ton of time doing market research on the Colombian physician, you know, what are they need? We pretty much relied on our global understanding of how nephrologists treat the kidney failure. So, I would say if there's something we did wrong, we probably did not survey the Latin American customer well enough as we were preparing our global plan. So, that's kind of like a lesson learned that I think we should have done a better job of. It didn't seem to hurt us too much because as I said, the process, this therapeutic process we were selling is, you know, it's all about just few diffusion and osmosis and that that's kind of the way our bodies work. So, I would say this, the key learning then is to allow the local country product managers to have enough decision making flexibility that they can adapt what the global group is selling to meet individual country needs, their country needs. That's to me the absolute biggest most important thing to do, and I don't have the luxury of seeing what other companies have done in Latin America, but it has always been intuitively obvious to me and my organization, that's the best way to go.

Julio Martinez: 27:13

Makes sense. All right, Steve, Could you please share with us any major trends do you see happening in Latin America in the MEDTECH industry? Have you identify any?

Steve Garchow: 27:26

Well, I'm not sure I see any major trends in Latin America, but I wonder whether one thing is going to have a very positive impact on Latin American access to high tech medical products and that's language. What I mean by this is we all know that the Spanish speaking population is one of the fastest growing groups in America, and the result is that Spanish is becoming more and more prevalent around us. You've got TV shows, you got cable networks, you've got billboards, you know, all of these things with Spanish language are popping up, and I think that as a result, more and more people are interested in picking up Spanish as a second language here in The US and just, so you know, each of my children were required to take a language in high school. Every one of them picked Spanish and I think if you look at white anglo saxons, you know, if you just kind of ask them, I would say the vast majority of people tell their kids that if you're going to learn a language, Spanish is what you need to learn. So, what does that have to do with Latin America and Medtech? And so what I believe is that with Spanish becoming more prevalent and the younger people learning it, I think that medical device companies will find more and more young employees who want to get those products into Latin America. They speak the language in all likelihood, they'll want to experience the culture and so from my perspective, I think commercialization in Latin America is going to be an outgrowth of the fact that The US country is really becoming more Spanish fluent in that, that's what I think's going to happen.

Julio Martinez: 29:29

And more culturally aware of the region, because it's already in the younger generations heads speaking Spanish and the culture of the Spanish community. Because isn't only about learning the language, it's not about learning"mañana""cerveza". It's also about learning the culture that is around the language and to think, that's the beauty of learning a new language.

Steve Garchow: 29:58

Yeah, and I think that's what most high school classes are all about. It's not just teaching what to say, it's introducing the kids to the wider world of what the culture is like, associated with the people who speak that language. I think you're right.

Julio Martinez: 30:19

You are right track thinking that way. It's a very interesting perspective. I actually didn't think about it. Thank you for that. Well, Steve, before we close the show here, do you have any final recommendations or best practices for the listeners? Any final thoughts?

Steve Garchow: 30:39

Well, I think it's really only the obvious, I think Latin America is becoming a prime area to focus on and I personally believe that if a company neglects Latin America, they are going to re really hurting their growth prospects. So, which I'm sure that's what this podcast is all about is creating additional awareness for what kind of a market opportunity Latin America is for medical device companies, and I just fully agree with that whole proposition.

Julio Martinez: 31:16

Well, Steve, I have no words to thank you for your participation in the podcast, is being a delightful interview and, I look forward to keeping in touch. Thank you.

Steve Garchow: 31:28

That'd be great. Thank you very much for having me.