Focusing Resources to Take on the MarketSat, 09/05/2015 - 12:29
Q: MSD, known as Merck in the US and Canada, is one of the largest pharmaceutical companies in the world. What is Mexico’s role in your global strategy?
A: MSD has the same goal for Mexico as it does for the rest of the world: to deliver innovations that can improve and save lives, something that we have been doing for over 100 years. Mexico is a strategic country for MSD for several reasons and it is part of MSD’s Emerging Market Commercial Organization which is specific to Latin America, the Middle East, and Africa. Despite challenges such as insecurity, Mexico is a strategic place to conduct business, and constitutes one of our top two Latin American markets for many reasons, namely its growing population, large market, strong IP protection, improving regulatory infrastructure, a significant private laissez-faire market, and a significant public market. In spite of all this, the Mexican market does not see double-digit growth like certain other emerging markets. Mexico is also a clinical research base for us. We currently have 41 protocols in different areas but one of my main goals is to find ways of increasing the amount of clinical research carried out in Mexico. Clinical trials in Mexico are cost-effective and efficient while the country also has the infrastructure to quickly enroll patients. At this point we are working both with the public and the private sector equally, and the only basic research we are doing here is a study on pediatric cancer, which is carried out by the Merck Foundation with FUNSALUD.
Q: What are your main product lines in Mexico?
A: MSD has developed a broad range of products over many years. The first line covers cardiometabolic issues, such as diabetes, heart disease, and hypertension. For diabetes, we have developed Sitagliptin, which controls blood sugar without common side effects such as hypertension. We have also launched a new DPP-4 inhibitor with extended release and we are developing statin drugs. Our second range is women’s health, including contraception, fertility, and osteoporosis. With this in mind, another concern is that Mexico has one of the highest rates of teen pregnancy in the world, which local health authorities recognize as one of the country’s most significant challenges, which we are helping to address in a government initiative. The third focus is virology, including Hepatitis C and HIV. We have outstanding HIV products including non-nucleoside reverse-transcriptase inhibitors (NNRTIs) and integrase inhibitors, which were important parts of the revolution that helped transform HIV from a death sentence into a chronic disease. Our final operation tackles Alzheimer’s, a disease for which cases are doubling every five years and which has so far been intractable. MSD has a novel drug in phase III that inhibits the production of a peptide protein, which is a precursor to the build-up of plaques in the brain.
Q: How has the increase of generics in Mexico affected your sales?
A: MSD’s strategy is innovation. Certain companies have a generics line incorporated within their business model while others have chosen to ally with other companies. But the generic business model is beneficial to us provided that intellectual property is respected and protected. It is also valuable to the system as it frees up money allowing the government to acquire large quantities of cheaper medications, meaning the money saved can be re-invested to acquire innovative drugs. This has been a challenge in Mexico but not impossible. We are now working with regulatory authorities to help ensure that the government dedicates money to innovation so people can access the medication they need. At the same time, we are facing the dilemma of what to do after our products age. So far, our medical representatives have focused on creating awareness among doctors about the value of our products, but a complementary sales strategy is needed in which we partner with local companies that are more focused on branded generics, which is a particular benefit to us as we can use their sales experience.
Q: MSD divested most of its OTC portolio to Bayer and acquired Schering-Plough - what motivated these moves?
A: While some companies choose to work in many different areas, we are focusing our resources on areas where we can have an impact on health and where innovations can make a difference. OTC is an exciting and expanding segment but it was not our core business, but MSD has made several recent decisions that are altering its long-term business strategy. Five years ago, we boughtSchering-Plough, which forced us to alter our production and business plans, and subsequently we had a very large number of manufacturing sites and a significant level of over-capacity. As part of the merger, we had to restructure our manufacturing strategy which required closing some plants, moving others, and opening new ones to ensure we had the correct manufacturing infrastructure. As Mexico is critical for our company, we maintained our manufacturing presence here while consolidating it to an efficient core instead of having many underutilized units. We take manufacturing extremely seriously and we believe having a single, high-quality facility is far more strategic than to try and manage a vast network in every country.
Q: Mexico has faced several challenges in the healthcare distribution area of late. How has this affected your sales?
A: MSD has a hybrid strategy, wherein we use distributors for the public and private sector, while working directly with pharmacy chains. Either of these strategies can work well depending on the customer. Casa Saba going bankrupt certainly created a disruption for the entire industry. Casa Saba was our largest distributor but, since the bankruptcy, we have learned how to effectively reach patients and we are now stronger than before. In comparison, we have a mutually beneficial relationship with our distributors and our pharmacy chain customers. The market itself is also changing and now pharmacy chains are offering medical consultations at the point of sale, which may be perceived as a threat by some but may represent and interesting opportunity to adapt.
Q: What expansion plans do you have for Mexico?
A: We are always looking for new expansion opportunities. For example, MSD just bought Cubist Pharmaceuticals, one of the largest and most productive antibiotics manufacturers. The world requires a revolution in the antibiotics market, as the number of antibiotic-resistant bacteria is increasing worldwide and the situation is becoming highly dangerous.
New products to fight these bacteria are needed, which is why we incorporated Cubist Pharmaceuticals’ research lines into our business strategy. MSD also has a global deal with Samsung for biologics, a process that is now at phase III and we are currently bringing these products to Mexico. By growing organically, our goal is to be the best healthcare company in Mexico which means becoming the fastest-growing multinational, which will be achieved by making smart global acquisitions in each country. These global deals have significantly increased our rate of growth in the past years.