Medical devices industry profile

Background

In Canada, medical devices are regulated under the Food and Drugs Act as a Class I, II, III or IV with Class I representing devices that present the lowest risk and Class IV the highest. The Food and Drugs Act provides a definition of a regulated medical device.

Examples of medical devices include pacemakers, artificial heart valves, diagnostic and imaging equipment, in vitro diagnostics, dialysis equipment, hip and knee implants, synthetic skin, surgical tools, infusion pumps, life support machines, catheters, bandages, as well as some information and communications technologies.

The complexity of medical device products continues to increase with the inclusion of multiple technologies into a given product. Technologies such as advanced materials, microelectronics, biotechnology, and software and informatics are now routine technologies featured in medical devices. Canadian and international companies continue to innovate further to develop new products and enhance the features of existing medical devices.

Firms in the medical device sector are highly R&D intensive and technology based. Studies on the sector have found medical device companies, on average, spend 12% of their revenues on R&D each year in order to develop, design, and commercialize innovative medical devices. Furthermore, small and medium sized enterprises (SMEs) generally spend an even larger proportion of their revenues on R&D activities to support the development of new devices.

Distinction between Medical Devices and Pharmaceuticals

Medical devices follow a different course of development compared to that of drugs. Medical devices are generally developed based on a variety of sciences including mechanical, electrical and materials engineering, and biotechnology, whereas, pharmaceutical development is based on disciplines such as pharmacology, chemistry, biotechnology and genetic engineering.

Some medical devices temporarily or permanently replace a function of the body, while pharmaceuticals are absorbed into the human body to perform their intended purposes. New medical devices can sometimes require change management and training measures on the part of health facilities and clinicians adopting these devices.

Medical devices have a relatively short product life cycle and investment recovery period while pharmaceuticals have an extensive product life cycle and investment recovery period.

Global medical device sector

The global medical device manufacturing industry is made up of more than 27,000 firms worldwide and employs about one million people. The global industry has traditionally a low level of industry concentration, with no one firm dominating. Small companies are common and typically specialize in developing niche technology, while larger players frequently seek to acquire smaller firms to expand their product range or gain access to a particular technology or market. However, during the past five years, consolidation has swept the industry, with the number of companies decreasing. Meanwhile, emerging markets such as China and Brazil are attracting medical device manufacturers.

In 2011, the key business segments of the global medical device market were consumables (15%), diagnostic apparatus (e.g., MRI and CT-scan) (27%), patient aids such as hearing aids and pacemakers (12%), orthopaedic products (11%), dental products (7%), and other medical equipment (28%).

Medical device companies are expected to realign their business structures and strategies to compete in the changing global environment (such as growth of emerging markets, health care reform and cost containment). Anticipated changes include company restructuring as well as an increased reliance on strategic alliances and outsourcing for marketing, distribution, research and manufacturing activities.

Canadian medical device sector

Canada's medical device sector is a highly diversified and export-oriented industry that manufactures equipment and supplies. Purchasers include Canadian and international hospitals, physician's offices, laboratories, clinics as well as patients (through direct purchases).

The sector is populated with companies driven by product innovation. The industry is able to draw on world-class innovative research being conducted in Canadian universities, research institutes and hospitals, some of which has been spun-off into Canadian medical device companies.

The sector is dominated by SMEs by number, and foreign-owned global companies by market share.

The industry is primarily based in the three largest provinces—Ontario, Quebec and British Columbia—with over 80 percent of the medical device industry located in the provinces of Ontario and Quebec.

The challenge of collecting data on the Canadian Medical Device Industry:

Firms in the medical device sector (medical devices as defined by regulations) are reported under many North American Industry Classification System (NAICS) codes, and those codes often include non-device firms. As a result, they do not provide an accurate representation of the economic foot print of the industry. However, the majority of NAICS code 339110 is comprised of medical devices, although the data associated with this code understates the industry's over all presence in Canada.

Canadian and global market for medical device products

Canada's medical device market

Canada has an estimated $6.4 billion (2012) medical device market accounting for about 2 percent of the global market. The following were key expenditure areas, as a percentage of total 2012 medical device sales in Canada:

  • Diagnostic apparatus (25.8%)
  • Consumables (15.3%)
  • Patient aids (12.3%)
  • Orthopaedic and prosthetic (11.9%)
  • Dental products (6.9%)
  • And, Other (27.8%) (including wheelchairs, ophthalmic instruments, anaesthesia apparatus, dialysis apparatus, blood pressure monitors, endoscopy apparatus, hospital furniture, other)

Approximately 80 percent of the market is supplied by imported medical devices.

International Medical Device Markets

In 2012, the global market for medical devices was valued at US$327.7 billion, excluding in vitro diagnostics. With a market of US$188.9 billion or 36.3 percent of the global market, the United States is the world's largest and most developed market and the leading supplier of medical devices with 16 out of the top 25 medical device global companies. The Canadian market ranks ninth in size.

Top ten medical device markets by sales revenue, 2012 Footnote1
Rank Country Estimated sales revenue
(US$ billion)
Market share
(%)
Source: Espicom, The World Medical Market Book 2013 does not include in vitro diagnostic sales.

Footnotes

Note 1

Revenue estimates are based on 67 countries

Return to note 1 referrer

1 United States  118.9  36.3
2 Japan  32.4  9.9
3 Germany  23.1  7.0
4 China  14.1  4.3
5 France  13.5  4.1
6 United Kingdom  9.9  3.0
7 Italy  8.6  2.6
8 Russia  6.8  2.1
9 Canada  6.8  2.1
10 Brazil  5.3  1.6
World total (67countries)  327.7  100

In recent years, the four BRIC markets (Brazil, Russia, India, and China) have rapidly grown to a total market of US$26.2 billion in 2012. While Chinese per capita spending remains low in absolute terms at US$10.5, the market is the 4th largest market in the world in 2012 and is forecasted to become the 2nd largest by 2017.

Trade

From 2007 to 2012, Canadian medical device exports increased from $1.7 billion to $1.8 billion and imports increased from $5.4 billion to $7.0 billion. From 2007 to 2012, Canada's medical device trade gap increased from $3.8 billion (2007) to $5.2 billion (2012), an increase of over 35 percent.

Canada's largest trading partner for medical devices is the United States. In 2012, medical device imports from the United States were $3.6 billion, representing 50.9 percent of Canada's total medical device imports. In 2012, Canada's medical device exports to the United States were $1.2 billion, or 64.7 percent of Canada's total medical device exports. In 2012, Germany (4.5% of total), China (3.1%) and France (2.7%) constituted the next three leading destinations for Canada's medical device exports. In 2012, China (7.0% of total), Germany (6.3%) and Mexico (4.7%) constituted the next three leading sources of Canada's medical device imports after the United States.

Canada's top ten medical device imports represent about 40 percent of all medical device imports by value of shipments, with laboratory reagents and instruments, and appliance parts ranking as the top two imported goods, at 7.4 percent and 7.1 percent respectively.

Top ten Canadian medical device imports
Commodity Harmonized System Code 2012 Imports
(Value of Shipments)
% of Total Medical Device Imports
Source: World Trade Atlas
Laboratory reagents 3822000020 $520,561,808 7.4
Instruments & appliances parts 9018909090 $493,728,085 7.1
Bougies, catheters, drains, sondes, and parts 9018390010 $296,013,162 4.2
Artificial parts of the body 9021390000 $294,396,764 4.2
Antisera & other human blood fractions for diagnostic purposes 3002100010 $225,159,236 3.2
Artificial joints 9021310000 $207,557,435 3.0
Orthopaedic & fracture appliances 9021100000 $202,579,485 2.9
Mechano-therapy appliances 9019100010 $195,962,690 2.8
Instruments and appliances, used in dental science 9018490000 $191,919,927 2.7
Therapeutic respiration apparatus 9019200000 $181,238,586 2.6
Total Top 10 Imports $2,809,117,178 40.1

Canada's top ten medical device exports amounted to about 73 percent of total medical device exports by value of shipments. In 2012, composite diagnostic and laboratory reagents were the top exports, representing about 21 percent of total Canadian medical device exports.

Top ten Canadian medical device exports
Commodity Harmonized System Code 2012 Exports
(Value of Shipments)
% of Total Medical Device Imports
Source: World Trade Atlas
Composite diagnostic or laboratory reagents 38220000 $396,524,653 21.5
Medical, surgical, dental or veterinary furniture 94029000 $138,359,491 7.5
Instruments and appliances, other 90189000 $125,287,391 6.8
Computed tomography apparatus, Other 90229000 $122,931,646 6.1
Radioactive elements & isotopes and compounds, excluding Cobalt 60 28444019 $112,673,536 6.1
Electro-cardiographs 90181100 $107,449,572 5.8
Needles, catheters, cannula, etc. 90183900 $94,969,040 5.1
Cobalt 60 radioactive elements, isotopes and compounds 28444011 $89,245,978 4.8
Mechano-therapy appliances 90191000 $88,055,867 4.8
Electro-diagnostic apparatus 90181900 $78,637,302 4.3
Total Top 10 Exports $1,354,134,476 72.8

Network of industry associations in Canada

Companies in Canada's medical device industry are represented by a number of national and regional associations, including:

National:

  • MEDEC Canada's Medical Technology Companies, including MEDEC—CMMA, a MEDEC affiliate (Canadian MedTech Manufacturers' Alliance)

Regional:

  • Alberta Health Industry Association
  • BioAlberta
  • BioNova
  • Life Science Association of Manitoba
  • LifeSciences British Columbia

Federally-funded research support programs

Several federally—funded research programs and councils support health-related research in Canada: the Canadian Institutes for Health Research (CIHR); Networks of Centres of Excellence; National Research Council (NRC); and the Natural Sciences and Engineering Research Council (NSERC). The NRC delivers the Industrial Research Assistance Program (IRAP) which helps firms develop and commercialize technologies though funding and advisory services.

The Canadian Scientific Research and Experimental Development (SR&ED) tax incentive program, administered by the Canada Revenue Agency, encourages Canadian businesses of all sizes, and in all sectors to conduct R&D in Canada. It is the largest single source of federal government support for industrial R&D. It provides claimants cash refunds and/or tax credits for their expenditures on eligible R&D work done in Canada.

Commercialization initiatives

Sector initiatives to facilitate technology commercialization include efforts by organizations such as the Health Technology Exchange (HTX), Biomedical Commercialization Canada Inc., and Le Campus des Technologies de la Santé (CTS).

Three Centres of Excellence for Commercialization and Research (CECR) with focused specialties in medical device research are located in Canada. Each CECR is a not for profit corporation created by organizations such as companies, universities and research institutions to match research expertise with business needs for the purpose of stimulating commercialization. The three CECRs are:

  • Centre for Imaging Technology Commercialization (London, ON)
  • Centre for Probe Development and Commercialization (Hamilton, ON)
  • Centre for Surgical Invention and Innovation (Hamilton, ON)

Export Development Canada and Business Development Bank of Canada

Export Development Canada is an export credit agency which offers a range of trade finance, credit insurance and other risk management services to Canadian exporters.

Business Development Bank of Canada operates out of over 100 offices across Canada, providing tailored financing, venture capital and consulting services to entrepreneurs. Its focus is on SMEs in manufacturing, exporting, innovation and knowledge-based industries.

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