Read the Conversation
EF: Upon assuming responsibility for overseeing the Spanish operations, what mission did you establish for yourself? What are your current priorities on the agenda?
AG: The previous managing director left us with good fundamentals. Internationally, our company has been one of the most important players during the last year, especially in sports medicine, advanced wound care, and orthopedics. We are one of the most important players in terms of company and market dynamics. We restructured and became a smart company after the pandemic, and this is something that differentiates us from our competitors. This lays down a good base for growing more in the future in terms of profitability and revenue. My predecessor did an excellent job, and I now accept the challenge of taking the company to new heights.
I have been working at Smith & Nephew for 18 years. I know the company and the kind of things it can do better than others, where we can and must improve. I think we are going on the right path. My main focus is to sustain the favorable trajectory we are experiencing, retain the key talent across all franchises, and enhance our operational capacities to tackle the market challenges ahead.
EF: How does your portfolio translate into the Spanish market, and what is driving growth for you in the country right now?
AG: Market access for innovation everywhere is always a challenge. Innovation usually represents value-based healthcare and the perception that customers are incurring an expense increase. Smith & Nephew is skilled at producing health economics and clinical evidence, which serves as the basis for introducing new technologies, materials, and surgical techniques. Innovation in all of our portfolios is key. This is how we differentiate our solutions.
We are also working to adjust and resize our portfolio as MDR is more frequently becoming a determinant tool that helps us offer the right solution at the right time and right price. Our portfolio has many SKUs and options, but we want to ensure that it is innovative and contributes real value. Ensuring the right adoption rate for innovation is also important, and that is why we are investing heavily in education.
We are trying to be smart in managing the product cycle life and the operational part of the business, particularly when we work with private sector-based. In summary, we want to manage our business more smartly through portfolio rightsizing to make decisions about the MDR and provide value to our customers.
EF: How would you describe the strategic significance of the Spanish market?
AG: In Spain, Smith & Nephew boasts a legacy spanning over 160 years, making it one of the oldest companies in the global arena. Our local company was established around 50 years ago, aligning with Spain's rich history. Throughout our extensive journey, we have consistently delivered cutting-edge technology and top-notch medical education to customers worldwide.
While our commitment to excellence remains unwavering, our primary focus has always been on fostering meaningful connections with our customers. We prioritize personalized service and tailored solutions, believing in a relationship-driven approach over high-volume transactions. Our goal is not to excel in a volume-based market but to provide unparalleled value through individualized attention and expertise. We have done well in Spain in our relationship with the main stakeholders. This relationship is based on trust and being a real partner.
EF: What do you want to focus on as you start a new role with Fenin?
AG: I believe Fenin is the ideal platform and association for introducing a new approach. Historically, Fenin has been the primary representative of the medical device industry in Spain. However, in the past, our interactions with public and private institutions may have been too accommodating. It is time for a shift in approach—to not only educate but also to advocate more assertively. For example, while consignments are theoretically not allowed under Spanish law without mutual agreement. Consignments often impose significant financial burdens on the industry, particularly in the trauma sector, where they are commonplace, and companies end up providing their products essentially for free despite the substantial investment required for medical devices, instruments, and implants. This is not valued and regulated by the public sector.
We are seeing a daily increase in DSO, which is putting more pressure on pricing than it was previously. Consequently, the public sector is growing in our operations. While the public sector demands benefits, there seems to be a lack of awareness or willingness to acknowledge the healthcare system's costs. Many decisions appear to be politically motivated rather than thoroughly considered. Additionally, there is a notable absence of a comprehensive strategy beyond a limited number of care group settings. These issues require careful discussion.
There is also a need to enhance communication, particularly with patients. However, legal restrictions prevent us from engaging in certain types of patient advertisement initiatives. However, patients and patient associations have to know some real facts about what is happening in the health system. For example, private insurance is involved in a war to gain market share. The industry is offering ridiculous prices of around 10 or 12 euros per month for healthcare insurance.
It is clear that at this price point, providers are aiming for high volume and minimizing payouts, as is typical for insurance models. However, when it comes to healthcare, transparency and honesty are crucial. Last week, we encountered a distressing situation involving a patient who required implants but had to bear a substantial cost because their private insurance did not cover the service. This highlights the growing seriousness of these issues. The patient is spending a lot of money with the company, but the return on investment is zero.
We need to sit down with the public and private sectors to reformulate our relations and discuss things like maintenance, price, value, and volume. We cannot have volume and value at the same time. We also need to communicate and become a real lobby to positively influence the private and public healthcare systems.
EF: What technology and AI applications do you think will be useful to the doctor and the patient, and how is Smith & Nephew approaching this?
AG: We are seeing an increased use of robotics in the industry. Artificial intelligence will dominate the sector, and it is akin to the new industrial revolution. AI is changing the game and all the rules. Smith & Nephew is working to incorporate artificial intelligence into all our devices. We have to be aware of the importance of new materials for bio-inductive implants for growing tissue. Biologics are important for bone care and post-medicine robotics.
Robotics play a crucial role when designing the intervention for joint reconstruction or repairing something in trauma. Artificial intelligence plays a pivotal role in achieving the highest level of precision and reproducibility in technology, leading to consistent clinical outcomes. This applies irrespective of the hospital or the surgeon involved. Who is more important? The surgeon or the technology? This is something that is under discussion, but I think the advancement in new technologies is something that cannot be stopped.
The new generation of surgeons will embrace robotics and artificial intelligence as integral components of surgical practice. This includes advancements such as surgical navigation and imaging management, incorporating technologies like echo and MRI. Augmented reality combined with robotics will revolutionize surgical interventions. Despite the transformative potential, resistance from some surgeons and barriers related to cost and market access may impede the adoption of these innovations. I am sure that all this technology will be a reality, but I am not sure when it will happen.
Singapore will be one of the first leaders to implement this kind of technology. The healthcare system needs to embrace the private sector. We need to pay for the technology and the clinical outcomes. For example, the Italian investment system is based on DRG. This is a cost-per-procedure, pay-per-procedure arrangement. Pay per procedure means that everything is included in one amount. It represents the greatest amount, but if this amount is fixed. Innovation and technology will have a higher barrier in Italy than in Spain.
EF: When you look back at these 18 years you have spent at the company, what moments stand out to you? What achievements are you most proud of?
AG: Over the course of 18 years, there have been several significant milestones. One enduring aspect that sets us apart from other companies is our agility and adaptability. For example, our organizational structure is now based on franchises, where each franchise operates with its own profit and loss responsibility. This model extends globally, not only within the cluster of Italy, Spain, and Portugal but across all regions. This decision was made in 2018 and has become a defining feature of our company's approach. Other companies are now following our model and clusters.
In many ways, our ability to have a forward-thinking vision has been a consistent strength. When it comes to M&A decisions, Smith & Nephew has also demonstrated exceptional judgment in the past. For example, our acquisition of Athrocare in 2016 was particularly significant. Athrocare was a pioneering company in sports medicine and notably introduced radiofrequency technology in arthroscopy. This acquisition proved to be highly beneficial for us.
Additionally, five years ago, we made another strategic move with the acquisition of Regeneten Regenetem is the name of the bio implant for rotator cuff regeneration. This is a new standard. It is not just reconstruction, resection, or repair. It is a restoration of tissue. This is a natural evolution in minimally invasive surgery. We are achieving tissue restoration with a new biological technology. This is a new standard and a game changer. We are implementing this innovation after five years of having the right vision and understanding the right pathway.
Our approach over the past 18 years has been marked by consistently employing a smart acquisition strategy alongside significant investments in organic growth. This isn't merely a one-time milestone achieved in 2020.
EF: Do you have any final message to our readers?
AG: The healthcare system is moving more towards the private sector. Nobody in the public sector wants to admit that the population pyramid has become inverted. Fewer people now have to have to maintain a lot of people. This is something that is happening in Spain and other places all over the world. I have not met anyone politically inclined who has been able to admit that this situation is unsustainable. They are not taking any action and are assuming that healthcare is being provided by the private sector, which is keeping the system afloat. This is a global trend that will provoke deep change in our way of understanding the healthcare system and the providers. This change will revolutionize the healthcare system.
