Medical Device Industry Profile 2013

Distinction between Medical Devices and Pharmaceuticals
Size and Structure of the Industry
Imports and Exports
Medical Device Manufacturing Costs
Low R&D Costs
Regulatory Process Emphasizes Harmonization
Supportive Network of Industry Associations
Federally-Funded Research Support Programs
Commercialization Initiatives

The medical device industry consists of firms that produce a wide range of products used for diagnosis and treatment of ailments. These products include the following:

medical, surgical and dental equipment (including electromedical equipment and related software)
furniture, supplies and consumables
orthopaedic appliances et prosthetics
diagnostic kits, reagents and equipment

Medical devices are regulated under the Food and Drugs Act as a class I, II, III or IV risk, subject to Health Canada approval. The Food and Drugs Act defines a regulated medical device.

The research, development and manufacturing of medical devices involve the application of diverse biomedical and engineering disciplines. The Canadian medical device industry benefits from the strengths of associated Canadian expertise and industries including biotechnology, advanced materials, microelectronics, telecommunications, and software and informatics.

In addition, the industry is able to draw on world-class innovative research being conducted in Canadian universities, research institutes and hospitals, some of which is spun-off into Canadian medical device companies.

Distinction between Medical Devices and Pharmaceuticals^{Footnote 1}

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.

Size and Structure of the Industry ^{Footnote 2}

Due to the diversity of firms in the medical device sector, key numerical benchmarks are difficult to obtain and are not effectively captured in ongoing economic and industrial surveys. However, in 2004-2005, Industry Canada commissioned a survey of the sector which provided the following snap shot of the Canadian medical device industry.

The medical device manufacturing and development industry consisted of approximately 1,100 facilities, comprising approximately 1,000 firms. (Firms engaged solely engaged in distribution were not included.)
Approximately 90 percent of the medical device facilities were Canadian owned, unchanged from 2000³. By number, most firms were small and Canadian owned. There were some larger, foreign owned multinational firms located in Canada.
Medical device-related employment in 2004-2005 rose to approximately 26,000, compared to employment of 22,000 in 2000.
The industry was distributed across Canada, although concentrated in Ontario and Quebec.

In 2011, the size of the Canadian medical device market was valued at $6,300 million, up from $4,500 million in 2006 ^{Footnote 4}.

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Imports and Exports ^{Footnote 5}

In 2011, Canada’s medical device exports were $1,835 million while Canada’s imports were $6,499 million.

The key markets for Canadian medical device exports based on total exports are: the United States ($1,195 million, 65 percent), Germany ($85 million, 5 percent), China ($57 million, 3 percent), United Kingdom ($50 million, 3 percent) and Italy ($48 million, 3 percent).

The following countries are key import sources for medical device products based on total imports into Canada: United States ($3,404 million, 52 percent), China ($469 million, 7 percent), Germany ($424 million, 7 percent), Mexico ($280 million, 4 percent) and Japan ($274 million, 4 percent).

Table 1: Canadian Exports of Medical Devices by Harmonized System Code, 2011
Top Ten Exports by HS code (8-digit level)	Millions $	Share of Total Exports
Source: Statistics Canada, World Trade Atlas 2012
38220000–Diagnostic or laboratory reagents	349	19.0%
94029000–Medical, surgical, dental or veterinary furniture	154	8.4%
90189000–Instruments and appliances used in medical or veterinary sciences	144	7.9%
90229000–Parts and accessories for apparatus based on the use of X-rays	137	7.5%
28444019–Radioactive elements and isotopes and compounds other than cobalt 60 radioactivity	129	7.0%
90181100–Electro-cardiographs	107	5.9%
28444011–Cobalt-60 and compounds with Cobalt-60	93	5.1%
90191000–Mechano-therapy appliances; massage appliances; etc	91	5.0%
90181900–Electro-diagnostic apparatus	83	4.5%
90183900–Needles, catheters, cannulae and the like	79	4.3%
Top Ten Exports by HS Code	1,366	74.4%
All other HS codes	469	25.6%

Table 2: Canadian Imports of Medical Devices by Harmonized System Code, 2011
Top Ten Imports by HS code (10-digit level)	Millions $	Share of Total Imports
Source: Statistics Canada, World Trade Atlas 2012
9018909080 Instruments and appliances used in medical, surgical procedures	466	7.2%
3822001010 Diagnostic reagents for medical diagnosis	375	5.8%
9021390000 Artificial parts of the body	279	4.3%
3002100010 Human antisera and other human blood fractions for diagnosis use, for therapeutic and prophylactic use in humans	247	3.8%
9018390010 Bougies, catheters, drains and sondes, and parts and accessories thereof	244	3.8%
9018909099 Parts/accessories for instruments & appliances used in medical, surgical, dental or veterinary science	242	3.7%
9019100010 Mechano-therapy application	194	3.0%
9021900000 Appliances, which are worn or carried or implanted in the body	190	3.0%
9021310000 Artificial joints	176	2.7%
9018490000 Instruments and appliances, used in dental science	171	2.6%
Top Ten Imports by HS code	2.584	39.9%
All other HS codes	3,915	60.1%

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Medical Device Manufacturing Costs ^{Footnote 6}

KPMG’s Competitive Alternatives is an annual survey of manufacturing costs in international business locations in various manufacturing sectors, including medical device manufacturing. The 2012 survey looked at 19 different industry operations in 14 countries: Australia, Brazil, Canada, China, France, Germany, India, Italy, Japan, Mexico, the Netherlands, Russia, the United Kingdom, and the United States.

The results for countries placed Canada fourth on the manufacturing costs index, ahead of major medical device manufacturing locations including the United States, Germany and Japan.

Table 3: Medical Device Manufacturing Cost
Country	Index (U.S. = 100)
Source: KPMG 2012
United Kingdom	94.8
Netherlands	95.0
France	96.0
Canada	96.2
Italy	97.0
United States	100.0
Germany	101.2
Australia	104.1
Japan	111.9

Low R&D Costs

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.

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Regulatory Process Emphasizes Harmonization

All medical devices in Canada are subject to the Food and Drugs Act and its regulations. The Act permits Canadian manufacturers to export product in accordance with the receiving country's laws, irrespective of domestic approval status. This export provision provides an advantage for companies wishing to establish export manufacturing from a Canadian base.
Canada has a risk-based system of regulation in keeping with international trends.

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Supportive Network of Industry Associations

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

Alberta Health Industry Association
BioAlberta
BioNova
Life Science Association of Manitoba
LifeSciences British Columbia
MEDEC
CMMA, a MEDEC affiliate (Canadian MedTech Manufacturers' Alliance)

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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).

Commercialization Initiatives

Sectoral initiatives to facilitate technology commercialization include efforts by organizations such as the Health Technology Exchange (HTX) and Biomedical Commercialization Canada Inc..