EPISODE 04: ALEJANDRO INFANTE, PRESIDENT, PROCURSUM MEDICAL

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. Today our guest is Alejandro Infante. Hi, Alejandro, it's great to have you here. Welcome to our podcast!

Alejandro Infante: 0:43

Thank you, Julio, it's a pleasure to be with you.

Julio Martinez: 1:47

Alejandro is President of Procursum Medical; a company that helps manufacturers of medical devices looking to launch and commercialize their products in Latin America. Alejandro is a global senior executive with over 30 years of experience in healthcare including P&L management, go to market strategy, setting up new operations and building organizations overseas. He has a unique background in international markets for pharmaceuticals, generics, medical devices and nutritional products. Prior to founding Procursum Medical, he held the position of President of International with Hill-Rom where, as a member of the executive leadership team, he managed a$500M business with focus on improving profitability. Alejandro work in Europe and drove sustain profitability and also emerging markets around the region. Alejandro was also President of the Americas, VP and General Manager of International Commercial Operations and Regional Director for Latin America with Hospira and also General Manager for Mexico and Poland with Abbott Laboratories. So, Alejandro, could you please briefly tell listeners about your journey to Latin America? How do you get involved with the region?

Alejandro Infante: 2:10

Sure, absolutely. I think we need to start by saying that I am Mexican, so I am Latin American by not only by birth but also, you know, by heart. Started my career with Abbott Laboratories in Mexico where I spent about 20 years of my career, most of them in Mexico, I did go to Europe to Eastern Europe to be General Manager in Poland and then return to Mexico to be General Manager of the affiliate at the beginning of 2000. In the 2004 Abbott spinoff Hospira, what used to be is a hospital products division into an independent company, and then I became originally the director for Hospira in Latin American, that was truly my first original assignment with the responsibility to manage all the separation from Abbott, the set up of the new company, the set up of the commercial organizations both in countries where we had a direct presence, so we have decided to have a direct presence and then in countries where we decided to operate through a distributor. So, that was kind of one of my first experiences in dealing with decisions in terms of go to market strategy, how do we go to marketing and market as complex as Latin America. Then I moved to the Hospira headquarters in Chicago, I became Vice President and General Manager for International where I also manage the rest of the world outside North America, I became also president of the Americas where I had responsibility for the US business for Canada and Latin America, and of course the US business, you know, was my main responsibility, but I still had responsibility for Latin America all those years. In 2010 I joined Hill-Rom as President of International, so Latin America was also one of my fastest growing regions. So, you know, for the past, I don't know, maybe close to 20 years, been involved with international markets in Latin America, always very close to my heart and, of course, an important part of the business.

Julio Martinez: 4:38

Thank you, Alejandro, that was a great introduction. So, do you have any clinical research experience in Latin America?

Alejandro Infante: 4:45

You know what, that's, unfortunately, an area where I don't have experience, but I can tell you that it is an area where there are significant gaps that somehow will have to be covered by other people coming after me, to make sure that patients in Latin America have access to the newest technologies, same as patients from other parts of the world who have access to them without having to, you know, wait for long periods of time like it usually happens today.

Julio Martinez: 5:20

All right, no problem. So, let's talk about your practical experience, selling medical technologies in Latin America. Could you please describe or briefly summarize your involvement in the region?

Alejandro Infante: 5:33

Sure. So, how I was mentioning a few minutes ago, I have had to make decisions in Latin America in terms of how do we go to market, Do we set up our own organization or do we go to market through a distributor? and this is a major decision for multinational companies, setting up its own organization has its own set of challenges because you need to have a certain critical mass, not only to make it profitable, but also to make sure that, you can research properly what organization within all the corporate functions that multinational companies usually require. So, unless you have a significant level of business, a significant chunk of business, it is very difficult to set up your own organization in Latin America, and then there are always peculiarities around, you know, market access, market knowledge, customer intimacy, but it is certainly one of the options that multinational companies, have and I actually have experience setting up these, but in my Hospira days we set up from scratch direct operations in Mexico, in Colombia, in Chile, and in Brasil. Unless you have a significant level of revenue and gross margin to make it work, most companies central in the market in Latin America have to do it through a distributor and, when you operate with distributors, be in Latin America or in any other region, emerging markets region, you run into a number of risk or multinational companies may run into a number of risks. To begin with, the ecosystem of distributors in Latin America is very, very fragmented, you know, in every country there are a handful of large, reputable, very professional distributors then there's what I would call the tier two or you have distributors that also have a long stand in the market, maybe not the same financial and commercial strength, you know, after that, you have literally thousands of distributors which, you know, may have very different levels of professionalisms because of their size, it's a challenge to collaborate with them. So, multinational companies really need to understand first, one of the grants to accomplished when entering the market, which are the markets that they want to focus on? What are the risks that you run when you are operating with a distributor? Which can be anything from financial risk? Am I going to be paid? Am I going to recover my account receivables? Is the distributor going to go bankrupt? Or someday do they have a significant concentration of revenue in a few customers? Do they have a significant concentration of revenue coming from very few suppliers? Are they diversified enough? Do they have actually broad coverage both geographic and in terms of the institution in the countries where they operate? Can they execute fuel corrective action or recalls if your business demands it? Do they have traceability when it comes to placing medical devices or what is their quality system? and truly, absolutely not the least and one of the most important issues, Do they operate within the compliance guidelines that multinational companies require, especially in light of the FCPA, you know, the Foreign Corrupt Practices Act that the US government and forces or the UK bribery act. So, there are many risks when operating through distributors in the region, but it can be done in a profitable way and it can be done minimizing the risk if you choose the right distributor and for them, this is a matter of having...... understanding, again, of what your needs are? What you are looking for in a distributor? Who are the main players in the market, How do you run your own due diligence? And, after you'll sign the distribution contract that doesn't end there, you still need to deploy the resources where they're from your headquarters or look at it in the region to make sure that you're managing the relationship on a day to day basis, understanding what they're doing, understanding the final customer needs and making sure that you can solve any issues and there would be many individually operations that arise. So, it's a long journey for a multinational company to set up a distributor, but if you find the right distributor and due diligence and, if you work very closely with them over the course of the business, it can be a very profitable business operation and it can certainly show up your grow internationally in the region and, you know, be part of the overall growth of the company.

Julio Martinez: 11:51

In your opinion, Alejandro, what are the best practices to find a distributor in Latin America?

Alejandro Infante: 11:58

That's a good question because, again, it depends very much on what do you want. I can tell you some of my preferences. For example, I like to look for distributors that have a complimentary portfolios to my company, that have good coverage, geographic coverage in the country, that are diversified enough so they'll be able to withstand the market risk and the economic and financial volatility that you find in these countries in Latin America and in other parts of the world; I think, managing volatility is definitely the end of the game in some countries. So, there are not source prevailed that they will not focus on certain segments willing off or they will not pay attention to your product line, but they're not so concentrated that they run into significant risk out of concentration, and by extension you're run into the same risk of being out of the market. You have to talk to a lot of people, you have to ask for references and you have to do your own due diligence in terms of what they're bringing to the market, and you've got to make sure that what they're bringing is exactly what you need, and everything that I'm saying. I think there is a delicate balance because a lot of companies may run into the temptation of having overwhelming due diligence processes, and you'll get to understand you're not buying a distributor, you know, you are going to be a part of the distributor. So, you can not overwhelm them with requests, especially for the end you decide not to appoint them a few distributors, but on the other side, it can be just a two hours meeting and a handshake, you know, you need to make sure that you understand what you're looking for and oftentimes you gotta be willing to either get the right help, get the right resource from someone who understands the market, who has a relationship, who can help you navigate the distributor segment in various countries which, again, it is not an easy segment to navigate. So, some multinational company, live your art world, gas? In the back pocket and go into the markets consciously knowing that you don't know everything and there is a lot to be learned from local people.

Julio Martinez: 14:53

All right, Alejandro. Have you ever been involved in obtaining regulatory or market clearance approvals in Latin America?

Alejandro Infante: 14:59

Yeah, sure. I think, the one thing in Latin America is, it is very diverse. So, the process is in Mexico with the Cofepris, you know, will not be the same processes as those within ANVISA in Brazil, or INVIMA in Colombia, and ANMAT in Argentina, what have you. So, it is very important that whether you set up your own organization or whether you appoint a distributor, it is very important that the local organization has the right knowledge for, you know, in relationships to process the registrations in an efficient manner. My understanding is that regulations have been changing in a number of countries and sometimes it is, it is for the good, countries like Mexico where there are expedited procedures if you already have FDA approvals, but do you also have countries like Brazil, which continued to be famous for the delays in the registrations, even though now it takes much less time than in the past take a registration from ANVISA. So, although I'm not a regulatory person, I have the manage the teams in charge of getting the regulatory approval and you know, what I can say is, again, you're going to be very close, you got to understand the markets, and defined very well your priorities and once you decide to go in you have to resource it properly.

Julio Martinez: 16:47

Good. All right, so have you been involved in strategies and tactics to increase end-user demand for a medical device?

Alejandro Infante: 16:53

Yeah, absolutely, and again, this varies very much. From one side of the spectrum, if you'll have your own operation and you have your own sales force, then you can decide how you want to deploy your sales force and do want to deploy your sales force on a geographic basis? Do you want to deploy your sales force by certain targets? And target in certain institutions or segments of the market? Do you want the dedicated resources for key account management? Or especially in government tenders relationships with healthcare practitioners?. You come to a lot of control when you have your direct operation and to some stand multinational gravitate towards what's been successful in other parts of the world, which is, sometimes it's a little bit a, it's a mixed blessing and a mixed curse because if you access to what has been successful in other parts of the world, you don't need to reinvent the wheel, but it may not work, you know, somewhere else, but multinational tend to do that and there's a number of decisions that you need to make, you know, sizing, how many people do you need, all of that. Then you have on the other spectrum, on the other end of the spectrum, when you operate with the distributors and again, you need to understand, you know, when you're appointed a distributor, what are their capabilities for demand generation? How many people do they have in the sales force? How are they structured? How many products do they have in their bag? How many other product lines are competing for the attention of the sales force? What's the incentive program? Are they going to be reasonably incentivized to sell your product line? Versus not a competitors because you will on partner with a distributor that also sells a competing program, but some other product line which may or may not be complementary to yours, but you have to understand what the distributor is bringing to the table in terms of demand generation capabilities, and then you have somewhere in between where you making a hybrid model, and actually we implemented that hybrid model back in my Hill-Rom days in a number of markets where, yes, the distributor would have its own sales force and its own demand generation team, but as a supplier, as a multinational manufacturer, you will also have feet on the ground, people that are not only very close to the distributor, but that also helps the distributor in terms of navigating the technical complexities, the regulatory challenges and understanding the customer needs. So, if ever that the relationship with the local distributor has to change as you had someone in a market, you know, who would have the know-how and the knowledge and these people are usually very strong from a product knowledge standpoint, but it also require some additional level of investment; you can't just go and hire people in certain countries without having a proper legal entity. So, you need to invest in all that, you need to invest in managing, all those legal entities what is a good in between where you don't go full-fledged into setting up your own capabilities with your own sales force; which may not have enough critical mass or enough products to pay for itself, but at the same time you're not just relying on whatever the man generation capability the distributor may have. So, you'll come to a happy medium, but a happy medium it's also going to require some resources and again, it depends very much on your segment, what kind of demand generation capability you are going to do, but normally you need to be very close to healthcare practitioners, make sure they understand your product, make sure that you have a way to influence the definition of specifications, the other benefits of your products and so on.

Julio Martinez: 21:29

Okay. So, what about pricing? Is there any price sensitivity in Latin America?

Alejandro Infante: 21:35

That's a very interesting question. Surprisingly, I would say that in my experience in medical devices, pricing for the end-customer, whether it is a hospital institution, a clinic, a practicing physician, what have you presently is not cheap, so you oftentimes, when you buy medical devices in Latin America, you're buying them at a higher price than what you would get them for in the US and there are some very good reasons for this. Of course, there's an added component of our logistic expense, either you have to ship the product there, you have to clear customs, there are customs duties several countries; Brazil is certainly a very good example of that, but not the only one. Countries have different applied different levels of duties depending on whether they have free terms agreements with certain countries or regions or not. So, all of these begins to add to the cost of the product and then you also have the, of course, the distributors margin or markup because they need to realize a reasonable profit, in multinational companies, you know, let's be honest, when they sell to these regions they don't decrease significantly the price when they sell it to the distributor. So, you add all the logistic components, all the customs duties that distributor markup, and you end up with a significant difference, price difference, versus the US or versus Europe. So, it's not cheap and when you're working through a distributor, even though you don't have control over their pricing practices, I'm probably neither should you for a number of legal reasons, but you are going to make sure that you understand how they're pricing your products, that you help them understand what is the appropriate pricing strategy to be successful in the market, and as a result of these dynamic, where products are more expensive. Medical devices are more expensive in the region; I think you tend to see very well defined tears of products being sold in the market. So, in my experience, in every country you'll find a very well defined tear of premium price products, which are not that price sensitive, where all the most reputable hospitals in the region want to have, even though if they are more expensive than in the US; they want to have them because these institutions want to have the most recent, the best technology to shelve their patients, and why not say that, to also shelve with their reputation as a vanguard institution, but this is a very small segment. So, every company can sell in Latin America their highest price premium products, most innovative products at a high price, but it's a very limited sick?; It's only going to be the deep of the pyramid that is going to buy this, again, because of the price points, and then you have, a lot of, you find a good segment of low tier products where price can be more sensitive and for some distributors they're just easier to sell. So, they'll sell the cheapest products because there's sensitivity in the market. I mean, most of the HealthCorps in Latin America is government funded and governments are doing a great effort in expanding access for the population and try to do it with the same budget. So, also there's more and more pressure on pricing, from the intuitions, which by the way leads to some very older interest in mechanisms for acquisition of technology, but this becomes the larger segment, the base of the pyramid where you would find low price, low feature, maybe some low-quality products to satisfy the need for, you know, to comply with tight budgets in an economic constraints, and then you find the other middle segments what we call the tier two which, especially in countries like where they a have a significant ecosystem of local manufacturers, there're products that are in a manufacturer and developed by local companies, they tend to play the role of being good enough, good quality, reasonable price, they're not cheap in imports, but they are not also the very expensive premium price products that only the people of the pyramid can buy. So, as a conclusion, yes, there is significant price sensitivity, there re significant constraints in budgets, there's a very, very small portion of the market that will not suffer for that's sensitivity, but it is a challenge, and it's a challenge that will have to be solved in the future. In my mind, it will have to be solved by continuing to develop products that specifically address the needs of these markets, a price point that these markets can pay and that's not going to be solved by, neither by selling your top premium price premium price products, and neither by just dumping into Latin America your all discontinued products thinking that they're going to solve the needs of the market and that because they're old, you can sell them at a lower price. Eventually, this has to evolve into a whole portfolio of solutions develop either by multinationals or local companies that, as I said, are tailored to needs of the market are acceptable price points.

Julio Martinez: 28:19

Excellent. What about reimbursement, Alejandro?

Alejandro Infante: 28:23

I think, for medical devices, the way I see reimbursement is, I don't see it as reimbursement per se for most products because it is not like, someone will use the product and somebody else will pay for it, you know, like in Pharma; reimbursement is more prevalent in Pharma, but it's definitely most of the market is deliver? by government purchases. So, it is the government and the public institutions who are going to be your main customer, and again, they're under challenge, they're trying to expand access to the population and we see some examples in countries like Mexico and Colombia where the government has been making tremendous progress in expanding access to the population, but at the same time they're very constrained in resources. So, it is no property the reimbursement, but just selling to a very large customer with usually high volumes, but very high constraints in terms of affordability, in terms of what they can afford them. Then, that plays into how you bring your best solutions to them in a manner that they can afford it and they can continue to not only expand access for the population, but to provide them with the latest forms of treatment.

Julio Martinez: 29:50

Okay. So, what about the importation process? I know you already touched on that, but could you please expand on that?

Alejandro Infante: 29:58

Yeah, sure. Absolutely. You have countries which are very open. Mexico and Chile, certainly are two very good examples of very open countries where, especially Chile, for the most part, you don't pay import duties when you're importing medical devices and if you do, they're very, very low, and in Mexico, with Mexico having free trade agreements with North America, the European Union, Japan, and number of other regions, you also don't have to pay import duties when you import these products into Mexico, and then you have on the other spectrum Brazil where they import duties can significantly up to the cost of your product, resulting in these pricing discrepancies that I spoke about before, and also resulting in an advantage for the local manufacturers, but it's not only duties, I mean, duties is a part of it. When you're importing products you need to make sure that you have a regulatory team and an export compliance team that also provides them with the right documentation, the quality certificates, keeping the local registrations updated. So, there's never a discrepancy between what is locally registered and what is coming through the door of the customs office, and then after you import the products, you got to make sure that you know where they are and that's perhaps another topic, but you got to make sure that, you know, where they are, have a good traceability, etcetera cause work doesn't end when the clear customs are out of the port or the airport and they go into the workhouse, much less into the, you know, into the hospital, or into the health care practitioner office. So, this is going to require a very good logistics department, export compliance, regulatory department on the end of the exporter, and on the end of the importer is going to require the same solid regulatory operation, understanding of the customs regulations and then the quality systems to do the proper traceability, and most of the medical devices in the region are imported. So, this is a very important topic that both local, either local companies, local affiliates, local distributors as well as exporters need to mindful of.

Julio Martinez: 32:49

Ok, fantastic. Are there any other areas we haven’t mentioned that you think listeners should be aware of?

Alejandro Infante: 32:57

I always liked to talk about FCPA, the foreign corrupt practices, and for the audience which might not be familiar with the FCPA, the FCPA is a US government enacted act that basically holds accountable companies doing business in Latin America for all the corruption practices, that made take care in foreign countries and what's interesting about this FCPA relation is that as a company, you're not just accountable for the corruption that may be incurred by your own employees, you're also accountable for the corruption that may be incurred by your distributors, or your agents, or anybody that is acting on your behalf, and these may be a significant risk that needs to be managed appropriately by the companies. Healthcare is particularly sensitive to exposure to FCPA because of what I was saying, the main buyer is normally going to be a government or public institution. So, you'll have to make sure that as you're operating directly or indirectly a distributor, you are compliant with all the regulations, that you can demonstrate that you have a solid compliance program, that you're training your distributors, that you are training your employees, that you're monitoring what's going on in the market, that you're taking action once you detect that something is going on that is against the regulations, and this is very important in a trap that a lot of companies fall into, they believe that if they sell the products to a distributor and then they turned a blind eye, they're not liable, well, they are, they're liable; you can't turn a blind eye and sell to a distributor, and it is not an excuse to say, you know what, such and such market is very corrupt, so I don't do business directly with them, we are selling to a distributor and what happens afterward we don't want to know, you do want to know, you're liable for that. So I think, FCPA is a very important topic that should remain all the time on the table when multinational companies are getting, not only into Latin America, but also to other regions, not only other emerging markets but, you know, other regionals, and you have to keep a good eye on it and solid compliance program, a solid disciplinary program cause you gotta be able to demonstrate to the government if ever you run into problems that you have done everything that is reasonably within your reach to avoid this from happening and that you have taken swift action to stop it when you find out that something actually did happen.

Julio Martinez: 36:19

Excelent! So, Alejandro, what major trends do you see in Latin America that are relevant to our discussion today.

Alejandro Infante: 36:23

Yeah, sure. I think what I've seen recently is, perhaps, I little bit uncertainty in the region created by either changing governments, changing regulations, and whether you're in Latin America, you're in Europe, you're in Asia or whatever, you know, there is always going this uncertainty, there's always going to be this volatility, and you have to be able to manage it, you have to be able to stomach it whether it is tension relations, whether it is volatility in exchange rates, whether it is a change in political environments, and if you decide to do business in this region, you have to do it for the long term, and you have to be able to adjust your presence, adjust your resources according to a situation, but again, be there present for the long term, manage the business in such manner. So, I think as we see recently in the region in terms of uncertainty or volatility, keep cool, make sure that you take the appropriate actions to protect your business, stay there, this is a roller coaster, It's going to be ups and downs, and those of us that have been for many years operating in the region know this. There's always a better day, there's always a country that is better than the others, and there are new waves of technology coming into the countries, there's a growing patient population, so you just have to be able to operate in these countries, as I said, keep cool, don't lose sight of your strategy and make sound decisions.

Julio Martinez: 38:20

Thank you, Alejandro, I'm sure listeners will find this episode to be fascinating, you have a wealth of information in your head and I'm sure people will enjoy and benefit from listening to these episode of the LATAM Medtech Leaders Podcast.

Alejandro Infante: 38:33

Julio, thank you very much for the opportunity, I had really enjoyed this conversation. I hope your audience find it useful, and you know, I'm always available.

Julio Martinez: 38:57

Thank you so much. Have a great day.