This report on the Land of Stranded Pilots examines the shape of the health technology (health tech) industry in Canada with a focus on three specific questions: Does Canada actually have a problem with health tech commercialization? If so, how extensive is that problem? And what is causing it?
Health technologies can be divided into three primary areas: health tech software, devices and equipment for health, and biotechnology, drug discovery and development. Our review of active health tech companies in Canada and the US can be summarized in Exhibit 1. We have sorted the firms by whether they are “starting” or “scaling”, using $10 M as a cut-off between early-stage and growth (i.e. scaling) companies.
The US has five times as much capital on a population basis available to both new and growing companies. The gap grows even further for more established businesses: our neighbour has six times as much investment capital for companies that are scaling. Within the US, Massachusetts is the clear winner at overall capital and in the scale-up of companies. Relative to Ontario, it has 43 times more total capital and 51 times more investment resources for growth companies.
Canada’s underperformance, especially when we consider the wide margin in all areas of health technology, is astounding. For this reason, we will dedicate the remainder of this report to a systemic analysis of the innovation system and its components. Our analysis suggests three major factors in the underperformance.
- There is no alignment of research dollars and researchers with commercialization objectives.
- From the perspective of the entrepreneur, the system for commercializing health technology is a byzantine and flawed system with multiple overlapping, competitive, and duplicated parts with funding and assistance gaps.
- The healthcare system is not aligned to purchase the innovation that comes out of the health tech system, and in fact, can act as a brake on innovation.
This brief is not intended to be a criticism of any organization in the system or the individuals that work for those organizations. We truly have a system and people within it who are trying to do the very best job they can for their clients. Governments at all levels too are keen to develop solutions to problems in the system and have been launching new programs on a regular basis to fix problems that have been identified. All of the players are doing an excellent job meeting the needs for which they were established and addressing issues within their sphere of influence.
The problem is centered on the gradual evolution of the system as a whole. The piecemeal design over decades has created inefficiencies that no amount of hard effort by the participants in the system can change. The health tech innovation system has no measurable objectives and is plagued by misalignments, gaps, competition, and overlapping resources. The system design is flawed and must be fixed if we are to compete in health technology innovation.