Read the Conversation
EF: How do you see 2023 from your perspective: as a challenge or an opportunity?
EH: I see it as a huge opportunity. We have had two very good years, and we were very well positioned during the Covid-19 pandemic because we had the right medication. In February of the first year of Covid, when doctors began prescribing one of our products to patients, we sold one million three hundred thousand units. We had a million in stock by chance but had to put our plant on a 24/7 work rota to make the other 300 thousand units. We had great results that month, and since then, we have had a high demand for different products at different times. Unlike other companies that went out of stock, we were well stocked in raw materials and finished products. We never broke the supply chain, even when getting products from China was difficult. Our strategy is “just in case” and not “just in time;” as a result, we have had two very good years.
Now we have purchased several licenses, added new products to our lines, opened new lines, increased our sales force into new markets, and further specialized sales forces, and we are doing wonderfully. Last year was the first year we had to work 24/7 for six months to meet the demand. Fortunately, we could comply. We purchased a new line for the capsules; we were the first company worldwide to do continuous granulation. We installed the equipment for production that combines 3 to 5 milligrams in a gram, every capsule must have the exact amounts, and the only way to manage a perfect combination is to do it in its liquid phase. We used to reprocess several batches, but with the new equipment, that has been a problem of the past. We are now getting a second line with the same equipment, which will increase our output; we have started exporting to the United States, and it has gone much faster than we expected, and our market will grow impressively.
EF: Chinoin has three production plants, Aguascalientes, Mexico City, and Farmacol in Colombia. How do the plants complement each other in your production footprint?
EH: Our facility in Mexico City is a small distribution center; we make bacterins for veterinary products and packaging for some human products, mostly for the representations of some European multinational companies which do not have facilities in Mexico. We had registrations and did some manufacturing and distribution –we still do- but we are moving away from that business. Originally, we got involved because we wanted to take advantage of their quality control audits; they helped us bring our facility up to European standards, a huge gain for us. It demanded investment on our part, increasing the quality control and our labs; we had to duplicate our capacity, which we have also just done in Colombia. We bought Farmacol from Takeda, which needed updating, and now it is up and running.
We continue to invest; we are separating veterinary pharmaceuticals from our human production because the active ingredients are sometimes different. To this end, we are inaugurating a new plant in Aguascalientes for veterinary products. We do everything in Aguascalientes; in Colombia, we have purchased several products, some of which we will manufacture. We are considering manufacturing in Colombia for Mexico; we are also increasing capacity in human pharma in the existing plant in Aguascalientes, we have the space to do so, and the next phase will be an expansion to add a fourth line for manufacturing solids without having to do any major changes, just using space we already have but are not using them to maximum efficiency. We have 20 hectares for new plants, which will come in time to increase any part of our installations.
EF: What was the idea and the opportunity you saw for your expansion into Colombia?
EH: In the past, we had a presence in Venezuela, but due to some issues, we had to leave that market. However, we have been exporting to Bolivia and Paraguay since the 1940s, and we are now excited to explore bigger markets like Peru, Colombia, and Ecuador. To help us diversify, we strategically decided to acquire a plant in Colombia, which has provided us with a geographical advantage and the opportunity to expand our product offerings. This move will also enable us to increase our exports to Central America, where we have had a presence for decades. In summary, Colombia is a valuable addition to our production capabilities and provides us with a foothold in new markets.
EF: Regarding your portfolio, what is the driving force behind it? What is the balance between prescription and over-the-counter markets, and what drives growth?
EH: Our OTC products are so effective that they are prescribed by doctors, despite being available over the counter. We have established a strong reputation for quality and reliability, which has allowed us to maintain a dominant position in the market without relying on extensive media advertising. Our products have even gained popularity in the United States, particularly Antiflu-Des, which required some adjustments to meet the rigorous standards for branded generic products. With our sights set on expanding into the Mexican market in the United States, we plan to leverage our well-known products to establish a strong foothold before moving on to even greater success.
EF: How do you assess the regulatory framework in Mexico versus other countries in Latin America, with Colombia, for example?
EH: Despite the challenges in Mexico's health system over the past four years, we have been adapting and finding ways to succeed. While there have been changes at COFEPRIS that have inhibited the processing of registrations, we have been able to continue providing low-priced medications with a high volume of prescriptions. We have purchased products registered by Indian companies, and we have been successful in marketing them through a combination of virtual and face-to-face visits with doctors. We pride ourselves on being one of the leading companies in the number of prescriptions obtained.
With Covid, we had to adjust our strategies and have been utilizing virtual visits and samples to continue to meet the needs of physicians. However, we have still been able to introduce new patented products designed in Korea and have quickly positioned them in the top spots. We receive many product offers but are very selective in what we choose to take on. We remain hopeful that the next government will bring increased efficiency to the system, but in the meantime, we are committed to continuing our success by providing quality products and services to our customers.
EF: What is the strategy of international companies in Mexico regarding partnering with local companies to market their products?
EH: In recent years, numerous international companies have chosen to divest their traditional products, leading to a decline in prescriptions. Meanwhile, global companies are focusing on specialized markets like biologicals and selling off their older product lines. Capitalizing on this trend, we have successfully acquired some of these products for various markets, particularly in Mexico and Colombia. Despite facing significant competition from local rivals, we are pleased with our performance, although negotiating favorable prices and ensuring immediate growth remains a challenge.
EF: As somebody who has navigated the growth of a successful and sustainable Latin American company, what would be your advice for somebody looking to follow in your footsteps?
EH: Having a good team is fundamental; it means having the best professionals in each field, technology, production, logistics, etc., and creating an atmosphere within the company where everybody is in the same frequency and works together. I believe that achievement has helped us move forward because it is useless to have just one successful area; we must be a team working together. There must be communication between the different areas. A good choice of products is also necessary, as is knowing the doctors that prescribe our products, and today there is information on that. We do a lot of market research and work on managing distributors as we want our products in stock, yet not overstocked. It does not matter too much if we have one bad month and then two good months as we are not on the stock exchange and do not have to push sales, allowing us a better relationship with our distributors, as we do not have to reach a certain sales target. We have highly invested in quality control, duplicated our quality control lab -we now have 120 chemists working there- quadrupled our microbiology lab and built another facility for the biological tests.
EF: How do you attract top talent to create a team that takes you to sustainable growth?
EH: You need a good headhunter and go through many candidates. Twelve years ago, our CEO decided she was not the person to take us into the future. She helped us out of near bankruptcy in the 1980s but said we needed a new person prepared to take more risks. We went through 70 candidates, and it took us three years to find the correct person, but we found him, and he is doing marvels. He has had offers from larger companies outside pharmaceutical manufacturing, but he is enchanted with the job. We take care to have a good atmosphere at work, and for the last four or five years, we have worked in preventive health, encouraging healthy habits in eating, exercise, etc., contributing to making people happy in their work. Our IT Director, unfortunately, died from Covid complications, and we had to get a new director, but we have the necessary budget and invest heavily in information technology. Our technology department is strong, we handle Colombia from Mexico City, and it works perfectly. We emphasize education and helping people grow. In Aguascalientes, we originally employed people that have not finished their primary schooling, we made it possible for them to study, and many have completed their primary and secondary education; some even went on to university and did a Masters's degree. Now that we are doing well, our biggest problem is preventing other companies from poaching our directors and executives; even my daughter was approached by the competition. I believe we must not repeat what we have been doing but dream of how we would like our information, and this was my message to my people when we changed to SAP 25 years ago, and now that we are changing again, it is the same. It is not enough to bring in an expert to change; we must be clear on how we want our information and be creative. People enjoy their work more when they have opportunities to be creative.
EF: Next year, you will celebrate 65 years working in Chinoin while the company celebrates its 100th anniversary in Mexico. What will be your celebration speech for either of these momentous occasions?
EH: We will see where the company is by then. Chinoin is a family business, but fortunately, not all the family is involved. It is not a good idea when the whole family is involved in the family business. I have seen the problems family companies get into because of family over-involvement. Family is not necessarily the most competent of the employees. Only one of my daughters is involved as the Commercial Director, but other family members are professionals working elsewhere. The General Director knows he will be the director till he retires; my daughter will not take his place. She will eventually take my place on the board of directors but will work in operations under the director. We pick people on merit, not on blood relationships.
I am very involved in the health system because of FUNSALUD, which I presently preside with, and I have been on the board for ABC Hospital for twenty-five years. I was in charge of presiding over the design and building of the first phase of the Hospital in Santa Fe, a full hospital, when they wanted to make it an outpatient clinic, which I opposed. Santa Fe Hospital today is more than a full hospital; it is several hospitals put together and has been a great success. A longer vision and an awareness of the possibilities are needed to do things right.
EF: How do you assess the recent changes to the public health system? How can we best transform the system?
EH: With the recent changes in INSABI and IMSSS Bienestar, which may not be fully understood by most people, it seems like our country is facing challenges in the health system. IMSSS and IMSSS Bienestar are separate entities, with the latter focusing on rural health through mobile clinics. Due to gaps in third-level hospitals, primary care is now being provided to 50 million people in urban areas, which could lead to complications. The government's inadequate procurement and delayed payments to the industry are causing issues. However, we are actively working on a plan to improve the system beyond 2024. Although we cannot revert to the past due to infrastructure and distribution changes, we are determined to tackle the significant challenge of revitalizing the health system. We hope that the opposition will gain the presidency in Congress to support these efforts. FunSalud and other organizations are actively seeking the best models to reconstruct the system, along with opposition state governments that have not yet joined INSABI. For example, in health issues other than excess sugar and heart problems, Chihuahua has the highest rate of adolescent suicide in Mexico. We must attack the problem as soon as possible. To elaborate:
EF: Is there any final message you would like to share?
EH: First, I would like to recognize our team of directors and all employees who have enabled us to reach the situation we presently hold. I would also like to invite other entrepreneurs in Mexico to continue investing with integrity, quality, social responsibility, and values in spite of the uncertainties of the local and international economic and political environment. The health sector is full of opportunities and challenges.
The following issues have more to do with my position in FUNSALUD, the local think tank for health issues, than with CHINOIN itself.
- We must ensure that the doctors have what they need and enough nurses. We have calculated that by 2030 we will need 800 thousand more nurses and 300 thousand more doctors.
- No law in Mexico addresses digital medicine; private doctors can do digital medicine, but public servants can only do what is permitted by law. With no regulation, they cannot use technology.
- Social Security has eight hundred thousand mammographies taken but not analyzed because they lack the staff. A mammography result takes eight months to reach the patient; by then, if the patient has a strong case of cancer, they could be dead. Artificial intelligence can do a better and quicker job. As things stand, we have no law for digital medicine, meaning we cannot use new technologies in the public sector, which needs to be more efficient.