Increasing wait times and staff shortages are putting Canada’s health care system in crisis, and homegrown start-ups are developing new technologies to mitigate the burden.
But for many Canadian firms in the business of developing new technologies to solve pressing collective challenges, the road is very often an arduous one. There are many systemic barriers to overcome as outlined in Canada’s Moonshot, a recent report published by the Brookfield Institute. Amongst its findings, the report identifies barriers around mass adoption of new technologies into the Canadian market, and bridging them into the global market. And while policymakers have committed to address some of these barriers, change won’t happen overnight.
The Canadian government spends billions to foster innovation, but lags on key indicators of innovation—such as business research and development, technology adoption and new product and service development—compared to other countries in the Organization for Economic Co-operation and Development, or OECD.
Put simply, Canada is great at investing in innovation, but not so great at building the necessary structures to ensure that companies have a clear path to grow and scale their business. The outcome? Industry experts have watched many health tech companies take their homegrown innovations to the U.S., while others lose precious funding dollars and resources waiting for procurement contracts to go live. This results in a loss of much needed improvements to the health care system, coupled with shallow returns in Canadian innovation investment dollars.
Effective government policy can counteract these losses. Canada’s Moonshot puts forth program design principles to support the development of emerging technologies through commercialization, scale, widespread adoption and global export—otherwise known as the transformational innovation process. The goal is to ensure that Canadian businesses grow and scale in Canada, and eventually export their products to a global market from home soil.
Two of the honourees on the CB’s 2022 New Innovator’s List, Cloud DX and Breathesuite, are making strides to grow and scale their health tech companies by developing unique strategies to overcome challenges to transformational innovation in the Canadian health care system. Developing relationships with investors and buyers, partnering with larger companies to overcome regulatory hurdles, and building strategies to navigate Canada’s complex health care procurement system are three ways these companies are finding success amidst the transformational innovation challenges identified in Canada’s Moonshot.
One of the challenges that Waterloo-based health-tech firm Cloud DX faced early on in developing its business was completing the control trials necessary to go to market. Sometimes it can take years, putting investors on edge, even if they know the product is viable.
“You can be walked through the door of a hospital, make a pitch, be brilliant and absolutely prove without a shadow of a doubt your technology improves things, but someone in the room will say, ‘Show me your randomized control trials,’” explains Robert Kaul, CEO and founder.
Cloud DX developed the Pulsewave 2, a software that detects small changes in a patient’s heart beat, blood pressure, heart rate and respiration rate, long before it gets so serious that the patient has to seek emergency care, saving time and costly visits to the ER.
To overcome the commercialization hurdle, Kaul has strategically invested with doctors who understand that randomized controlled trials can take up to four years to go from concept to a published peer-reviewed paper—a ticket to gaining credibility in a health care setting.
Kaul says that finding buyers for his technology has become easier after cumulative small wins, such as patent application grants, successfully protecting their company’s IP and a feature in the British Medical Journal. All of which have gained attention of health care product buyers in Canada and the U.S.
Brett Vokey is the founder and CEO of Breathesuite, a health-tech company in St. John’s, New Brunswick. He says that marketing his smart inhaler technology started with getting insurance companies to offer a clear path to reimbursement for patients who purchase the device.
Designed for those with COPD and asthma, the device is a battery-powered rubberized sleeve that fits on top of an inhaler. It monitors medication adherence and technique so that users can ensure they are using their inhaler correctly.
The team is doubling down on relationship-building efforts with insurance companies to grow their market. But getting their attention to focus on patients with asthma and COPD, Vokey says, has been challenging. “There are so many problems that they can tackle and can only do so much at the same time,” he says.
The Breathesuite team has been focusing on telling stories from patients that have experienced marked improvements in their breathing and overall quality of life. A story that continues to inspire Vokey is of a patient who reduced his need for his inhaler medication and was able to start exercising again.
“This strengthens our value proposition and illustrates to insurers why this is an important problem to solve, and more importantly why this is an important problem to solve now,” Vokey says.
While basic health care services are funded by the Canadian federal government, procurement contracts for medical devices are primarily done at the provincial and territorial level, and each carry their own regulation standards. Further, the procurement process can vary widely across hospitals, clinics and long term care homes.
“The buying process for medical technology in Ontario is completely different from Alberta or Nova Scotia,” says Vokey. “Some of them have health-tech assessment groups that make decisions based on a certain level of clinical rigour before implementing them into a health-care environment. Others take the approach of trying things out first to evaluate the impact within their specific population.”
When it comes to the global market, each country carries their own regulations as well. The time, resources and costs associated with navigating regulations for contracts to go live makes it challenging for smaller companies like Breathesuite and Cloud DX to gain traction in the market.
“Succeeding at scale in the medical device space is rare because of levels of regulation such as Health Canada licensing, FDA registration and clearances, protection standards, and global and European medical device registration. Every jurisdiction has different and specific rules, and attempting to accomplish all that as a small company is impossible, explains Kaul.
One way to grow faster, he says, is to partner with a company that has the resources and inroads to expedite the processes to pass jurisdictional regulations. To that end, Cloud DX partnered with health care tech giant, Medtronic Canada in December 2021.
“Medtronic can integrate us into their other technologies and operations and deploy us at scale all over the world as a partner,” says Kaul.
Vokey’s team at Breathesuite prioritized fulfilling larger jurisdictional regulations such as Health Canada and FDA in the U.S. Building on those efforts, they plan to tackle the smaller provincial regulations and build their market incrementally in jurisdictions in which they have clearance.
Doing the lab testing to fulfill regulatory requirements during the pandemic was especially difficult, Vokey said. The team had to work remotely to find labs around the world to ensure the tests were being done. “But that’s just really us getting started,” Vokey says.
“The next thing is mass adoption of this product and this program which is certainly a much higher hurdle to get over in comparison to just getting through regulatory approvals.”
Once health tech companies pass the necessary qualifications to sell in markets across Canada, mass adoption becomes a whole new challenge. Governments and health tech procurers in Canada are generally risk-conservative when it comes to buying new products, regardless of regulatory approval, and prefer to do business with larger companies that have decades of experience in the industry.
“This is the notorious story, not just for health care, but for all kinds of technologies–invented in Canada, proven in Canada, funded by Canadian innovation tax dollars, unable to find a market in Canada,” Kaul says.
New health tech companies struggling to cut their teeth in the Canadian market due to hesitant buyers will often move to the U.S., explains Kaul. In many cases, they get bought out by U.S. firms, resulting in loss of Canadian innovation tax dollars. Canadians lose out as well. Technologies produced by up-and-coming companies like Cloud DX and Breathesuite are designed to improve parts of the health care system that, oftentimes, no one else is addressing.
To help start-ups grow through procurement and market uncertainty, Kaul suggests a national mentoring program that directly incentivizes large, stable companies to take newer companies under their wing. In partnering with Medtronic, Cloud DX gets attention from buyers through the credibility and reputation of a larger and more experienced firm.
“Large companies don’t necessarily have to acquire new ones, but use the partnership to a mutual advantage,” Kaul says. Cloud DX now adds their Pulsewave 2 monitoring technology to Medtronic’s suite of health care services as part of their partnership agreement.
A recent announcement in Budget 2022 promises better policy to support health-focused small and medium sized enterprises, or SME’s. The initiative brings hospital networks and health authorities in nine provinces together to procure innovative health care solutions.
This effort to encourage cross-jurisdictional collaboration that would improve procurement processes mirrors a program design recommendation put forth in Canada’s Moonshot. This is a promising development for companies like Cloud DX and Breathesuite who are fighting complex regulations and cumbersome procurement processes to grow and scale their companies. Policy that continues to support smaller homegrown companies through the transformational innovation process can ease the strain on our health care system by creating better conditions for health tech adoption, while making good on Canada’s investment in innovation.
The idea that Canadian taxpayers have paid for all of this innovation means they should have first crack at it,” Kaul says. “Governments shouldn’t try to pick winners, but they do need to level the playing field.”