Medical devices industry profile

1. 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.

2. Global medical device industry

The global medical device industry traditionally has 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, as well as developing their domestic industries.

In 2016, the key business segments of the global medical device market wereFootnote 1:

  • diagnostic imaging, such as MRI and CT-scan (25% of world market)
  • consumables (16%)
  • patient aids (such as hearing aids and pacemakers) (12%)
  • orthopaedic products (12%)
  • dental products (7%), and
  • other medical equipment (27%).

Medical device companies are expected to realign their business structures and strategies to compete in the changing global environment (characterized by 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.

3. Medical device industry in Canada

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. Approximately 10% of Canada’s medical device companies have spun off from Canadian research organizations.Footnote 2 Approximately 20% of companies are pre-market.Footnote 3

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.

4. Canadian and international market for medical devicesFootnote 4

Canada's medical device market

Canada has an estimated US$6.7 billion (2016) medical device market accounting for about 2% of the global market. The following are key expenditure areas, as a percentage of total 2016 medical device sales in Canada:

  • Diagnostic imaging (21%)
  • Consumables (18%)
  • Patient aids (15%)
  • Orthopaedic and prosthetic (12%)
  • Dental products (8%), and
  • Other, including wheelchairs, ophthalmic instruments, anaesthesia apparatus, dialysis apparatus, blood pressure monitors, endoscopy apparatus, hospital furniture (27%)

International medical device markets

In 2016, the global market for medical devices was valued at US$336 billion, excluding in vitro diagnostics. With a market of US$146 billion (43% of the global market) the United States is the world’s largest and most developed market, as well as the leading supplier of medical devices.

5. TradeFootnote 5

From 2011 to 2016, Canadian medical device exports increased from $1.8 billion to $3.1 billion and imports increased from $6.5 billion to $8.6 billion. The trade gap increased from $4.7 billion (2011) to $5.5 billion (2016), an increase of 17%.

Canada’s largest trading partner for medical devices is the United States. In 2016, medical device imports from the United States were $3.9 billion, representing 46% of Canada’s total medical device imports. In 2016, Canada’s medical device exports to the United States were $2.1 billion, or 67% of Canada’s total medical device exports. In 2016, Netherlands (4%), Germany (4%), and China (3%) constituted the next three leading destinations for Canada’s medical device exports. In 2016, China (9%), Germany (7%) and Mexico (6%t) constituted the next three leading sources of Canada’s medical device imports after the United States.

6. Global trendsFootnote 6

  • Market growth will vary as to region. Asian markets are expected to experience significant growth relative to the Americas and Western Europe.
  • Factors such as emerging markets and the aging population will play a major role in industry growth.
  • Knowledge and expertise will be shared across geographic borders.
  • New device technologies will grow at a fast rate.
  • Big data and connectivity are expected to support innovation development (such as wearable technology).
  • Regulators will continue to face challenges from the growth in innovative technologies.

7. 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

Regional:

  • Alberta Health Industry Association
  • BioAlberta
  • BioNova
  • Life Science Association of Manitoba
  • LifeSciences British Columbia
  • Life Sciences Ontario
  • Ontario Bioscience Innovation Organization
  • PEI Bio Alliance

8. Federally-funded research support and tax incentive 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.

9. Commercialization

Centres of Excellence for Commercialization and Research (CECRs) 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. Some of these CECRs are:

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

Examples of Canadian translational centres:

  • Medical and Related Sciences (MaRS) Innovation (Toronto, ON)
  • Ontario Brain Institute (Toronto, ON)
  • Princess Margaret Hospital Global Cancer Centre (Toronto, ON)
  • McEwen Centre for Regenerative Medicine (Toronto, ON)
  • Montreal Heart Institute (Montreal, QC)
  • Quebec Consortium for Industrial Research and Innovation in Medical Technology (MEDTEQ) (Montreal, QC)
  • Ottawa Heart Institute (Ottawa, ON)
  • Toronto Rehabilitation Institute (Toronto, ON)
  • Sunnybrook Health Sciences Centre (Toronto, ON)
  • Lawson Health Research Institute (London, ON)

10. 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.

Footnotes

Footnote 1

Espicom, World Medical Markets Factbook 2016

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Footnote 2

Innovation, Science and Economic Development Canada, December 2015

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Footnote 3

Innovation, Science and Economic Development Canada, December 2015

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Footnote 4

Espicom, World Medical Markets Factbook 2016

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Footnote 5

Global Trade Atlas

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Footnote 6

Stacy Lawrence, The top 5 trends for med tech in 2016, Fiercemedicaldevices.com (December 25, 2015)

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