José Peña
Director General
Grupo Marzam
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View from the Top

Efficiency Drives Growth for Distribution

Tue, 09/06/2016 - 10:55

Q: What does your recent decision to take a new professional direction, moving from the pharmaceutical sector to the distribution industry, mean for you?

A: I want 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. I also 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. With this in mind Grupo Marzam has the opportunity to position itself as a truly critical and unique provider for the healthcare system.

Q: What are your immediate plans as the new Director of Grupo Marzam?

A: Innovation in the distribution segment has been lacking in the past decade, therefore, we are excited to start looking at things disruptively, hoping to provide new services. Customers want new things so we plan to focus on efficiency. Considering that margins in distribution differ greatly from those of pharmaceutical companies, implementing the right organizational structure and capabilities will certainly help us optimize our processes and costs. Today, about 96 percent of our profits come from the private market and this will continue to be the priority for the next five to 15 years. However, we still want to grow our public sector customer base. Multinational pharmaceutical companies are increasingly focusing on specialized medicines such as biotechnology and oncological drugs, which are mostly bought by public institutions. The public sector represents 44 percent of the pharmaceutical market, therefore, we cannot afford to ignore it.

Q: What role do you think distributors should play in today’s healthcare industry?

A: Having spent 25 years in the pharmaceutical industry has allowed me to fully understand what pharmaceutical companies expect from distributors. I think more synergies could be created between the pharmaceutical industry, points of sale and the government. We must also make an effort to emphasize the importance of distributors in the healthcare supply chain. The healthcare system cannot function without distributors, so strengthening the image of Grupo Marzam as an essential actor in the value chain is a priority. We have the opportunity to position ourselves as a truly critical and unique provider for the industry.

Q: What does Münch Cooperatif owning the majority shareholding of Grupo Marzam represent for the company’s future?

A: Münch Cooperatif purchased 51 percent of Grupo Marzam shares and our intent is to be a strong actor in pharmaceutical distribution in Mexico. This is a long-term project that represents both a challenge and opportunity to take the company to the next level and become a major player. 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 scope and technological capabilities to become the supplier of choice, not necessarily the largest one, but the smartest one. Grupo Marzam is also determined to become a strategic partner for our customers regarding business development and execution. 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 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 Mexico's healthcare system impact the distribution segment?

A: Mexico is considering healthcare universalization, which I think is still at a conceptual stage. The country’s healthcare system is complex because there is no single healthcare provider and having a highly fragmented system makes it difficult to implement an effective strategy across the country. Having a single healthcare provider could certainly make operations more efficient but it could represent fewer opportunities for players used to negotiating with different institutions. Consolidated purchasing, for instance, makes supply of goods difficult to a certain extent because of the large volumes demanded and negotiating with a single supplier is riskier for institutions. We have to closely analyze procurement methods and evaluate their success in providing medicines, devices and diagnoses to the population.

Increased collaboration between the private and public sector is worth our attention. There are nearly 30,000 pharmacies in Mexico that could be pivotal in drug dispensation for the public sector. Private hospitals could also become more relevant in supporting public institutions by overcoming their weaknesses. There are a lot of private and public partnerships involved in building new hospitals but more partnerships are needed to deliver higher quality services to the population. It is important to visualize how the healthcare sector is going to move forward.

The dominant model today is cutting prices but there is a limit to it. Grupo Marzam needs to focus on being a reliable supplier and offering appropriate distribution solutions. In the past, there was no significant focus on efficiency, margins were greater and there was less pressure on pricing. This has completely changed and prices of both generic and innovative medicines in Mexico are among the lowest in the world. Efficiency in all activities could be one of the major factors contributing to success.

Q: What growth strategy would you consider efficient given the different sectors and market segments?

A: Product segmentation is essential to devise effective strategies for tackling the different sectors. We must make sure that we have a clear strategy for generics in both the public and private markets since Mexico is the top consumer of generics worldwide as they comprise 84 percent of all drugs distributed. We must also focus growth on the distribution of specialty products, such as biotechnology drugs, oncology and orphan drugs, since these areas are evolving and sustaining the importance of delivering value to our customers.

One of our priorities is to deliver quality services that will differentiate us from a simple logistics provider transporting cargo from point A to B. We must ensure client satisfaction by optimizing processes and working closely with our commercial partners in implementing new business models such as shared risk and pay for performance. These are becoming increasingly important given public sector budget constraints, so we should master their implementation to become a catalyst between the industry and end user. This could lead to reducing the gap between manufacturers and the final client by using strategies such as home delivery. Grupo Marzan is known for its deep understanding of the industry, which results in trust building and strong client relationships.

Q: How are you facing the changing landscape in the retail market?

A: The market has seen a significant amount of changes, including pharmacy chains consolidating. As some expand there are fewer independent pharmacies, but this trend will shrink. In terms of distribution we still need to mind the different channels. Supermarkets and pharmacy chains require different services than independent retailers or private hospitals. Independent pharmacies will continue to rely on large distributors and represent 25 percent of our sales, while pharmacy chains constitute 30 percent and are currently establishing direct commercial relationships with pharmaceutical companies.

They will never purchase medicines from a single company though, so the role of distributors is still extremely relevant. Grupo Marzam has 10 distribution centers and 30 sub-distribution centers across the country, supplying 420,000 units of medications per day and covering 18,000 pharmacies so there is robust infrastructure to capitalize on.

Q: What role does digital technology play in improving distribution efficiency?

A: Our customers want to know in real time the status and location of their products to make quick decisions. IT platforms are an area where we can grow and differentiate ourselves to provide more effective solutions to our clients.

We have several IT projects at advanced stages aiming to optimize times, resources, routes and follow-ups. We are looking forward to implementing them in the short to middle term.