/
Analysis

Uncertain Times an Opportunity for Business

Wed, 09/05/2018 - 11:45

A climate of uncertainty has permeated the healthcare industry for the past year as both local and international matters pushed some investors to place their projects on hold. However, others see in this uncertainty opportunities for growth and are actively investing in the development of new companies in Mexico.

If one word characterizes the past year, it is “uncertainty.” Between 2017 and 2018, the international and domestic stages have been dominated by uncertain change, with the US throwing NAFTA in the air and a new president arriving on Mexico’s horizon. Not everyone likes uncertainty, but many investors see a silver lining, particularly in Mexico’s health sector.

“Our experience of over 20 years in Mexico has taught us that periods of political and economic uncertainty often give rise to attractive investment opportunities,” says Ariel Blumenkranc, Director of Advent International Mexico. “Additionally, company owners may be open to a partner that can help them navigate cycles of instability.”

These intrepid investors can see beyond the smoke clouding the environment, such as the potential results of NAFTA talks and the TPP11, to the trends on the ground that are shaping the health industry, which remains open to new players wanting to participate.

Doulton, Founder and Managing Partner of Oriundo, says the scenario is positive because most companies have enough products and business models to overcome the prevalent challenges. In Blumenkranc’s opinion, companies should focus on the micro trends that are affecting industries and companies, not only on the macro issues.

According to Doulton where many see challenges, companies see opportunities for change, growth and development. “Some CPTPP countries are far less competitive than Mexican companies, so I guess the treaties will strengthen Mexico’s pharma and healthcare industries because they fully comply with global standards and regulations.” In this context, the Center for US-Mexican Studies by the University of California says that it is time to reconsider NAFTA’s existing provisions on cross-border trade services and expand health trade between both countries because most Mexican border areas are larger than their US counterparts.

Insurance companies are among those that have an opportunity to benefit from this trade exchange, and provide a benefit to the population at the same time.

“There are also significant opportunities to increase penetration of medical insurance solutions to the middlelow income segment. Through a value-based approach to healthcare delivery, with time-driven activity-based costing and all-inclusive bundled packages, companies can provide more transparency to the healthcare system, thus enabling the major insurers in Mexico to offer affordable products to the middle-low income segment that now lacks access to a quality medical insurance plan,” says Alonso Gómez, Investment Officer at International Finance Corporation. On an international level, a win-win situation could emerge from NAFTA’s talks, according to the Center for US-Mexican Studies. The center says US citizens have greater access to healthcare through insurance plans, so Mexico could take advantage by expanding its appeal for medical tourism, investing more in state-of-the-art medical facilities and training bilingual medical professionals.

Beyond the challenges, the uncertainty and the changes, Mexico is still an attractive country for investment for several reasons. “Mexico is going through an epidemiological transition. Today, around 55 percent of mortality is related to diabetes, cancer and cardiovascular diseases. These conditions require an increase in the availability of infrastructure, resources, materials and health personnel,” says Ignacio García-Tellez, Director of the Health Sector at KPMG in Mexico. In addition, GarcíaTellez says that the country has the right conditions to attract new companies and the necessary demand to continue introducing innovative products and services in the health sector.

To maintain favorable business conditions, companies should approach “business as a community-building effort, where growth comes from reaching beyond the familiar circles of influence to new players,” says Sandra Sánchez-Oldenhage, Owner and CEO of PharmaAdvice. “As an industry we must multiply our business relationships to keep reaching all the patients who can enjoy the medicines available and the new ones to come; it is an expanding circle of need. The challenge is how we can get all these stakeholders, from academia to governments, payers, researchers, and with the patient at the center of all decisions, organized in pursuit of the same goal.”

ENTREPRENEURS, MEDICAL TOURISM

According to ProMéxico, in the last 10 years the country has become the second-most important destination for medical tourism, with approximately 1.2 million visitors a year, lagging only behind Thailand, which ranks first with 1.8 million visitors. The value of medical tourism industry is growing year by year and in 2016, ProMéxico estimated the value of the industry at MX$4.8 billion, while the projected value for the end of 2018 is MX$5.3 billion. According to the Center for US-Mexican Studies, three areas of expansion must be considered when discussing the cross-border health relationship: the increase of medical tourism, people who work in the US and who receive medical attention in Mexico and the development of the workforce in charge of addressing the shortage of primary care physicians, nurse practitioners and others in the US.

Innovation and entrepreneurship are recognized by the World Bank as key factors in addressing development challenges such as inclusion, sustainability and prosperity, as they boost productivity and economic dynamism; therefore, emerging economies such as Mexico’s can benefit from new or improved products developed by entrepreneurs.

Entrepreneurs in the health sector must “understand the problems in the healthcare industry and for the industry to support them with the necessary resources,” says Héctor Valle, Founder and Partner of INNOVASALUD, who adds that the main difficulty for entrepreneurs is that “Mexico lacks an angel investor system, which complicates the creation of new companies.” The entrepreneurial opportunities in the health sector, according to Entrepreneur, reach across the industry’s entire spectrum, although the most interesting opportunities are in dental health, gyms, pharmacies, clinical laboratories, stem cell banks, skin care, foot care, nutrition physical rehabilitation and psychological attention.

“Individuals need to increase their investment culture to support these emerging companies, but it is also necessary for the government to invest more in the generation of new companies,” says Valle. He adds that new companies and entrepreneurs should keep in mind that “healthcare products must undergo complex, expensive and time-consuming regulatory processes and new companies must be able to finance themselves throughout these periods.”

Governments, according to the World Bank, should focus on creating healthy innovation ecosystems where human capital, research and development institutions, financial capital, the industrial base, the legal and regulatory environment, business and innovation culture are present for entrepreneurs. In a market economy, entrepreneurship should occupy a central position because it can stimulate the economic success of a nation.

Map Medical Tourism