Artículos en Inglés
Miguel Lacayo – Businessman
Translated by: Vivian Melara
By: Mauricio Gonzalez
Where does Miguel Lacayo come from?
Well, on the academic aspect, I am an Industrial Engineer from Georgia Tech, and I have a Masters in Industrial Engineering from Stanford. Six years after that, I worked in the textiles and garments sector. We had a business in Florida. Eventually, I gave up my participation in the business and I pursued another Masters in Business Administration in Harvard. During that period of time, I created another business in Mexico and eventually returned to El Salvador in 1993. So it has been practically 20 years since I’ve returned to the country.
I managed Batteries of El Salvador and during my term we managed to multiply our sales six-fold. This was around the time when Francisco Flores invited me to participate as member of his team to construct the government’s plan for his term. We spent approximately 15 months doing that: talking to people, trying to define what were the population’s needs and creating a government plan, not imposed by or invented by something, but rather out of people’s ideas, out of their real needs. Then we entered the government with Francisco Flores in 1999.
What was the greatest challenge you had as a public officer?
The truth is that maybe it was a challenge related more to personal topics and learning how to be an officer. When you enter these positions, I think that almost nobody is prepared for it because the topics are extremely complex. But you have to learn to relate to all production and political sectors, in such a way that you can implement a government plan with the support of diverse sectors. There were many complicated topics. But the main challenge was reaching the Free Trade Agreement. This was completed at the end of our term but there was a preparation process which allowed us to get there, a treaty with Mexico, with Dominican Republic, a treaty with Chile, with Panama. We slowly constructed a team and a relationship with the production sector which allowed us to arrive there after completing this challenge.
If you could, is there something related to the FTA negotiations that you would change?
No. We completed practically everything we wanted to achieve. There were two or three sectors we knew initially would be very, very hard to reach the level of protection desired. For example, the pig farming sector and the rice-production sector were the only sectors we knew would present real problems.
In the United States, the political formation of the Senate, strengthened sectors on the basis of which political commission there was in the Senate, in such a way that the pig farming sector, which does not have subsidy in the United States but does have an enormous production scale—a farm of 40 thousand or 50 thousand pigs— was called a sector against a farm in El Salvador which I believe doesn’t even reach 10 thousand pigs. The scale was very different. But, no, I wouldn’t change anything in the treaty.
If there was a chance, would you be a public officer again?
No. But I do clarify that I am grateful to have been a public officer. I believe it is a privilege having had the opportunity to be one. Simply put, you need a great level of energy to be a public officer and I consider this is the responsibility of other generations, to the next generation, to younger people, taking that role.
First, I identified that need and void when I was in the government, seeing the opportunity of taking healthcare and medicine to a sector in a more effective, comfortable and affordable way for the population. I saw this opportunity when I was in the government. I left the government without a job, looking for what to do and I considered there was an opportunity to provide the population with this type of service. This is why I have immersed myself into the pharmaceutical sector, without knowing a thing about detailed sales or pharmaceuticals.
Which are the initial main barriers for the medical industry?
In the pharmacy area, there are relatively few barriers to establishing pharmacies. Initially we had many difficulties invented by others on the way, to block our entrance to this area. But in the end we could overcome them. The sector saw us as a threat when we entered. The pharmaceutical sector in general. The main problem it has, and the reason for which people complain about is prices. It is the enormous barrier and there is a great bureaucracy to register new products, meaning, wanting to import products to El Salvador is exceedingly tedious and difficult. They ask for unreasonable requirements and there is a lot of bias in the process.
Do you consider that medicines in El Salvador were more expensive prior to the Law of Medicine?
Well, I am not one hundred percent sure that this assertion is true, despite the existence of many examples of medicines which are more expensive here than in any other place. But I would say the main problem is a market distortion issue, not because of a lack of competition but rather because of information asymmetry, meaning, when the doctor has more information than the patient, the laboratory has more information than the doctor. They push money, what is given in the pre-sale to the people in the sector, which are things that you should have, and this law has eliminated them. But basically the problem is that there are many barriers to import products. This is the reason why I consider that El Salvador does have high prices in some products because it is expensive to import products to the country.
If these prices were compared to the rest of the Central American region, how would they compare?
In the rest of the Central American countries, like Guatemala and Nicaragua, there is a greater habit of selling generic medicine. In the generic medicine sales what happens is that you have a force which causes the decline of prices because generic medicine is more affordable. In El Salvador something abnormal happens, something which economists say should happen doesn’t: the lower the price of a product, the more it sells. In El Salvador this is not so. Here, expensive medicine sells the most; the most expensive medicine experiences greater sales in the country. Then, this evidently suggests there is a factor where the doctor becomes involved too much in the increasing prices of medicine in the country.
Do you believe that some companies have been protected over time?
Yes. I believe there are companies which have used their weight, power, economic capacity or even dangerous practices of influence in the past. Yes, of course this exists.
How can medicine prices be lowered without recurring to price control?
Law is beneficial in some things. It creates another fifty problems, let’s say. But there are certain aspects where it is good. The main factor that would reduce prices in the market is the citizen since when he or she receives his or her prescription the doctor may have the option of suggesting a specific medicine yet alongside can suggest a generic medicine so when he or she goes to the pharmacy he or she can ask the attendant what other medicine options are available based on the generic name. He or she may give you one, two, three or four options more and you can say: “well, this medicine is $50, this one is $40 and this one $25.”You may know one of these laboratories and trust it and say “I’ll choose the $25 option. You did not lower the prices, you lowered the expense.
Is this a competition generator?
What happens is that in time this generates an additional competition that forces the company with higher prices to lower them or else lose too much of the possible market. This is the main factor to create dynamism in the generic sector in the whole world.
Secondly, the government or pharmaceutical sector should prohibit perverse practice which involves economic incentives so one or another medicine or brand may be prescribed, so that one or another medicine may be specifically sold in a drug store. Principally I believe it is information.
That’s the deal, if the market may be opened so that more products are imported and so that registering the product is not so complex, there is still going to be competition. But, like I mentioned before, what the superintendent of competition, a person who has studied the sector, said is that there is not a lack of competition. His conclusion is that there is a lack of information for the consumer, mainly.
What must be the role of the Superintendence in the medicine market?
The Superintendence of Competition regulates or mediates the competition topic. The National Direction of Medicine regulates the sector. The role of the Direction, while they do not declare it unconstitutional, (which is really probable) is to ensure the law; make sure that the law is followed by all and try to reduce the unnecessary bureaucratic barriers because there are bureaucratic barriers which are invented by diverse people in the sector for different reasons. But when you compare the requirements of El Salvador’s registry with the registry’s requirement, for example Guatemala’s, you realize that in Guatemala it is much easier to register a medicine.
How is the medicine market supposed to be managed? What should be the role of the State and companies?
Well, the State should reduce bureaucracy, facilitate importation, and eliminate shackles so the market functions better. Companies should have the best offer to compete in the market healthily.
At a Glance
Miguel Lacayo: father, businessman, responsible citizen
Medicine Law: necessary but poorly established
TLC: a great achievement for the country
Mauricio Funes: irresponsible
Dollarization: a misunderstood benefit
Generic medicine: a practical and effective solution
Your advice for El Salvador’s youth
The future of the country and the fact that our country becomes more enjoyable to live in and where we all have opportunities for progress is not given automatically; the only way this happens is when youth become involved in our country’s political life. We cannot allow someone else to do our job. We are all responsible for having a better country. The citizen who does not involve himself or herself in any way and does not contribute in any concrete manner to this goal, does not have the right to complain because society is only going to get better if the people in it care about the future of El Salvador falling into other people’s hands. Let’s be the ones in control of our future.