03 June 2011
Running a medical device company is nothing like managing a hotel or oil company. Key concerns include investing in new technologies, gaining government approvals and training doctors.
Those were among insights shared at WorldCity’s CEO Club May 6 by Jim Hogan, senior managing director for Latin America for medical device maker Medtronic. The Minnesota-based company is best known for inventing and pioneering heart pacemakers. Today, it posts about $17 billion a year in sales worldwide, with Latin America a relatively small but growing market.
“It’s very rare that I sit next to someone on a plane, and they’ve heard of Medtronic,” Hogan said.
The business also differs from pharmaceuticals, because most medical devices don’t have patents to protect them for 10 or 15 years from competition. Medtronic relies on innovating products to keep sales growing, making it vital to get goods quickly to market and to train doctors in new devices, he said.
“Two-thirds of what we’re selling now, we weren’t selling 18 months ago. And two-thirds of what we’ll be selling in 18 months, we’re not selling now,” Hogan told the group.
Intrigued by those differences, CEO Club participants peppered Hogan with questions.
How does Medtronic decide where to manufacture, and are most products made in China?, asked international trade attorney Peter Quinter of law firm Becker and Poliakoff.
Production takes place in 35 countries, with most manufacturing outside Asia, Hogan said. The company invests in technology startups and often acquires them as their sales grow. It bought seven companies worldwide last year. Production often ends up where the startup began, Hogan said.
“Manufacturing is probably a lot less strategic than you would think,” he said.
If sales are directed at hospitals, what should consumers ask to make sure they get quality medical devices?, asked Erich de la Fuente, president of Miami-based public relations firm EDF Communications.
“Make sure you are in a high-quality health care system,” Hogan said. “And don’t hesitate to ask your doctor: ‘Have you done this procedure before? Where were you trained in this procedure?’ ”
How does Medtronic train doctors?, asked Ruben Rotulo, president of consulting firm Robles Advisors.
The company has surgery simulation centers at its offices, where doctors learn new procedures. In Latin America, those offices are in Puerto Rico, Brazil, Mexico, Argentina and Colombia. Next, doctors get training on cadavers. Finally, a proctor often joins a surgeon in a hospital operating room when the doctor performs his or her first procedure on a patient with a new device, he said.
“Training is often 10 times more important than the device itself,” said Hogan.
What does it take to get government approvals in Latin America?, asked Lorena Keough, a managing director in Miami of executive search firm Diversified Search.
Product approvals take time, but a larger problem in Latin America is payments and patient access to health care, Hogan said. Hospitals and governments pay for medical devices, and often, they’re strapped for cash and hesitant to spend on new technologies that can prolong or save lives, he said.
A big challenge for Medtronic and other medical device companies is to persuade governments that “a healthy population is a wealthy population,” one better able to work and to provide a return on investment in healthcare for the long-term, said Hogan.
And how does corruption play into the business in Latin America?, asked de La Fuente, whose public relations firm develops anti-corruption campaigns.
In Brazil, some hospitals give kickbacks to doctors who install pacemakers, since the doctors can’t live well on their salaries, and the local government can’t afford to pay doctors enough, Hogan said. Medtronic stays out of that: “Morally, we don’t believe in it, and legally, we can’t do it,” he said.
Other countries are more transparent in business, especially Chile, “a very clean market,” Hogan said.
Jokes and laughter studded the session. In one instance, Hogan noted Medtronic must carefully control risks in the United States, because “we’re in such a litigious environment.” ’ Quipped attorney Gary Rosen, who leads the litigation practice at Becker & Poliakoff: “You say that as if it’s a bad thing.”
At another point, Hogan called the human body “basically one big electrical grid” that with age, can use the help of electric impulses from pacemakers and other devices. “I hope all of you live long enough to need one of our products,” he said with a smile, prompting laughs of surprise from the group.
The CEO Club is one of seven event series organized by WorldCity to bring together executives on international business topics. The CEO series is sponsored by the University of Miami School of Business Administration and the law firm Becker and Poliakoff. The next CEO meeting is set for June 3.