Health Committee on Feb. 7th, 2013

[Dr. Ilse Treurnicht]

Yes. These are all very research-intensive companies.

One of the other primary sources that funds R and D in Canada is the SR and ED tax credit. While these companies are in the research phase, they typically claim tax credits. In some other countries, you would find government being more proactive in funding specific companies directly, but in our case, our indirect funding through SR and ED is quite large

[Matthew Kellway, NDP, Beaches—East York, ON]

On the government funding that comes through this part from tax credits, does the government act in any way as a bit of a venture capitalist? Is there return on these things for government?

[John Soloninka]

It depends. We provide loans. We do get returns, but we're not seeking returns. IAF at MaRS is like a venture capital fund, but again, social capital.... In Ontario, for example, there are also the Ontario emerging technologies fund and OVCF, the Ontario venture capital fund. They are more like a regular source of funds. They provide funds to other venture capital companies. They also co-invest. FedDev does co-investing with angel funders.

The key is not so much for the government to try to get into the venture capital business in the sense of displacing private sector venture capital. The key is for government to get in and de-risk the opportunities. As Ilse was saying, there are certain elements that are just not viable by themselves, but government can get in and de-risk. It can make the equation look better and attract more private sector funding to that particular area for investment.

[The Chair, Conservative, Joy Smith]

Thank you so much.

Thank you, Mr. Kellway.

We'll go to Mr. Lobb.

[Ben Lobb, Conservative, Huron—Bruce, ON]

Not to simplify this too much, but is there a problem in the sector?

I worked for a while in the automotive sector. With GM, Ford, and Chrysler, 3% price reductions are just a fact of life, so every year you're trying to drive costs down through innovation.

Is part of the issue in this sector that there are not enough ideas coming up or is there not enough innovation coming up to actually drive efficiency?

Certainly there would be a great portion of them that are trying to improve outcomes for patients, but I'm sure there is also technology, or new ideas, that can drive efficiencies and economies of scale to help drive down the cost to the hospitals. What is that mix out there right now?

[Brian Lewis]

I'll make a really simplistic answer for it in the hospital environment. As I was saying during my presentation, when you take a look at a department budget versus a cross-hospital or cross-system budget, you see that it doesn't tend to get looked at in that hospital as the total benefit of outcomes. They look at a department budget.

There needs to be a shift in mindset. I've seen physicians and others who see a product and say that yes, it would really be good, but they can't get it. It's because of a budget mindset. It's that simplistic. Looking at it a little differently may have a positive impact.

[Ben Lobb, Conservative, Huron—Bruce, ON]

I'm from Ontario. Are you saying that hospitals in Ontario are so backward that their budgets won't allow them to do that? If there's an opportunity to invest money and to save money for the department over five or 10 years, are they not allowed that flexibility?

[Brian Lewis]

Often that's true.

[John Soloninka]

The other way to look at it is there are technologies. You've got to be careful because for medical technologies in the cost environment we have here, doing more is not always good, right? You could come out with a new technology that allows cardiac bypass to be done that much better, and then we do 50% more cardiac bypasses but half of them are inappropriate. You've got to be very careful with health care technology. You want it to be used to achieve good outcomes, not just to be used, because with every use it's going to cost you more money.

[Brian Lewis]

The other thing is if you have something that reduces the hospital stay, the mindset is that stay is just going to be replaced by another patient coming in, so you're not going to save money. It really is a system look at it. If you have enough products you utilize that reduce the stay, the stays would actually reduce. But there's such a backlog in our system, in terms of waiting, that if there's a product that saves three or four days in the hospital, and then you go to the hospital, they'll just say, no, because that is just going to be replaced by another patient.

It's that simplistic. It's very pragmatic at the interaction level.

[Ben Lobb, Conservative, Huron—Bruce, ON]

That's certainly not motivating anybody around the table, I don't think.

[John Soloninka]

But there are solutions to that.

[Ben Lobb, Conservative, Huron—Bruce, ON]

Yes, I realize.

[John Soloninka]

We just haven't got time to talk about them, but there are solutions to that.

[Ben Lobb, Conservative, Huron—Bruce, ON]

The other thing I wanted to talk to you about was the idea behind basic and applied research. Correct me if I'm wrong, but the majority of our research in health care is basic research.

Is there an issue right now, today? Is this part of the problem, that we have plenty of identified issues and problems within our health care system and not enough of it being in the applied research to get those problems fixed, to get those products to market and to get better outcomes? Is there a problem right now in that area?

[John Soloninka]

I don't think I'm informed enough to comment on basic versus applied research, and the levels, and whether they're appropriate or not. Ilse, you may have a thought on that. I just know there's not enough spent on the commercialization and innovation phase.

Whether there's an appropriate amount on the innovation, Ilse, can you comment on that?

[Dr. Ilse Treurnicht]

I think that's an open question.

My own view is that real expertise and basic research is table stakes in the global innovation economy, and that's what the world is investing in. It's not just because basic research is fun to do; it's because it actually keeps you at the leading edge of the knowledge frontier, and that knowledge applies down the road.

The important point is that you have to look at the innovation process as a continuum that goes all the way from basic research to market adoption and look at how you apply resources or develop resources along that continuum. If you have a break in the continuum, a lot of the upfront investment that you may make will fall down the cliff, because the continuum is not robust enough along that pipeline. It is a system view.

[Ben Lobb, Conservative, Huron—Bruce, ON]

That's fair. There has to be a mix, and nobody's arguing going 100% either way. It does seem to my mind that in Germany, with the Fraunhofer institutes, the most technologically advanced vehicles generally come from Germany, and I wouldn't want to say all the time, but generally speaking that's what the last 50 years have produced. Their focus is very much on applied research.

I'm just throwing that out there, that we're advocating for basic research, and there is a space for it here, but in some of the other industrialized businesses, sectors, applied research is where....

Do I have time for one quick question?

[The Chair, Conservative, Joy Smith]

Actually, you don't. I'm sorry, Mr. Lobb, but I would love to hear it another time.

[Ben Lobb, Conservative, Huron—Bruce, ON]

Okay.

[The Chair, Conservative, Joy Smith]

We have with us the Honourable Lawrie Hawn. Welcome to our committee. You're up next.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

Thank you, Madam Chair.

I was going to go onto some other things, but what you said in response to Mr. Lobb has piqued my interest.

Mr. Soloninka, you've got four minutes and 30 seconds. What are the solutions to the situation that Mr. Lobb brought up?

[John Soloninka]

The problems that we're describing here are the siloed nature of the health care system and its funding. Even our health care funding is a hospital and doctors funding model, as opposed to an integrated health care system model. There are many books on this that you could read that articulate it very well.

For example, if a patient comes into a hospital with congestive heart failure and goes out of the hospital too early from congestive heart failure and has to come back to the hospital for care, that hospital and those doctors will get reimbursed for doing that more times. You don't want to do that. What you want to do is, say there's a certain way you should get incented to do the job correctly, and to have the resources necessary to do the job correctly. The scope of the patient is hospital, community centre, a private doctor's office, home, etc. There should be a way of incenting care delivery across that envelope, not just in each of the individual components.

Whether it's so-called value-based health care financing or a different integrated care delivery network, there are such things that exist in the world. They work very well and they get much better outcomes than we have in our environment here.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

What's stopping us from pursuing those solutions?

[John Soloninka]

Interestingly enough, I think it's ignorance on the part of the public. In deference to the politicians, health care reform is often seen as kryptonite, as death to a politician. It's not because the politicians wouldn't do the right thing if they thought it was the right thing, but Canadians, and Jeffrey Simpson's book is really good on this, have a wrong idea of what the health care system is, how it performs, how good it is, how bad it is, what it covers, and so on. They have a very strange view of it. They have to change their view so that politicians can say, “Right. Now that the public is informed, I can now do something that makes sense”, rather than....