The Medical Technology Blog

Welcome back to the Medical Technology Blog. After a bit of a hiatus, we have a special report compiled by Lawrence Miller (editor of Medical Industry Week) after a recent trip to Ontario, highlighting Canada’s healthcare system. The report features the agencies that are supporting business, and the companies that are benefiting from it. The first is a long piece so I have split it into two articles, please read on…

How private and public sectors are working together to boost Canada’s healthcare system

The Canadian med-tech sector has evolved rapidly to become a priority for Ontario as part of an overall goal to build innovation capacity in the province and establish the region as an “outstanding place” to develop advanced medical technology. It’s an ambitious goal but, over the four busy days, Medical Industry Week was shown how these initiatives are being put in place and position the country and province for significant growth potential. So why the need for change? To do answer that one has to look at Canada’s position as a relatively small local market that lies right on the doorstep of the world’s largest market for medical devices – the US.  Historically, the pattern of implementing healthcare procurement decisions in Canada, where, as Dr Tom Corr, President and CEO of the Ontario Centres of Excellence (OCE) acknowledged, were overtly focused on  small deals with the result of haemorrhaging investment in Med-Tech innovation – that is converting R&D into products and technology – over the past five to ten years.

Given the recent global economic meltdown, the Ontario Province’s Med-Tech cluster is comparatively healthy.  It’s one of the reasons why Ontario as a province is so keen on the Med-Tech. The sector has high value and boasts recession proof nature, and stats from 1997 to 2006 have shown that the medical devices market performed favourably compared with the likes of pharmaceuticals and other higher-profile industries such as IT. Med-Tech companies also have “very good returns” because of the shorter innovation cycles (third less than pharmaceuticals), lower investment requirements, high margin products, high M&A activity as companies are sold in bite size chunks.

There are 1,100 companies in the Canadian Med-Tech field, of which 700 are manufacturers. Clusters of expertise have evolved around universities and teaching hospitals such as Waterloo, London,  Ottawa, as well as Thunder Bay and Windsor. Southern Ontario is the third largest medical R&D cluster in North America when taking into account the universities, health science centres etc, whilst volumes of trials and treatments range third largest in North America.

Ontario has 13 million inhabitants, C$46 billion public healthcare system and C$20 billion private system. Historically, however, the healthcare system itself hasn’t had a dedicated R&D arm.  So whilst lots of R&D has been made in the products, but not directly by the payer for the payer. Current moves are aimed at changing this process/environment, with a particularly eye on healthcare IT, diagnostics, home healthcare and medical imaging.

Med-Tech is still a challenge, especially in view of a major decline in funding and participation in recent times of venture capital investors. Angel life science investment has also dropped. This has prompted the policy makers  in the province of Ontario to start a C$400 million government backed venture capital funding initiative, and recently unveiled plans for a C$400 million tax credit initiative.

Most seed capital comes from Angel investors, whilst a fraction comes from government agencies and venture capitalists. At this stage of development, most  Med-Tech companies need it to support clinical trials, approvals, reimbursement studies and outcome trials (healthcare assessment). The Ontario government says that although money is provided by countries worldwide in support of R&D it is not always applied in the most effective areas. It’s a viewpoint that not only looks outwards but is also highly critical of its own perceived failings.

Ontario, and Canada as a whole, has kept on churning out new companies but recognises that it may not have helped them financially in comparison to countries such as the US.  Overall R&D spending has mainly been dished out in the form of tax credits. These help going concern companies, but start-up companies are less keen because they have to earn the money to get the money. The push for Ontario going forward is to refocus from pure R&D funding to translation and commercialisation and direct investment.

Government Funding

Funded by the Government of Ontario, the OCE’s mission statement is to create jobs in the province. Employing around 30 business development people, split in three regions – South West Ontario, Greater Toronto and North East Ontario – the OCE has a clear a focus on tapping into ideas that emerge from both universities and companies.

OCE has a clear criteria in awarding its grants. For every C$1 of funding it provides, the applicant must also at least match this funding. The goal is to support research at the very early stage and then pass it on to other organisations such as like HTX and Mars Excite. This “synergistic” approach with HTX aims to ensure the organisation work alongside each other rather than overlapping.

In total, 95 per cent of OCE funding is targeted within four industrial sectors, of which healthcare comprises 25 per cent. All decisions are externally verified and money is given based on milestones over a time period.

In 2011, OCE secured C$30 million from provincial government and C$5 million from the Federal government, along with industry matching contributions of approximately C$40 million. The initiative claims to have secured over 2,000 jobs were created by OCE initiatives in 2010. Encouraging spin-offs from university graduates/students

In practice, industry often approaches government and OCE employees also work with universities, but ensure that the university works with the company on the project. In fact, the commitment of the OCE is a key attribute to its activities. In some cases, the OCE may even help subsidise some of the salary of medical students as they gain a foothold in the industry for the first year or so, which has resulted in around 75 per cent of these students being offered permanent positions with their employers.

OCE also funds colleges and institution’s with Technology transfer grants. Dialogue with professors helps to identify IP and research that may offer significant opportunities within industry either in terms of a potential start-up or for licensing to larger established businesses.  OCE provides funding and as the technology matures within university helps to look at the issues involved in transferring them to additional programmes.

The OCE’s Social Innovation Programme (SIP) provides a valuable link between industry and not-for-profit organisations and helping the two conflicting parties work to together. In these cases, the non-profit company would hold the IP, and the OCE will provide cash in partnership with companies to make the programme a reality….

This article, and the rest of the articles to follow next week in this series, have been kindly provided by Lawrence Miller, editor of Espicom Business Intelligence’s excellent publication Medical Industry Week and medical newsletters teamleader.

Please come back to read the rest of this article tomorrow, and more in this Canada Healthcare System series this week.

Paul.


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