EPISODE 08: MICHAEL BENZAKEN, FORMER ACTING CHAIRMAN, CEO, NUBENCO ENTERPRISES

Episode’s transcript

Julio Martínez-Clark: (00:04)
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 Michael Benzaken, and Michael, thank you for being on our show today. Welcome to it.

Michael Benzaken: (00:22)
Julio, my pleasure. Glad to be here!

Julio Martínez-Clark: (00:24)
Excellent, Michael. Michael has extensive experience in various advisory, mentorship, and leadership roles combined with his educational background in human behavior and cognition. This has enabled him to become a successful turnaround specialist in the life sciences industry. He is the former acting chairman and CEO of the Nubenco and PharmeuRopea group, a marketplace providing medical devices, pharmaceuticals, and medical equipment to distributors, NGOs, major multinationals, and government agencies worldwide. Michael has been involved in international markets since 2011 since he first started his global role as Nubenco's international business director. At Nubenco, Michael —among other notable accomplishments— expanded the company's foothold to over 12 new markets, including Latin America, and doubled the company's customer base as well. Michael has recently co-founded Mist Medical an early-stage medical device company with a mission to gradually replace the demand for high consumption medical disposables, beginning with his first target: to replace the old syringe. Michael has a BA in Behavioral Neuroscience (pre-medicine) and Biological Foundations of Behavior from Franklin & Marshall College in Pennsylvania. So, Mike is really a pleasure to have you here in the show, I mean, you have an outstanding background and I'm sure listeners will enjoy our conversation today.

Michael Benzaken: (01:52)
Thanks, Julio. Yeah, it's been a wild ride over the last four years, specifically after expansion, got to meet a lot of interesting people, I learned a lot along the way. There was no blueprint for me, so I had to learn from those who I wanted to learn and I've been very fortunate. So looking forward to chatting about it.

Julio Martínez-Clark: (02:14)
Excellent, Mike. All right, Mike, let's start with the first question that I usually ask our guests on the podcast. Please, describe how you got involved with Latin America. I mean, how do you get to work in the region?

Michael Benzaken: (02:28)
So originally we didn't even think about Latin America in terms of a market. I spent a lot of time when I was young in summers living out there, getting to know the people used to the culture, so while kids were going to camp, I was going to Latin America. I came back and I told my family how much I enjoyed it and it gave me a great perspective. My father runs a life science company that was two generations old and it sort of encouraged him to take a look and this ended up looking first in Colombia, Chile, and Nicaragua, and that was our original foothold in Latin America and then from there it just spread out and really had a successful time.

Julio Martínez-Clark: (03:14)
Awesome. That sounds very intriguing, I can't wait to hear your stories about finding distributors and all that in the region. So Mike, thank you for that explanation of how you got involved with Latin America. So please tell us what's your overall perception of Latin America as a market to commercialize medical technologies?

Michael Benzaken: (03:35)
Well, so Latin America as a whole is very convenient: it's right next door, a lot of people speak English —that helps me because my Spanish is pretty poor— but each country and the nature of the markets, the risks and the upside is completely different. So when I look at Latin America, it's difficult for me to lay out a blueprint of what one needs to do step by step, it really depends on the nature of each individual country. I'll tell you, the first thing you want to do is: find someone you trust. A lot of international business is based on partnerships or affiliations, synergistic relationships where you get good information and you develop a relationship with the other person enough that you can trust them, that the information is correct and that they're giving you what you need to succeed in the market.

Julio Martínez-Clark: (04:30)
Very good. So specifically in what countries have you been involved in Latin America?

Michael Benzaken: (04:37)
So we have an operation in Colombia, in Bogota, right now. it's quite a large operation, it's been there for I think 15 years now, about a hundred employees as of six months ago and it's really fantastic, I love my employees down there, I love spending time in Colombia. We have our own sets of issues that we need to deal with that are not unique to the Colombian market, but certainly, one that needs to be resolved before one enters the market, I would say the most important thing is to be wary of collections and of currency fluctuations. Colombia recently went through a big drop in the COP against the Dollar, so all the distributors that were there ended up having their assets cut in half in effect and recently dropped another 20% so if you're looking at starting a distributorship in Colombia, that's one thing; if you're looking at exporting to Colombia, that's something else. So it really depends on what business model you are going to approach and what markets you're going to be approaching your work.

Julio Martínez-Clark: (05:47)
Great answer. What about other countries? At the beginning you mentioned something about Nicaragua and Chile.

Michael Benzaken: (05:52)
Yeah. We have a smaller, about 40-50 person outfit in Nicaragua, nothing like Colombia. So these are two very different markets. So it's important that you have good relationships with Nicaragua, it's mandatory that you have good relationships. The regulatory process can be grueling. There's a boy's circle that either you're in or you're not. If you're not, you're going to have a difficult time having access to timely information, accurate information to have products registered, understand that Nicaragua has a partial nationalized health care system and pharmaceutical distribution system, so you're competing with the government of Nicaragua, so that's not a small feat if you're not friends with the government of Nicaragua. So when you're looking to select the country, I would say be wary, look at it in terms of is this a free market, or do I need to play games to succeed? And if your conclusion is that you need to play games to succeed, I would argue not worth it. Start where you don't need to, focus on the relationships and you'll do quite well outside of those territories, but we were very fortunate in Nicaragua specifically because we have a relationship here in the States. I live in New York and I looking at the George Washington right now as we talk and I spend a lot of time at the hill with certain super nationals, one that you would know is the Pan American Health Organization. If your audience has never heard of them, they were the ones who started a small fund in the 70s; the gentleman who started that fund was the one who developed the vaccine for polio. They eradicated polio and they have malaria and TB on the horizon almost completely wiped and the beautiful thing about actually is that they don't just dump its products into a country and then give a quarterly report back to whoever is giving them funding saying, oh look how great we are, this is how many people we helped, nothing like that, which is the reason why I value them and I've formed my relationships with them in DC. They expect the member countries who will receive these immunization programs global or Latin American and North American initiative, by the way, the sister company that everyone would know of is the WHO, you know, the medical arm of the UN. So these are these large super nationals that cross borders? No, they know how effective the program is, probably because the government has to pay it back, right? The government has to pay back the loan. They have to support the purchase of syringes and these various pharmaceuticals, immunization drugs and having to pay it back, I believe makes the government take it more seriously and the facilities who administered the drugs understand that it's a privileged position to be in, and take it more seriously as well.

Julio Martínez-Clark: (08:56)
Excellent. All right, so moving along, Mike, talking about the approach that you took in Latin America, when you first get started or when you first decided to move into the region, did you have a proactive and well thought out strategy where you created the market access plan for each country you were planning to enter in the region? Or did you have an opportunistic or reactive approach where you wait for the distributor to contact you and then you move forward?

Michael Benzaken: (09:27)
Right. So when I was promoted to CEO, I had inherited a group of countries and distributorships and I'm not sure what had been done prior to that, but by the time I had received that, I realized that the risks were not properly managed and roughly 50% of the relationships were suspect at best. So I went through a period of cleaning up the relationships, reaching out, building new relationships (you're going to hear that over and over again, trust and relationships, trust, and relationships) where they would get to me accurate and reliable, timely data from the market. I need to know pricing data, I need to know who's purchasing the products, I need to know when we can expect to get paid, I need to know what the terms of the purchases, can I work with local banks so they can mitigate my risk of collection? In which case I need to throw a couple of points on the margin as cost there but will worth it?. So I assessed the market in terms of its risk factors, I then determine if I have a sufficient margin after correcting for those risk factors, and if the answer is I do and I have someone I can trust to continue to give me that information because markets change often, then I know I have a good investment in registering the product. Now that to me is an export, If I were to be a distributor, that is a completely different scenario. So it really depends on your intent, either you intend on finding a distributor and you're the exporter, in which case it's certainly a best practice or if you're going to become an operation in the country, in which case there's a completely different set of best practices.

Julio Martínez-Clark: (11:09)
Very good. All right, so there are usually two management styles in our foreign territory. One is a hands-off management style where you let your sales to the distributor and you let the distributor around the shell on his own or a hybrid model where you have your distributors and you also have a local agent or a local office that represents your company's interest and that is supporting the work of the distributor and it's helping the distributor generate demand for your products. In every country do you have a hands-off management distributor strategy or a hybrid one where you have a distributor and you have a local agent or office that is supporting the work of the distributor?

Michael Benzaken: (11:55)
So we've never done that setup. I can walk you through the setups that we've done and sort of partial it out. There are two scenarios. One where we've exported, in which case our primary contact and our trusted relationship are with the distributor in other where we selected to be the actual entity within the country and hire someone within the country to manage the operation, very rarely did we just select an agent and we appoint them to a distributor, a lot of the time we felt like that was encroaching, and to me that didn't feel like I trusted the distributor and that's the truth is that you want to develop a trustworthy relationship and if you need to babysit then maybe it's not the right distributor. Now, I have no problem covering your bases but some people may not take too kindly to that. Although in terms of margin, having a single agent on the ground who you could just pass through to the direct tenderer is one of the more aggressive ways to export, directly distribute into the final procurement agency. In general, these were my contacts, I never took a hands-on approach, my general managers, the owners, and the CEOs of the companies that distributed the goods for us as well as my department heads, we had what we call communication circles. So at the end of the week, I had touched down with those three levels of management organization, external and internal to the company because the less you do that, the more risk you're assuming, and I would prefer to strengthen the relationships if it doesn't take too much time. So I would say for anyone looking to get involved in the market in general, the Latin American people are built on relationships, they like good solid relationships. A lot of them in Colombia for me became like family, the people that I trusted very deeply. It's not just about making money, it's about making a difference, and if you can build relationships and improve lives and have a positive effect along the way, it makes assuming those risks much more worthwhile.

Julio Martínez-Clark: (14:02)
Very good answer. Actually, I'm Colombian myself and I totally understand where you're coming from with that comment, It's very accurate and not only in Colombia and many other countries, but in Colombia specifically, people are very warm and they first have to trust you as a friend and then they do business with you.

Michael Benzaken: (14:18)
I love the Colombian, great country, great people. Fantastic.

Julio Martínez-Clark: (14:21)
Great. Thank you for that. I appreciate it. Alright, Mike, moving along. Let's speak about your experiences and recommended best practices in the following areas. What about obtaining regulatory approvals or market clearance in each country in the region? Can you please tell us about your experience on that?

Michael Benzaken: (14:42)
So my experience is limited there, I had people that I trusted to do that but I can tell you the major differentiators were how well developed the market was. So the more developed, the more they go through the process and we can predict how fast and the cost it would take to get the product approved; the less developed the markets, the more artificial barriers to entry, the more uncertainty as to the timeline, the longer the timeline if it will ever happen but the final cost will be high, I will tell you that when it comes to registering in any country, it doesn't matter where it is, you need to own the exporter, should own the registration. Now, each market is different in terms of assigning one or two distributors and what that takes to add to distributor to the registration, but do not form a relationship with the distributor and give them the ownership of the registration. It is a con game and you will end up burned, avoid that if you can.

Julio Martínez-Clark: (15:49)
Great advice. Thank you. All right, so what about the distributor selection? What are your thoughts or tips on how to find a distributor? Which by the way, it is one of the most demanded or sought-after topics on this podcast. I recently did a poll to my LinkedIn network and that's 70 something percent of the borders on the poll said that they wanted to know how to find a distributor in Latin America. So please share with us your experiences there and best practices.

Michael Benzaken: (16:20)
Absolutely. So as an owner or let's say as a leader in the company or someone in Business Development if you're not going to the major events, four times a year, one in Germany, one in Dubai, one in China, and one in Miami, If you're not going there, and I'm sorry, one in Brazil as well, then you're not doing your job. So finding the right distributor first means you need to have the option of assessing a variety of distributors. Once you have the variety of distributors and you understand the market with which they distribute, and let's say three of them have the same terms of distribution, the question is who do you trust? But you are networking, this business is about networking and building relationships, attending the events. Of course, you can go online, you can generate a list, you can purchase a cold list, email in, and try to meet them that way. For me, it's too impersonal and I've had a lot more success the other way around. So I love those trade events, nothing replaces them in terms of being able to network well, and when it comes to distributors selection, who do you choose? Choose the person that you can trust. It doesn't have to be the biggest distributors, there are some benefits there, but it could be a smaller distributor who you can trust that is very ambitious and that has a good idea and he may be able to do for you something that the larger distributor just wouldn't because you're not important enough to the larger distributor, let's say relatively speaking. So distributors selection, you want to understand the financial capabilities of the distributor. That's something that's very, very important. Can they work with the local banks? Do they understand the procurement centers and would they be able to absorb the risk or not? If the answer is no, you're going to end up with problems; if the answer is yes, which is usually the case with the larger distributors, then you have less problems. So in my opinion, the best-case scenario is to go to the events, find the smaller, trustworthy, and ambitious distributors who also understand how to work the financial nature of their specific market. That's who I liked the most. It's funny cause I liked that the most, but we always ended up with the bigger distributors, but I'll tell you if I had to do it all over again, that was the way I go about it.

Julio Martínez-Clark: (18:36)
Excellent answer. The financial aspect of the distributor search and selection process is very key. Especially in countries like Colombia where hospitals want distributors to provide them inventory and they can only invoice once the inventory is a result or paid by the system, so there's a financial aspect of the business that the distributor has to take into consideration. They have to absorb the financial costs of having their inventory in the hospital's warehouse. Right?

Michael Benzaken: (19:15)
That's right. There's a lot, especially Colombia, the greatest operation I've had the privilege of leading. Yes, there's a lot of costs built in to be able to deliver the product, especially in Colombia. The ports are expensive so I would say be smart, no your logistics, I played what's called Ping Pong logistics. So understand where you're exporting from, where you're importing to and try to get your costs down that way, that some very general advice that people who are serious players need to hear and then it's how are you going to get the goods into the country? How are you cutting your costs along the supply chain? and then there's the matter of storing the product and sometimes giving the product out or let's say giving a piece of equipment out and then have an agreement that they will buy the disposables from you, but then you've got to ensure that they follow up. So I would say there is a lot of costs specifically in Colombia and risks associated with maintaining inventories in-country just because of the currency fluctuations that the ideal approach for someone considering Colombia would be to start a smaller operation and find a place to store inventories outside of Colombia or just export directly to Colombia, to a distributor who is financially capable.

Julio Martínez-Clark: (20:30)
Very good answer. All right, moving along, Mike. What about end-user demand generation? In other words, there are cases where your business is a combination between institutional sales and trade or retail sales, and sometimes the distributor cannot generate sufficient demand for your product. Have you ever been involved in situations where you've had to work with your local distributor on your own to generate end-user demand for your products?

Michael Benzaken: (21:01)
Yeah, absolutely. So towards 2017, we started carrying a niche group of wound care products and they would be slightly more expensive than the studio commodity, a generic, you know, talking about gauze and bandages and such. So we would have to create that demand, we would have to be able to create value that would justify an increased unit cost and the way that we will create value is have to show how the benefit net decreases the cost of whatever function is trying to achieve. So absolutely generating end-user demand is all about relationships, it takes a certain personality to be able to sell someone on something new, especially if it's more expensive. So your marketing is going to be important, but then again, if your focuses are on where the lion's share of the procurement is, you're not going to be doing a lot of promotion. They already know what they want and you just have to hope that your price makes the color.

Julio Martínez-Clark: (22:06)
Yeah. Have you be faced with situations where you've had to compete with Chinese and Indian products?

Michael Benzaken: (22:14)
Oh boy, yes. I like good competition. So I like to have to say, okay, well this is the case now, now we need to find a way to reduce my cost of landed goods by 15% just to be competitive and so it gives me something to focus on, which is interesting, it did inspire me exactly where I am today. I looked at the landed cost of syringes, especially for global immunization programs and I said, okay, I need to be able to decrease the cost of healthcare, how am I going to do it? syringe, with the pharmaceutical, the injectable: pretty big market, rolling a lot larger four times the size or be a trillion-dollar market by 2025, how are you going to do it? Decreased transportation costs, decrease unit price costs, which be a part of the transportation costs, decrease the cost it takes to administer the product and if you could decrease costs for everybody, for the manufacturer, for the distributor, and for the facility added safer, then that generates hopefully its own demand. So that's the trick. Having the right product.

Julio Martínez-Clark: (23:11)
Yeah, and having a very strong value proposition to the end-user so that they choose your product versus the lower cost product.

Michael Benzaken: (23:19)
Yeah, that's right. It's a real issue in Latin America and from what I understand, in my experience, they did not throw a premium value on US products quantitatively, like they may choose that if it's A and B in the same price to go to the US product. We wanted to have a US product because it has a certain canals, you know, internationally so we did business in Middle East, Africa, Europe, some parts of Asia that don't actually like the Chinese goods actually.

Julio Martínez-Clark: (23:48)
So anyway. What about pricing, Mike? What's your position on pricing in Latin America? In other words, some people say that Latin America is a very price-sensitive region, other people say that it similar or sometimes even higher than in the US what's, you stand on this?

Michael Benzaken: (24:07)
Get your supply chain together, people, that's my suggestion. It is a very price-sensitive region, certainly, the markets differ, but the price has sensitive all the same; you need to be able to look at the costs within your supply chain and your operating overhead, you need to be able to have a good corporate tax structure at a good logistics set up. It's not just a matter of introducing a product you get from a contract manufacturer anymore, packaging it, and selling it, it's a matter of really understanding the way the products move from point A to point B and the way to come in under the competition. I'll tell you now there's one Japanese company I'm thinking specifically that sells syringes under cost and that's under a cost I would find from a contract manufacturer in India. How do I do that? How do they do that? Well, they've pretty much held the market, they bought the market, eventually, the prices will go up, but their name will ring true, and eventually, there'll be tendering specific for their name. So you really come to pricing, figure out the product pricing and the players before you go to the market and say if I offer my product and let's say a 20% margin, can I still make business down here? And if the answer is NO, avoid it.

Julio Martínez-Clark: (25:32)
Very good answer. All right, so what about reimbursement, Mike, what's your experience dealing with the government agencies or insurance companies to get your product included in the list of reimbursable procedures or products?

Michael Benzaken: (25:47)
In terms of reimbursements I have no experience in submitting for reimbursement, I never played that game, I hear it's a lot of paperwork and not so fun, but if it makes people money, God bless.

Julio Martínez-Clark: (26:02)
Alright, so what about the importation process, duties, etc., you lightly touched on that, but can you give some tips or best practices on how to import products into countries in Latin America, is it fast, is it slow?

Michael Benzaken: (26:17)
Right. So it depends on the market. It took me six weeks until I can find someone that I can trust to ensure that my goods would pass through at the port in Venezuela and get to where it's supposed to go and that was before everything became less stable. So all the markets are different, landed costs to Colombia, for example, to Bogota is very expensive, land transport after the port, very expensive. We have three trucks, two fairly large trucks, and one smaller truck, and just recently, I think about a year and a half ago, I know there were some union issues with the trucking and the port and so that was a real mess. So make sure you set up your inventories close to the port. That's my big piece of advice, make sure that you understand you're importing to different countries that have different trade relationships with the country of export, right? So be creative. It's what everyone does, if you don't do it, then you don't stand a chance to do it. I also understand the way that products are classified, assigns it a different import tax value, make sure that you cleaned the ID numbers of your products, that changes not often, but when it does and you don't make that change your competitor certainly will do it and then the storing inventory, storing inventory is tough, especially when the currencies are less stable. So my advice to everyone who wants to start a distributorship specifically, let's say in Colombia, hold your inventories outside of the country or have your distributorship close to the port, make sure you know where the major highways are and if you need to develop a limited partnership with someone who's got the logistics down, take it off your shoulders. Right? You don't need to be the logistics wizard, we need to get a great product into the hands of people who need it at a good price. Let someone else bear the responsibility of the logistics. So that's my advice.

Julio Martínez-Clark: (28:12)
Very good, Mike. All right, moving along. Let's talk about the FCPA. What's your experience with corruption and bribery in Latin America?

Michael Benzaken: (28:25)
Well, it exists, that's for sure, there's no question. Each market has different ways with which it's become a standard to do things and some of those standards fall outside the FCPA allowance, you need to know what those markets are and avoid those markets. Now, why do I say avoid them? Well, want that amount of podcast right now so that's probably a good thing to say, but also because the second you start playing those games, it never ends. It's a spiral and you won't make out in the end, understand the markets where the standard is that you must do something unkosher and avoid them. There's a lot of countries out there that have standards that are decent and right and where everyone's on the same playing field, so yes, FCPA is a good thing that people sign off and commit to doing things the right way; a lot of people don't do things the right way, but they got to go to bed with that, right? So do things right.

Julio Martínez-Clark: (29:21)
Okay. Excellent, Mike. All right, we are almost done, and are there any other areas that we should talk about that we haven't covered?

Michael Benzaken: (29:30)
I would just say for someone who is looking to get to start a distributorship, understand that every detail from the beginning to the end has value. Look at it, understand that you're going to be paying taxes, you can be buying from one place and selling in another, understand your cost structure, no where you want to have your products land, figure out from there where you want to export from, which may be counterintuitive because that made me do have three regions with which you have contract manufacturers. Make sure you trust everyone you're with, it is about trust is about relationships, the money goes away if the trust is not there, give it enough time, I assure you it will happen. So form good, trustworthy relationships, manage the expectations of your team and of your distributorship and have fun. That's a very important part.

Julio Martínez-Clark: (30:25)
Very good. All right, Mike, what about any major trends that you see happening in Latin America that are relevant to our discussion today?

Michael Benzaken: (30:38)
So one of the trends that I'm very excited about is the homogenization of the harmonization of the regulatory body in Latin America. So right now I've avoided Brazil because number one, it's Portuguese so now I've got to make all the other materials in another language and I don't speak any of the languages down there. Something I didn't want to have to do, but also the regulatory process was just insane unlike anything else. Today, these things are changing so some of the countries I hear are getting together and sort of doing, what the EU did was allowing for products to be imported and exported freely and they had the same regulatory process in order to commercialize the product or establish a business. This is the most promising news that I have heard come out of Latin America in the last 10 years. If that goes through, I think the entire competitive landscape will change and I think that smaller distributors would be able to start competing. I think that will drive down prices and I think that better people will have better access to healthcare. You know, this is what's going to increase the competition throughout Latin America. So that's the promising thing.

Julio Martínez-Clark: (31:47)
Excellent. Mike, I think you're speaking specifically about the Pacific Alliance, right?

Michael Benzaken: (31:53)
I believe that's right.

Julio Martínez-Clark: (31:54)
Excellent. All right, so before we close, make any final thoughts for our listeners before we finish the show today?

Michael Benzaken: (32:03)
Just thank you, Julio, thanks for having me. You can find me on Facebook and LinkedIn and say "Hello" I'm a nice guy, I'll say hello back. I really appreciate it. If you have any other questions, you want me to discuss another topic I'm available.

Julio Martínez-Clark:: (32:16)
Excellent. Mike, Thank you so much for your time today and I'm looking forward to keeping in touch and I'm certain that the audience will find these episodes very beneficial to them and informative. Thank you so much. Bye Bye.

Michael Benzaken: (32:30)
Absolutely, Julio, cheers.