Paul Doulton
View from the Top

Navigating Local Waves in Mexico and LATAM

Wed, 09/07/2016 - 15:29

Q: In the context of the Mexican landscape, what do you believe is Oriundo’s role and how was this accomplished?

A: We help companies understand Latin America, with its 22 countries and differing market dynamics. Oriundo means “someone who hails from” and we channel this by helping foreign companies navigate local waters. Our offices are all over Latin America including Argentina, Brazil, Chile, Peru, Mexico and Colombia. At Oriundo, we help our clients develop the right entry strategies into Latin America through licensing, distributors, partnering, joint ventures, or acquisitions. One of the most successful strategies has been outsourcing marketing, regulatory, medical and sales services and try before you buy, while others prefer partnering with Mexican companies. The right strategy depends on the company’s portfolio, what the customer wants to achieve, his appetite or reluctance for risk in investment and the degree of control needed. We then find the right solution and most appropriate fit. Many companies try to do this alone but are rarely able to identify the most strategic alliances to meet their needs.

Q: What role do Mexico and other Latin American countries play in companies’ internationalization strategy?

A: We have been in business for about 15 years and we now have more work than we ever had before, which reflects the increasing interest in the Mexican and Latin American markets. This is due not to the market growing, and its regulatory environment, which is highly supportive of the industry. In comparison, the regulatory framework in other countries, such as Brazil, is still extremely protectionist. The policies introduced by Mikel Arriola in Mexico are speeding the introduction of new molecules into the country. It also makes the process more predictable, fair, reduces the duplication of work and approval by other serious regulators such as EMA and the FDA. This is all being done without the need to relax standards or compromise patient safety. Contrarily, Mexico’s pharmaceutical and generics manufacturers now meet global standards. Mexico benefits from a sound economy and positive regulatory environment so many companies are now choosing the country as a launching pad for Latin America. At Oriundo, we have spent eight years studying healthcare systems across the region in order to ensure that companies know where local policy and its execution is headed.

Q: How can both international and local companies drive growth in Mexico given the challenges they face?

A: International companies generally thrive in generating and introducing new molecules. Major innovators are losing their patents and have been unable to generate new ones fast enough. As a result, big pharmaceutical companies are implementing new strategies such as the acquisition of smaller ones. For example, Merck (MSD) recently bought Schering Plough, Pfizer is buying Allergan, while Sanofi has incorporated 10 to 12 different companies. International companies modified their business model by acquiring local generic companies and an issue they face after acquisition is trying to use their former business model by promoting to doctors, using the old wholesaler and pharmacy channel for generics too. The only commonality between a patented medicine and its generic counterpart are its manufacturing and patient consumption but the intermediate market dynamics are entirely different. The more successful generics companies are often managed by former fast moving consumer goods executives well versed in the channel dynamics and who are focused on improving the value chain. As for local generic producers, pharmacy and supermarket chains are also promoting growth, especially private label generics. These chains now represent more than 60 percent of all pharmaceutical product sales and are still growing. Local producers, especially of generics, have traditionally been flexible during manufacturing, which enables them to meet market regulation, low-inventory and ever changing requirements of the big chains just in time. Manufacturers in India, the US and elsewhere with large dedicated plants are not able to match these requirements at a distance. Therefore, local manufacturing, at least for high volume products, has gone from a regulatory to a strategic imperative. Price is indeed far from the most important factor in Mexico.