Health Committee on Feb. 7th, 2013

[John Soloninka]

Yes, I would.

I can give you an example. Ilse mentioned and I mentioned the lack of funding. There's the lack of funding in terms of creating early-stage companies and getting them to the point where they can get the interest of international customers, international companies that may be strategic partners or may buy them out. Early-stage capital is the number one problem. When you have capital, you can attract talented people. Those two things go together.

To try to demystify what we're talking about with local procurement, there's logic towards the provincial health care systems telling the hospitals that they must minimize the costs that they have control over.

However, chronic disease management crosses all silos. Right now there are no good business models in Canada in any of the provincial health care systems that will pay a physician to have a remote monitoring system inside a patient's home taking data, or when the patient with congestive heart failure is released from hospital, to have them go home and be monitored by a nurse in the hospital. When you do that, you avoid about 80% to 90% of the readmissions because of congestive heart failure problems.

There's no business model to fund that. There is the technology; we have companies in Canada who have built such technology and are selling it in Europe and are selling it in the United States. There's no business model here to do it.

Michael Julius, the vice-president of Sunnybrook Research Institute, quipped that....

Oh, sorry.

[The Chair, Conservative, Joy Smith]

We've gone quite a bit over.

[John Soloninka]

I beg your pardon. No problem.

[The Chair, Conservative, Joy Smith]

Thank you very much.

We'll go to Dr. Carrie.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you very much, Madam Chair.

I want to thank the witnesses for being here today. Technological innovation is such an interesting topic. One of the things I've been interested in for a long time is commercialization and the challenges.

I do want to congratulate you on MaRS. I think it's a great example of the partnerships when government, academia, and industry work together. I do want to congratulate you on the progress that you have made.

I was wondering if you could comment on how essential it is to promote collaboration between universities and the business sector in order to boost commercialization of knowledge. We see that in different incubators. We see that happening in MaRS. What steps could the federal government take to help make this grow even stronger and more quickly?

[Dr. Ilse Treurnicht]

I see the role of government in these processes as very much catalytic. You have academe as the feeder system of these important discoveries and ideas, and obviously the government has a role in funding those. There is industry and more established sources of funding to move these products further down the pipe.

The challenge is to build the right collaboration models in the middle that can translate between these very different worlds. I think the role of the governments is in training the people who have those straddling skills between business, academe, and finance, because it is a translation function, and then providing the very critical proof of concept funding models that get you through the de-risking of the technology.

One of the things about our funding system is that technologies emerge from our academic sector earlier than they would in the United States. John alluded to the SBIR program in the U.S., which takes that fledgling technology and funds it through the point where you can be pretty sure it's going to work. Then it becomes more attractive either to grown-up industry or to funders to take it further through a start-up.

It's an area where the market doesn't really work. If you look around the world, this is where government steps in typically. I think the trick for government is to create commercially viable businesses that can stand on their own so that it doesn't fund a bunch of co-dependent hothouse flowers. I think that's where you have to be very thoughtful in how you structure the partnership.

There are models that I think are very well proven. The seed fund, for example, that we administer, is prepared to go early. It goes in as a convertible debenture so it doesn't distort the cost of capital. It does the grunt work to de-risk the technology and actually create the package that's ready for investors. On its own investment committee, it has all the key investors present. The investors see the technology as it comes through that early pipeline and can therefore take it up. They've had a very good success rate even though this is an early portfolio, five times leverage of private capital.

I think there are good examples where government played that catalytic role either in training people or de-risking important opportunities, but making sure the market is the driver of the decision-maker ultimately so that those things can emerge as stand-alone viable entities.

[Colin Carrie, Conservative, Oshawa, ON]

Very good.

You did mention in your comments....

Sorry, was there another comment?

[The Chair, Conservative, Joy Smith]

There's another comment.

[John Soloninka]

Very briefly, I totally agree with what Ilse just said.

There are two other things that government can do. I mentioned the quote from CIHR and we know that CIHR is moving quickly to address the translation aspect of what they're doing, but encouraging them to do so is very important.

Another program is IRAP. IRAP in its criteria says that it doesn't fund certification of technologies. There's a misconception of what a clinical trial is and what clinical development of technologies is. In medical technologies, 75% of the early stage capital that they get is to do clinical trials to generate evidence in order to show that their technology works, etc.

That's misconstrued as a licensure, a certification that you meet a standard in telecoms or something like that. The problem is that we need to change those criteria, or broaden the definition of them so that it can get fully funded by IRAP. IRAP is a great program. It just stops short of 75% of the capital that early stage med-tech companies have to spend. That's something government can do, and it would be a dramatic difference if IRAP were to understand that nuance.

[Colin Carrie, Conservative, Oshawa, ON]

Thanks for that input.

You mentioned five things in your presentation. You talked a little about social impact bonds and the private-public partnerships, things along those lines. I've read that Britain is doing something on that. Could you expand on that?

[Dr. Ilse Treurnicht]

Absolutely. Yes, Britain has been the pioneer in this so-called area of social finance, led by Sir Ronald Cohen, one of the world's grandfathers of venture capital. He has been exploring for the last 12 to 15 years models of partnership between the public and private sectors. It was pioneered in the U.K. with a task force.

We had an equivalent task force in Canada in 2010 that published a set of recommendations. Some of those include the foundation sector, for example, which includes, in this context, the very large disease-based foundations, whether it's heart and stroke, or arthritis, and so on, coming into partnership with the public and more direct private investors to build performance-based models of investing in health technologies. So you can see, if I'm heart and stroke, rather than just giving grants to researchers for heart and stroke research, can I partner to better manage chronic heart disease, or invest in a diagnostic technology in partnership with other actors? There are a number of vehicles, and the social impact bond is one of them, where essentially you are sharing the upside benefit. It's really a partnership that says it pays when outcomes are achieved.

It's tricky to do in health care because you need the longitudinal evidence to know what line you're shifting over typically a fairly long period of time, but we're deep in that experiment, so I'm very curious to see how it plays out. There has been a lot of interest from both the public and the private sectors.

[The Chair, Conservative, Joy Smith]

Thank you, Dr. Treurnicht, and Dr. Carrie.

Now we'll go to Dr. Fry.

[Hedy Fry, Liberal, Vancouver Centre, BC]

Thank you very much, Madam Chair.

Those were excellent presentations.

My questions are pretty focused, and I don't know if you can answer them.

I remember that in about 1998 there were certain things the federal government did. They created the Canada Foundation for Innovation, which allowed the infrastructure for hospitals and laboratories and others to link with innovation, etc., and to afford innovation. That was one thing. Then, of course, there was Technology Partnerships Canada, which was created to do that kind of venture capital linking from the laboratory to making it a commercial product. There was another foundation that had been created where the government acted as a venture capitalist for biomedical technologies only. It was all about linking the laboratory to a private company. The government would put in matching funds so that it could become commercialized.

I don't know what happened to that last foundation. I think it was a 10-year thing and it sunsetted in 2008. I don't know where it is or whether it still exists. I've tried to find it everywhere, within Industry Canada or elsewhere, and it's as if it has disappeared.

How does the Canada Foundation for Innovation work? It should help hospitals to take the technology that you're talking about and use it for benefiting Canadians, to take that technology and make it affordable within the hospital and the laboratory systems. That's what CFI was created for.

Is CFI not doing that? That's my first question.

My second question is, what happened to that foundation, which, I know when it sunsetted, had a $10 billion purse? What happened to that? That was going to do some of the things that you talk about. Can you tell me what happened? Does anybody know?

[John Soloninka]

Ilse may know about that fund, but I'll just make a comment on the CFI that I've been involved with.

There's been this belief not just in Canada, but in the rest of the world as well that you invest in research, either philanthropically or in the public sector, because you want to help patients at the other end. The belief is that if you invest in research, you get those outputs.

The Canada Foundation for Innovation is very much along those lines. It got great researchers and it got significant infrastructure created and so on, but none of that money funded the path between that invention and the actual market. It's not used to allow hospitals, for example, to go out and buy PET scanners for new uses. It's purely on that side. But around the world and in Canada we've recognized that just doing that is not enough and we need to spread our investments not only here, but also in those other areas. Ilse mentioned a bunch of them, as did I. I think that's changing, and going forward we're going to be investing, public sector and private sector, in a more balanced way between basic and applied research, and then the commercialization pieces.

With respect to that fund that you mentioned, I really have no knowledge of it. If I knew the name of it, that might ring a bell, but just by itself, it doesn't ring a bell. I'm sorry.

[The Chair, Conservative, Joy Smith]

Dr. Treurnicht, do you have an answer to that?

[Dr. Ilse Treurnicht]

I wonder if you are referring to Genome Canada, maybe. I'm just thinking about the large pots that have been created since then. I would say that is still very much a translational research and fundamental research funder. It funds more people than CFI, which funds equipment.

[Hedy Fry, Liberal, Vancouver Centre, BC]

I wasn't referring—

[Dr. Ilse Treurnicht]

The Canadian medical discoveries fund was a private fund that sunsetted in about 2008. I don't know if that might be the vehicle. It was—

[Hedy Fry, Liberal, Vancouver Centre, BC]

I thought one of you might be long enough in the tooth to remember that the fund was a $10 billion fund when it sunsetted in 2008, and then it was refunded for one year. Now it has totally disappeared. I think the sad thing is that you can't find it anywhere on the site. It's disappeared. A $10-billion fund doesn't just disappear. It did some of the things that you were talking about. Since none of you know about it, I'll move on.

My big question is whether CFI can be altered in the way it functions, or have added to its function, to be able to fill that little gap so that hospitals and laboratories not only would get the thing from academia down the line, but there would be a reverse path as well in which anything that is innovative that was built in Canada or elsewhere could be part of the infrastructure that a hospital can now get.

Do you think CFI could or would benefit from having that expanded function?

[John Soloninka]

It certainly could, whether you build a new one or transmute the CFI into that function.

All of my colleagues and I were saying that what you really need is not to change the hospitals from their very severe cost management, but in fact to give them another path that says if this technology has a great potential to bend the cost curve of health care, then you should not be penalized if it costs you more but saves more across the health system.

If you got CFI to say, “Let's propose this technology, get a grant and do this in this way”, that could be a way of allowing hospitals to buy innovative technology.

[Hedy Fry, Liberal, Vancouver Centre, BC]

I am really concerned that I don't know, and nobody seems to know, and there is nothing on any website to know what happened to this particular fund.

I was in cabinet when we created CFI and we created Technology Partnerships Canada out of Industry Canada. It was back in 1997-98 when we created this fund. It was heralded. It was really working. It generated $10 billion out of the private-public partnership. It is kind of bizarre that it has disappeared from the history of the Government of Canada. I was there. I know it existed. I was a big part of it. I now find that it has disappeared.

CFI was meant to do more of what I talked about. It was meant to do more. It wasn't meant to function so rigidly as it currently is. It was meant to do more, to allow—

[The Chair, Conservative, Joy Smith]

The time is up. Perhaps you could give a brief answer.

[John Soloninka]

I'm going to look for that money.

[Hedy Fry, Liberal, Vancouver Centre, BC]

It's gone. I don't where it's gone.

[The Chair, Conservative, Joy Smith]

Ms. Block.