Madam Chair, members of the committee, thank you for inviting me.
During my presentation, I will ask you to consider three questions. First, what constitutes a good health innovation? Second, where is Canada's health innovation policy headed? Third, could health care system expertise be used to influence innovative businesses?
During my presentation, I will talk about three messages and try to explain a recommendation for the federal government to set up an intersectoral health innovation development body driven by the health portfolio.
Let's begin with the first question. What constitutes a good innovation in the health field?
I assume that the members of the committee already know, based on what they have learned from testimony, that the current challenges in health care funding and delivery are considerable.
Regarding the various dominant visions on technologies, you have probably heard it said that technologies are the beneficial but unpredictable result of the marketing of scientific advances. You may also have heard that the best technologies are necessarily the most expensive ones. I believe a new position should be adopted to preserve the future of care systems by conceptualizing innovation differently. That means focus should be placed on design. I will illustrate that with an example.
Dialysis has been in use since the 1960s and has improved over the years. Today, hospital dialysis uses specialized equipment. There are alarms, and data is gathered in real time and digitalized. However, when patients are asked what they really care about, they say it's treatment length. They are hooked up to the machine three days a week, four hours at a time.
You may wonder how come, although the treatment has been provided since the 1960s, it has only recently become possible to undergo dialysis at home, over night. Only a handful of manufacturers develop dialysis equipment. Those machines allow patients to undergo more regular and mild treatments, follow a less restrictive diet and, most importantly, maintain job ties. That is a key factor when it comes to public health.
The idea is not only to capitalize on technological advances, but also, more importantly, to meet users' needs.
I think it is clear that the current policy challenge is neither to increase the adoption of innovations nor to slow it down. The key question is what makes superior innovation come about and how can innovation policies lead to the development of brilliant innovations while avoiding troublesome failures.
About 50% of innovative projects fail somewhere along the way, very often because those who develop them, in the upstream part of the process, fail to understand the needs of care providers, in the downstream part of the process.
The first message is that, regarding health care systems, technologies should explicitly pursue at least the following three characteristics. First, they should be relevant to the context in which they are used. Second, they should be user-friendly on an organizational level—in other words, they should be easy to use in lighter infrastructures. Third, they should be sustainable and not require overly frequent updates.
Generally speaking, that would help us reduce our dependence on specialized services found only in urban centres, equip front-line physicians to provide their community members with the appropriate care, and act on the social determinants of health.
Let's now discuss the second question. Where is the Canadian innovation support policy headed?
The Jenkins Report, published in 2011, focused on some 60 federal research support programs for industry. It should be pointed out that a large part of our spending—from 70% to 80%—goes into tax credits for businesses.
The illustrated figure on the right gives an idea of how over-represented large businesses are in that program, given that 90% of Canada's industrial fabric is made up of small and medium businesses.
The $6.4-billion envelope is roughly equivalent to the funding for all health R&D in Canada. A closer look at the main sources of funding and places of R&D execution shows how incredibly important the public sector is. The category of post-secondary education in health includes university research centres.
Considering the envelope for R&D and the fact that the government—the public sector as a whole—funds but also purchases innovations, the federal government has important levers to play a structuring role in innovation. That is the second message.
However, a correct distinction must be made between at least two industries: the medical device industry and the biopharmaceutical industry. They are different not only when it comes to economic impacts, but even more so when it comes to their size and structure. The medical device industry is mostly made up of small and medium businesses.
That key distinction was not taken into account in the Jenkins Report. According to that document, the main problem is that commercialization efforts are very unsuccessful across the country. The report suggests the state should provide support to companies so that they can grow, but also do more R&D in co-operation with universities, to potentially create spin-off companies.
However, that type of model depends heavily on venture capital. Those spin-off companies face their first hurdle during the start-up and development phases, which are a key part of the development and innovation process. In our studies, we note that capital investors—and later shareholders—place tremendous pressure on spin-off companies to market products and generate revenues, even though those companies are not always ready for that step. That is to the detriment of clinical users and patients, who are seeing the value of technology rise.
As a result, companies very often end up being sold. According to the data provided by the Conference Board of Canada, about half of Canadian venture capital exits are through foreign acquisitions. So public funds are invested in research and development, our university hospitals are working on innovation development, but in the end, we lose most of the commercialization revenue.
My third message is that businesses should not only design more ingenious innovations, but when it comes to the economy, they should also contribute to job creation and the vitality of Canada's industrial fabric.
Let's now discus the last question. How could health care system expertise be used to positively influence business start-ups early on?
I think some of the difficulties technology developers encounter have to do with what I would refer to as the missing link—represented by the red arrow on the slide. Better alignment is needed between the two value creation models: the technology developer's model and the health care system's model. Expertise is required for that alignment to materialize.
Economic development Canada mainly seeks short-term commercial and financial success. Focus is generally placed on certain sectors rather than on innovation.
When it comes to health, focus is put on quality of care. We have access to a considerable amount of expertise regarding the health care system's needs and challenges. That is what really counts when it comes to designing innovations I have referred to as brilliant or ingenious.
I will now go back to my recommendation to set up an intersectoral health innovation development body that would be driven by the health portfolio. I think this innovation planning and design strategy cannot currently be developed by the industry. None of the portfolios—be it economic development Canada or the Department of Health—can achieve that goal alone.
Thank you for your attention.