#5 🧬 Magic or Medtech - What is wrong Canadian medtech?

yeah, I don't know either

I posted a question on LinkedIn yesterday and the response was both immediate and overwhelming.

I want to elaborate, but first here is the full post for context:

It seems like everyone thinks the medical technology market in Canada is broken.

I talked to dozens of people at Impact Health this week - founders, scientists, investors, and even government representatives. All of them said some variation of "there's a reason people focus on getting FDA approved rather than Health Canada approved."

Medical device founders almost universally target the American market. Digital health founders get a haunted look in their eyes when you ask them about getting their software into Canadian hospitals.

Why?

No one really agrees. Here are some of the reasons I heard:

- People aren't used to paying for things in Canada.
- People aren't allowed to pay for things in Canada.
- Canadians are risk-averse.
- The Canadian market is anti-competitive and prone to oligopolies.
- Canadian hospital IT is too old and compartmentalized to adopt new technology.
- Lack of funding because investors know American companies have better access to the American market.
- It's a federal/provincial clarity of responsibility problem.
- It's a "Canadian governments start tasks forces to assemble committees to make recommendations" problem.
- Canadian privacy regulations don't make any sense for modern workflows.

I do know it's not for a lack of talent and ideas. There's plenty of that here. It's really inspiring to see startups succeeding despite the obstacles.

There are also plenty of people trying their best to help founders and innovators succeed... it's just that the most direct way to do that is to help them access the American market.

And there are people in the healthcare system itself trying to accelerate adoption of medical technology - I heard about one hospital defying the odds and creating a technology intake system. It doesn't sound like much, but for a time-strapped founder trying to get a foothold, that sort of clear process can be a game changer.

To me, it sounds like the foundational problem isn't really any of the ones I listed above. The underlying problem is that we don't actually agree on what success looks like.

It's easy to point out problems, but talking about solutions requires some really uncomfortable conversations.

If you think the problem is Canadians being unwilling or unable to pay out of pocket - well, that kind of cuts to the core of the public/private healthcare debate.

If you think it's a risk aversion and health system IT issue - who is paying for the monumental undertaking of updating our critical digital healthcare infrastructure?

If you think it's an anti-competitive oligopoly problem - you're not wrong and the uncomfortable part of this is pointing fingers.

So what does success look like? How do we incentivize people to try to get there? How do we make Canada an attractive place for Canadian medtech companies to do business?

Let me know what you think.

I… don’t know enough. Every time I think I’m starting to get a handle on the Canadian healthcare system, I fall through a hole in the floor and there’s another layer of tangled, rusting infrastructure underneath.

I want to say, just before we get too far into this - I’m an optimist about this. The more people I meet in Canadian medical technology, the more I think we have a real shot at being legitimately world class.

I’m going to talk to people and learn as much as I can. There’s a good chance the next few newsletters will be on this topic, so…

… so you don’t miss anything!

Defining the problem and defining success

To start off, this week I want to break the problem down a little further.

There are a few (well… more than a few) major categories of concern in the Canadian medtech market:

• Lack of funding

• Brain drain

• Fear and risk aversion

• Lack of commercialization options

• Reluctant adoption of new technologies and workflows

• Bad healthcare system incentives

• Competition between federal and provincial priorities

• Lack of associated services and infrastructure

• American competition

• The Canadian competitive" environment and oligopolies

• Regulatory capture

• Cultural issues

Yeah, it’s a long list. That’s not even close to exhaustive.

Here’s another one from someone in the industry:

There is no financial incentive for hospitals here to adopt technology or even improve on healthcare.

The risk adverse/ maintaining status quo/ valuing pedigree nature of Canadian culture is whole other topic but that requires a cultural shift.

But before we can even begin to solve anything, we need to know what we actually want. What does success look like? What does a healthy Canadian medtech and digital health industry need from itself, from the healthcare system, and Canadians in general?

And how can we tell if we’re on the right track?

Here are a few indicators I personally would look for in a successful Canadian medtech ecosystem.

There are more medtech and digital health startups

This isn’t as obviously “a good thing” as it appears, but I still think it’s important.

So startups are great. I love startups. They are a core reason I started this newsletter (and the sole reason I started the podcast).

But having lots of startups is not the same thing as having good startups.

Medtech is a not a “throw things and see what puts a hole through the drywall” kind of industry. Not everyone is capable of starting a medtech company - and that’s fine. It takes education and a deep understanding of clinical workflows (or at least the ability to gain that understanding).

But for now, more is better… because it would indicate that the people capable of starting a medtech company aren’t moving to the United States.

Canadian brain drain is a huge, huge, massive problem and the reasons are not hard to understand. Housing cost, everything else cost, terrible long term economic projections, the impending retirement tax burden… most people my age agree with some variation of the statement “if I didn’t have family and friends here, I would try to move to the States.”

Having the potential to exit a successful medtech company circumvents those issues to a degree. Knowing that you could build a company (here in Canada) and achieve a life changing exit (again, here in Canada)… that changes the math for talented young people. It means you can be financially successful without having to move far from everything you know.

There are more Canadian health system commercialization and Health Canada regulatory consultants

Startups are the foundation species of the medtech ecosystem.

The health of the ecosystem is directly tied to the number and quality of startups that thrive in it.

The better startups are doing, the more they will spend on service providers - but for our purposes, the most interesting ones are those that specialize directly in Canadian regulations and institutions.

More companies choose to remain CCPC

Canadian controlled private corporation is the designation given to companies that are, essentially, owned by a Canadian (or Canadians) headquartered in Canada.

Medtech companies - device companies especially - tend to start out as CCPCs. Once they start making gains in the American market though… that changes.

If we are succeeding in making Canada an attractive place to do business as a medtech or digital health company, companies will decide being a CCPC is more of a benefit than a burden.

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There are other generic indicators of a healthy industry of course, but those are the most informative Canada-specific indicators I could think of.

I’m obviously very focused on startups, just since that’s what I know. I intend to get a better handle on the issues from the care delivery side.

If you can think of more indications, I’d love to hear them.

So what is the goal here?

I don’t know that I’ve really defined success yet. Let me try:

Our goal should be to create the conditions for Canadian startups to have a reasonable chance of commercializing and selling their products to Canadian institutions as well as the American market.

Working definition. “Reasonable chance” is carrying a lot of water there. It doesn’t say much about funding.

I’m open to suggestions.

Another interesting take I saw gave me some pause, and I’m not sure I’ve fully incorporated it into my thinking yet - but I want to:

We should offer to the world what makes us unique without thinking that we should be like Bay Area.

Good point. We can’t be America. But we have a highly educated population, specialized institutions, and proximity to America. There has to be a way to exploit the niche we find ourselves in.

So what is it?

I’m going to try to figure that out.

What’s next?

I’m going to dive into this. I think it will lead to some interesting places - clinical workflows, regulations, investor sentiment, culture, and who knows where else.

If you think you have something to say about it, let me know. I’d love to chat.

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That’s it for this week. Thanks for reading.

- Clark