Improving
outcomes and reducing costs:
An Ivey report focuses on global role of Canada’s
medical device industry
Medical
devices play an important role in improving treatment
outcomes, replacing surgeries with less invasive
procedures, and reducing patient recovery time and
length of hospital stays. For all of these reasons,
medical devices contribute significantly to reducing
health system costs and enabling the sustainability of
Canada’s health system. This is important since health
care costs constitute such a significant portion of
Canada’s national expenditures.
$3,959 for
each of us
In 2010, the Canadian government spent $135.1 billion on
our publicly funded healthcare system. That works out to
$3,959 for every citizen or 8.2%
of our total gross domestic product (GDP). Hospitals
account for the largest proportion of health expenses
($55.3 billion), followed by drugs ($31.1 billion) and
physician services ($26.3 billion). In 2009, growth in
national healthcare costs were 1.56 times the growth in
national GDP. Canada continues to spend an increasing
percentage of its wealth on health care while demands
for services continue to grow along with the costs of
healthcare service delivery.
Consisting
of a diverse group of products used in the diagnosis,
prevention, treatment and management of diseases and
disabilities, medical devices range from low-risk
supplies such as bandages and thermometers to innovative
imaging devices and drug eluding stents.
Expensive
and expected to quantum in costs As we are
often reminded, Canada continues to spend an increasing
percentage of its wealth on health care while demands
for services continue to grow along with the costs of
healthcare service delivery. Of course, Canada’s aging
population is expected to further propel health costs
upward. This demographic shift will create greater
demands on health systems than ever before and increase
the need for medical devices such as imaging systems,
hip replacements, pacemakers and blood pressure
monitors.
Although cutting edge medical devices are often seen as
significant and unaffordable costs by hospitals
operating within limited budgets, these devices offer
significant long-term cost savings and improved patient
outcomes through the provision of better preventative
medical care. In this respect, medical devices are
proposed as an important tool in achieving health system
sustainability.
The
medical device industry plays a key role The
medical device industry plays a key role in Canada. Not
just in the healthcare system but also in many other
aspects of our economy. Such is the main message of a
white paper report recently submitted by the Ivey Centre
for Health Innovation and Leadership. The London
Ontario Centre focuses on identifying the value of
the industry in achieving sustainability. The report
examines the role of industry, government, health system
stakeholders and Canadian universities in contributing
to and strengthening Canada’s medical device sector and
the economic advantage this industry offers to our
economy.
The report
recommends streamlined collaboration among all
stakeholders to provide end-user advisory for device
manufacturers. It points out that this would allow
Canadian companies to enjoy a competitive economic
advantage while better serving the needs of the
country’s health systems.
Reaching
out to global markets
As we all know, our medical device industry has tended
to limit itself to servicing American markets.
Accelerated growth in world markets is altering that
situation drastically. Canada now has the opportunity to
become a global leader in device innovation and
production. But along with increased potential for
growth, Canada faces a number of challenges in achieving
the ability to capitalize on growing global markets.
Systematically examining the current status of Canada’s
medical device industry, the Ivey report identifies the
main strengths of the medical device sector. It also
outlines specific recommendations designed to realize
opportunities for strengthening the industry and
enabling it to achieve greater capacity for patient care
services and health system sustainability.
Medical device regulations around the world In Canada,
medical devices are regulated by Health Canada, with the
purpose of protecting patients by ensuring the quality
of medical devices. Canada's regulatory system (the
Medical Device Regulations), enacted in 1998, replaced
preceding regulation from 1976. Canada’s Medical Device
Regulations are based on the European Medical Device
Directives (MDD) of 1992. Prior to 1992, EU member
countries had separate regulatory bodies. In order to
facilitate trade, regulations were harmonized under the
MDD.
}The USA started regulating medical devices under
distinct Medical Device Amendments in 1976, replacing
regulatory oversight by the Food, Drug and Cosmetics Act
of 1938. Canada has recently been working to harmonize
its regulatory framework with the USA, Japan and
Australia to reduce trade barriers for medical devices.
Manufacturing can be a long, complicated and risky
process Class III
and IV medical devices are often complicated, requiring
expertise in software, signal processing, engineering,
and any number of different disciplines to ensure
safety, efficacy, and cost-effectiveness. Medical
devices, on average, take nearly five years to progress
from idea to commercialization. Medical device start-ups
in Canada often complain that the long development
periods in their industry make it difficult to attract
venture capital.
Other industry factors dissuade investors by raising
investment risk. Medical devices have a relatively short
life-cycle, lasting an average 4 years on the market
before being replaced by a new version. This puts
immense pressure on companies to target large markets
with manageable regulatory hurdles to maximize periods
of profitability. Traditionally, medical device
companies within Canada develop products with an eye on
the US market and only supply products to Canadian
health systems as an afterthought to commercial success
abroad.
The US is the primary target market for Canadian medical
device exports. In 2005, Canada exported 78% of its
medical device output to the US. S
A market of global significance
The medical device industry continues to grow its global
economic significance. Medical
device sales reached $220 billion in 2009. Advances in
the globalization of world markets, improvements in
standards of living in developing countries and
increases in elderly populations throughout developed
nations make the medical device industry one of the
global economy’s most profitable sectors with potential
for meaningful growth.
Despite
global opportunity for growth in medical device
industries, Canada’s growth in the medical device sector
remains under developed. One of the limiting features of
Canada's medical device industry is its limited
expenditure on research and development compared to
other countries.
Over the past 20 years, R&D expenditures in the medical
device industry comprised 0.014% of GDP in Canada,
compared to 0.167 % of GDP in the US. The US investment
relative to national output is 12.08 times greater than
Canada’s.
Canada's industry is still relatively small In 2004,
the medical device manufacturing industry in Canada
consisted of 998 firms operating 1101 facilities and
employing approximately 26,000 people. Medical device
manufacturing and development facilities in Canada are
mostly small- and medium-sized enterprises. Over half of
these companies (57%) have fewer than 25 employees and
37% have 25-49 employees. Only 4% of companies are
medium-sized enterprises (50-150 employees) and fewer
than 1% are considered large enterprises (greater than
150 employees). Nearly 90% of Canadian medical device
facilities are Canadian owned.
A barrier
to R&D investment in Canada’s medical device sector is
the relatively small size of most Canadian companies and
their limited access to financial support. This barrier
creates reluctance in both companies
and potential investors to engage in R&D without
certainty of their ability to afford clinical trials and
administrative delays. This creates a significant
investment challenge for an industry where investors are
already wary about their inability to adequately predict
return on their investments.
In 2008,
Canada purchased approximately $6.4 billion worth of
medical devices. Approximately 73 % of US medical device
companies had fewer than 20 employees. 15% of US device
companies had as many as 100 employees.
An ideal home for an emerging global hub
Despite its small market and difficult regulatory
climate, Canada has substantial capacity to support
growth in medical device industries and is an ideal home
for an emerging global medical device innovation hub.
First and foremost, Canada boasts a highly educated
population that ranks 2nd out of 17 OECD
countries in high-school completion rate, 1st
in college completion rate and 5th in
university completion rate. Research published by
Canadian universities is world-class, ranking 8th
out of 17 OECD countries in quality, above the US and
the UK, but below Norway and Australia.
Despite its well educated population and global
leadership in research output, Canada ranks 14th
out of 17 OECD countries in health innovation. Growth of
the medical device sector in Canada offers opportunity
for improving this ranking. There is emerging evidence
that the basic framework for building and strengthening
medical device sector industries has already begun in a
number of provinces.
Canada’s capacity for collaboration is an asset Canada’s
second medical device sector strength is its emerging
capacity for collaboration among medical device
companies, university researchers and health sector
partners. Industry Canada identifies 6 med tech clusters
across Canada situated in: Vancouver, Winnipeg, Alberta,
Ontario, Montreal and Halifax.
Each cluster has access to strong local universities and
hospitals able to work with industry on research and
development projects as well as clinical proof of
concept studies. British Columbia is home to more than
60 medical device manufacturing and distribution
companies with specialties in interventional and
implantable cardiology, diagnostic testing and analysis,
as well as orthopedic and device design and development.
Simon Fraser University's 4D labs support the cluster
with advanced materials research.
Winnipeg
is home to a cluster of expertise in magnetic resonance
imaging (MRI) equipment. The cluster is supported by the
University of Manitoba, Winnipeg's Health Sciences
Centre and the Centre for the Commercialization of
Biomedical Technology serving more than 60 medical
device firms located around Edmonton and Calgary.
Alberta has a number of universities conducting research
as well as the National Institute for Nanotechnology and
the National Research Council Institute for
Biodiagnostics West.
Ontario
has clusters focused in Ottawa and Toronto. Ontario has
24 colleges and 20 universities, as well as research
institutes and the MaRS Centre for commercializing
medical technology innovation. Montreal is at the centre
of Quebec's medical device industry, playing host to
more than 350 companies. Quebec has a strong
optic-photonic sector who partner with a number of
excellent universities with access to national research
centers. Halifax is a strong and growing research and
development cluster in the life sciences.
This
text was edited from a white paper report submitted by
the
Ivey Centre for Health Innovation and Leadership in
London, Ontario. Keep
checking this site for further installments featuring
additional portions of the report. To obtain an
electronic copy of the report, simply phone
Marcel Lafleur at 705-374-4987 or write to marcel@tmta.ca
