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EF: 2019 was a transition year for a new government with new priorities. How did Carnot navigate in this new environment, what was accomplished in 2019 and what do you expect for 2020?
GS: 2019 was an overall year of transition but I think it is important to separate financial results from strategic advancement. Our financial results, achieving budget, etc., was fine, there was no significant decrease of the market, no significant negative impact to the exchange rate or interest rates so financially it was an OK year. But strategically it was significantly more difficult to evaluate, mainly because there was a high level of uncertainty regarding healthcare and what is the strategy to be followed. There is a significant communication gap between what the authorities need and how they are requesting the private companies to supply. I think there is a trust gap that initially was born out of the trust gap from the public sector to the private sector and as time has gone by it has developed into a mistrust of the private sector to the public sector as well and as it goes both ways it generates uncertainty. Healthcare needs long term investment turnover periods and in the best case scenario tends to take 4 years and real case scenario 7 years for things to come around. Uncertainty creates a lack of investment in long term projects so strategically I am worried as I think there needs to be a clearer message regarding the healthcare sector and health policies, regarding the expectations for the pharmaceutical sector and national pharmaceutical policies, and the expectations for innovation. In other words we need a vision to fill the gap between basic science and innovation in healthcare. In my opinion few if any of those gaps have been formally filled with information, strategy or plans and this worries me because they have an impact on investments of regulatory strategies and we need clarity to be successful.
EF: Carnot is the golden child of Mexico’s success stories, so what role can the company play in filling these gaps and allaying the mistrust you mention?
GS: We have to fill the gap of mistrust, if we don’t everything we do will fall into that gap, and neither side will be certain if it is done in good will or in good quality. There is a group of national companies that has been putting in a significant effort trying to bridge the gap of mistrust. The way to bridge the gap in my opinion is doing things right in the regulatory, quality and compliance departments and then exposing ourselves to contact with the authority in ways that will bring scrutiny. We must come forward; open the plants, the projects and our minds, doing things that put the company in the eye of the authority. The authority then can confirm that companies comply in regulations and quality and we are hoping this will bridge the gap and see us as company worthy of trust. As the trust gap goes both ways then the authorities need to answer in a serious apolitical technical way, approving what needs to be approved, (not refuse for political or ideological reasons). I do think this is happening albeit more slowly than we would like. The gap needs to be filled with good technical apolitical efficiencies and when this happens there will be a more effective relationship between serious private sector companies and authorities.
EF: How is Carnot aligning the national priorities to your own strategic priorities?
GS: We are aligning our priorities by participating in high value high impact areas which we believe will be decisive and mostly focused on healthcare. We are focusing on gratuitous universal healthcare access and access to healthcare is significantly limited due to competitors of some high value high benefit drugs, basically because there are single suppliers for biosimilars and vaccines products. The lack of a strong biosimilars or vaccine manufacturing capacity in the country makes the products more expensive for the state and for the public to be able to buy these products therefore limiting access and placing difficulties on free universal healthcare. We are focusing on doing studies and proposals that are roadmaps to potential ways of operating, we identify opportunities, we identify the science that allows for these opportunities in Mexico, who can do it and there is local capacity in the UNAM and in the Politécnico to bring these drugs along. We identify, define and prepare these opportunities technically and we define the pathway that maximizes the opportunity of success which includes aspects of pharmaceutical policy. Firstly there needs to be a co-related public purchasing strategy because most of these products have one single buyer therefore the risk of development without an agreement with the buyer ends up being too high, so mutually beneficial agreements need to be reached where a share of the market is accessible to the local firms that invest in this technology at a price that is convenient to the buyer but that promotes the investment in these technologies. There are multiple models that allow for this. What also needs to be resolved is the regulatory support or pathway as we are talking about products that have a significantly higher technical complexity to small molecules which also comes with a higher cost of development. This needs to be resolved because it is a matter of risk mitigation, for example getting guidance when proposing a clinical plan or feedback or validation on what is proposed so that companies that are trying to develop inordinate complicated drugs can walk with the authority to maximize the potential for approval because even if it the company benefits it is also in benefit of the country to have more competition in these drugs. Finally although some work has been done with the new IP law, we need an environment where there is an absolute respect to patent protection balanced with the non-consent of extraordinary exclusivities by judicial means.
Pharma chemicals and the security of supply has been an important issue forever but has now been made more visible with the COVID-19. In Mexico above 90% of the APIs are imported whereas in the 80s about 80% of the raw materials were manufactured locally. This has not just happened in Mexico, it’s a global phenomenon where everything has been moving toward China and India -China mostly as even India imports from China. This has generated a national security issue both in Mexico and the US as the US imports about 94% of their APIs. Being so close to the US is for us an opportunity as is local consumption. I am not suggesting we compete with China in this area but we do need to figure out the critical APIs which will be most important in the future so we can have a strategy to work toward that. Cost cannot be the only evaluating driver, we must set up alternative valuation methods that attract this sort of investment and it doesn’t have to be huge we can still buy 90% from China but leave 10% to be bought locally in order to ensure it´s operative. The same principle applies for the US; they have been asking Mexican businessmen to invest in APIs for years now but without a guarantee of purchase so it hasn’t really prospered.
EF: What would be the alternative valuation models?
GS: There are a couple of models that have been used in different places for example “Grado de Integración Nacional” where depending on how many elements are entered you get a different factor on the existing pricing and this is something that could be used, or some sort of purchasing policy where a percentage of the strategic drugs have to be sourced locally. The reason this should be done is that it’s a national security issue. It is just a question of setting up the necessary rules to avoid corruption and establish pricing etc.
EF: You are a Mexican visionary when it comes to healthcare and in this new decade, so what footprint would you like to leave, as a health influencer and what you would like to be seen for?
GS: I would prefer to be pushed away and forgotten, but I do think Mexico has a significant capacity to bring forth higher technology products. Bigger innovations can be brought out of labs and translated into clinical operations, the basis is there but the ecosystem needs to be improved in order to advance. My role is to be one of the first players to manage medium or light successes, because first attempts are never huge success stories. My role is to push and generate, to create the pathways for others to use for future successes. There are globally bigger, richer, smarter people around the world that when they see this sort of success I hope will come to the market and generate a larger push and therefore I will most certainly be pushed away. I want my work today to pave the way for the ecosystem to become viable, for the people doing new technologies to understand what they need regarding IP, legal organization and tactical development so they can be sellable.
EF: Do you have any advice for the future science and innovation generation?
GS: My recommendation to the coming scientific innovative generation would be that science for the sake of knowledge is very commendable but of limited value, for science to really reach its potential and benefit mankind it needs to be applied. My message to the future innovators of Mexico is for them to focus their innovations on the bare needs of mankind on the big problems.
Follow-Up: What are your top three pieces of advice for managing in times of transformation.
In these times of transformation and uncertainty I would have the following advice:
- Decide and be critical about where to focus. Determine where you are adding value to the customer, where you are adding value to the stockholders and focus your efforts on improving or transforming those processes first.
- Develop a culture of adaptability. In these volatile times it is critical to have the capacity to analyze and pivot effectively. Implement processes that move quickly from idea to implementation and that analyze the results of the implementation and its impact for the company and the customer.
- Take advantage of “disruptive” opportunities and technologies. These transformational times will come with “disruption” and commercial opportunities, be sure to take advance and implement new technologies where applicable and act upon the opportunities as they become available.
- Don’t go at it alone. There are partners, associates, suppliers, customers, academia and even competitors that can increment your chance of success by working together. Identify those players and work together on mutually beneficial ways of achieving transformation leveraging on each other’s strengths.
- This is the new status quo. Prepare the culture and processes in your organization for this to be part of new normal. Your long, medium and short term plans should be prepared to accept the changes that these new and frequent transformations will require.
