Mexico Health Review recently had the opportunity to sit down with the newly appointed Director General of one of Mexico’s main distributors, Casa Marzam. Having worked with pharmaceutical mammoth Glaxo Smith Klein for over a decade, Peña shares his ambitions for this new direction in his career.
Q: What does your recent decision to take a new professional direction, moving from the pharmaceutical sector to the distribution industry, mean for you at this stage of your career?
A: Having spent 25 years in the pharmaceutical industry, I have gained a deep knowledge of the healthcare sector as a whole. Even so, during the short time I have been with Grupo Marzam, I have undergone a massive learning process regarding the distribution segment, including how pharmaceutical distribution behaves, as well as the gaps to be closed between the two sectors. I am aiming to implement different ideas and practices from the pharmaceutical industry and provide insights on what the industry requires from distributors. I think there are more synergies to be created between pharmaceutical companies, the points of sale, and the government regarding distribution. In addition, I believe we must make a concerted effort to emphasize the importance of distributors in the healthcare supply chain. The healthcare system cannot function without distributors, so strengthening the image and value of this segment of the value chain is a huge priority today. With this in mind Grupo Marzam has the opportunity to position itself as truly critical and unique provider for the healthcare system.
Q: What are your most pressing immediate plans as the new director of Grupo Marzam?
A: First of all, I want to focus on efficiency. The margins that exist in the distribution segment differ greatly to those of the pharmaceutical one. This part of the business is financially driven, so we are looking to become more efficient by implementing the right structure and capabilities in all areas, in order to provide a different approach to our customers from what has been traditionally delivered. There has not been massive innovation in the distribution segment for a decade or so, so an area of opportunity would be beginning to look at things differently and providing several new kinds of services. About 96% of the company profits come from the private market, and this will continue to be the priority for the next five to 15 years, however looking ahead we also plan to focus on the public sector. We know that 44% of the value of the pharmaceutical market comes from the public sector and therefore failing to participate in this segment would be a huge mistake. The pharmaceutical industry is increasingly focusing more on specialized products, including biotechnology drugs, which are mainly bought by the public sector, and therefore we need to find the right balance between our services for private and public markets.
Q: Grupo Marzam was acquired last year by Genomma Labs and subsequently the majority shareholding was purchased by the financing group Münch Cooperatif. What does this acquisition mean for the future of the company?
A: Münch Cooperatif invested in Grupo Marzam by purchasing 51% of the company shares. I was employed by Münch Cooperatif to manage the company, and our intent together is to be a strong player in all aspects of distribution in Mexico. This is a long-term project that represents an interesting challenge for me and I ended my ten-year career in GSK because of the great potential I saw in this opportunity and the determination of the shareholders to make the company a major market player. The move also represents an opportunity for me to deeply understand a completely different segment of the industry. In the long term we are committed to increasing our stake in the company. We will introduce several innovations to Grupo Marzam’s structure, business approach, and technology use in order to become the supplier of choice – not necessarily the largest one, but the smartest one – as well as a strategic partner for our customers regarding business development and execution. To achieve this, it is essential to think differently. Looking at the distribution sector today, the vacuum left by Casa Saba has already been filled by three major distributors and by companies developing their own distribution channels. We have therefore moved into a new stage for the industry. There are a lot of things we can learn from Casa Saba so that we do not follow the same path.
Q: How does fragmentation of the healthcare system in Mexico impact the distribution segment?
A: There are talks in Mexico regarding the universalization of healthcare, which I think is in fact still a concept at this point. The county’s healthcare system is complex due to the fact that there is no single healthcare provider. Moreover, it is highly fragmented and therefore difficult to integrate in such a way that a single decision can be implemented across the country. Another issue is the way in which the private market gets involved with the public sector, and since the country has 30,000 pharmacies, it is interesting to consider the role of the private market as the dispenser of medications for the public sector. In addition, private hospitals could play a more relevant role in supporting areas of weakness of the public sector. I believe a greater level of integration between the private and public sector is needed. There are a lot of private and public partnerships when it comes to building hospitals, but more partnerships are needed regarding services. Therefore, it is important to visualize how the healthcare sector is going to move forward.
Regarding the system’s fragmentation, having less healthcare providers would certainly make operations more efficient. However conversely, the fact that the system is highly fragmented gives the chance for more players to get involved. We now see consolidated purchasing with such high volumes that it makes supply difficult and also using a single supplier means increased exposure and risk. We have to look at methods of procurement, which triggers a discussion on whether the way we procure medicines, devices, and diagnoses in the country today is the right one. The dominant model today is oriented to lowering prices, but there is a limit to price reductions. We have to ensure that Grupo Marzam is focusing on being a reliable supplier, and offering an appropriate distribution system. In the past, there was no great focus on efficiency. Margins were greater and there was less pressure on pricing. Today, that has changed entirely and prices of both generic and innovative medicines in Mexico are some of the lowest in the world. Efficiency in all activities would be one of the major factors contributing to success.
Q: How is the increasingly competitive landscape in the distribution segment changing in the private market?
A: There have been a lot of changes, including consolidations in the private market. Pharmacy chains are expanding, while independent pharmacies are decreasing in number. Nevertheless, the level of cannibalization of pharmacy chains on independent pharmacies is going to decrease. From the distribution perspective, we must ensure that we have a clear strategy as far as channels are concerned. The approach we have with supermarkets and pharmacy chains is very different to the one we have for independent retailers and for private hospitals. Independent pharmacies will continue relying on large distributors and they represent 25% of our sales, while pharmacy chains constitute 30% of our sales and are currently establishing direct commercial relationships with major pharmaceutical companies. However, they will never purchase medicines from only one company and therefore the role of distributors is extremely relevant. Today we supply 420,000 units of medications per day and we cover 18,000 pharmacies with ten distribution centers and 30 sub-distribution centers across the country. We therefore have a robust infrastructure to build upon.
Q: What role is digital technology playing in making distribution more effective?
A: Our customers want to access information easily regarding the status and location of their products in order to make quick decisions. IT platforms are an area in which we can differentiate ourselves and provide more effective solutions for our clients. We have several IT projects at advanced stages aiming to optimize times, resources, routes, and follow-ups.
This is an interview excerpt, the full version of which will be featured in Mexico Health Review 2016 to be launched on September 7, 2016 at Mexico Health Summit. For more information, please visit http://mexicohealthreview.com/ and http://mexicohealthsummit.com/