CANADIAN MEDICAL DEVICES INDUSTRY - LifeSciences BC

CANADIAN MEDICAL DEVICE INDUSTRY
The medical device industry consists of firms that produce a wide range of products used for diagnosis and treatment of
ailments, and which include the following: medical, surgical and dental equipment (including electromedical equipment
and related software), furniture, supplies and consumables, orthopaedic appliances, prosthetics and diagnostic kits,
reagents, and equipment. Firms that are active only in distribution are not included in this profile 1 .
Size and Structure of the Industry
• In the period 2004-2005, the medical device
manufacturing and development industry consisted of
1,101 facilities, comprising approximately 998 firms.
(An additional 685 facilities, operated by 602 firms,
solely engaged in distribution are not included in the
following analysis.) Medical device manufacturing
and development facilities were generally small in
size as more than half (57%) had fewer than 25
employees and 37% had from 25-49 employees. Of
the remaining facilities, only 45 (4%) were of medium
size (50-150 employees), and less than 1% were
large (greater than 150 employees).
• Approximately 90 percent of the medical device
facilities were Canadian owned, unchanged from
2000 2 . Foreign-owned facilities tended to be larger as
21% had 50 or more employees, compared to just
4% of domestically-owned facilities.
Number of Facilities.
700
600
500
400
300
200
100
0
Distribution of Canadian Medical Device
Facilities by Size
634
408
45
8 6
1-24 25-49 50-150 >150 Not Classified
Number of Employees
• Medical device-related employment in 2004-2005
rose to approximately 26,000, compared to
employment of 22,000 in 2000, as reported by
Statistics Canada.
• The industry was distributed across Canada,
although concentrated in Ontario and Quebec where
42% and 32%, respectively, of all facilities were
located. 22% of facilities were located the West and
4% in the Atlantic.
• Nation-wide average facility employment was small
at 23 employees. Average facility employment was
largest in Quebec (27) and Ontario (25) and below
average in the West (16) and Atlantic Canada (11).
Number of Facilities .
500
450
400
350
300
250
200
150
100
50
0
Distribution of Canadian Medical Devices
Facilities by Region
41
356
463
241
Atlantic Quebec Ontario West

Industry Revenues Depend Significantly on
Exports
• In 2003, Canadian firms generated approximately
$4.0 billion 3 from medical device sales in Canada
and abroad, of which over half ($2.1 billion) were due
to exports. With $3.8 billion in medical device
imports, the size of the Canadian apparent medical
device domestic market was just under $6.0 billion.
• Canada’s exports of medical devices increased at a
solid compound annual growth rate (CAGR) of 10.5%
from 2000-2005 as exports increased from $1.6
billion in 2000 to $2.4 billion in 2005. During the
same period, import growth was also strong although
lower at a CAGR of 6.5%. Despite the higher CAGR
of exports compared to imports, the significantly
higher level of imports resulted in the medical device
trade deficit having increased slightly from $1.8 billion
in 2000 to $1.9 billion in 2005.
• The United States remains overwhelmingly the
primary market for Canadian medical device exports
and the destination for 76% of all medical device
exports in 2005. However, there is an increasing
diversification of destination markets for Canadian
medical devices as the export share destined for the
United States has decreased in each of the last three
years and is down sharply from 87% in 2002. In
2005, the other growing export markets for Canada
were the United Kingdom, a destination for 4% of
Canadian medical device exports, Germany (3%)
and China (2%). Since 2000, the most rapidly
expanding export markets, as measured by sales
CAGR, were China (168%), Singapore (93%), South
Africa (83%) and South Korea (79%).
• Since 2000, there has also been a shift in the source
of Canada’s medical device imports. Although the
United States still accounted for over half of all
imports in 2005 at 54%, the share is down from 68%
in 2000. During this period, both Germany (8%) and
China (6%) have doubled their share of the Canadian
market by way of sales CAGRs of 27% and 29%,
respectively. Higher average growth rates were also
posted by imports from Ireland (65%), Mexico (36%)
and Australia (29%), although their shares of total
imports remain at 3% or less.
• Canada’s trade in medical device products is
categorized using the Harmonized System (HS). The
accompanying tables list the top ten exports (using
2
$ Billions
the 8-digit classification) and the top ten imports
(using the 10-digit classification) according to dollar
value and share of total dollar value.
5.0
4.0
3.0
2.0
1.0
0.0
Canadian Medical Devices Exports and
Imports
1.6
3.4
1.8
3.9 3.8 3.9 4.0
1.9
2.1 2.2
2000 2001 2002 2003 2004 2005
Exports
Imports
Canadian Exports of Medical Devices by HS Code, 2005
Billions $
Total Exports 2.40
2.4
4.3
Share of Total
Exports
Top Ten Exports by HS code (8-Digit Level)
Sanitary articles of paper, incl sanit towels & napkins (diapers) for babies 0.56 23%
Mechano-therapy appl; massage app; psychological aptitude-testing apparatus 0.19 8%
Opacifying prep, x-ray; diagnostic reagents, designed for admin to patients 0.19 8%
Electro-diagnostic apparatus, nes 0.16 7%
Composite diagnostic or laboratory reagents, nes, 0.15 6%
Instruments and appliances used in medical or veterinary sciences, nes 0.12 5%
Medical, surgical, dental or veterinary furniture and parts nes 0.11 5%
Electro-cardiographs 0.10 4%
Parts and accessories for app based on the use of X-rays or other radiations 0.07 3%
Oxygen therapy, artificial respiration or other therapeutic respiration app 0.06 2%
Top Ten Exports by HS Code 1.70 71%
All other HS codes 0.69 29%
Source: Statistics Canada, World Trade Atlas
Canadian Imports of Medical Devices by HS Code, 2005
Billions $
Total Imports 4.33
Share of Total
Imports
Top Ten Imports by HS code (10-Digit Level)
Diagnostic reagent,w/n on a backing,for med diagnosis/mfr semi condu device/etc 0.36 8%
Instruments & appliances used in medical,surgical,dental/veterinary science,nes 0.34 8%
Bougies, catheters, drains and sondes, and parts and accessories thereof 0.24 5%
Mechano-therapy appl; pwr-op message appl; psychological aptitude-testing app 0.18 4%
Cannulae and the like, nes 0.16 4%
Instruments and appliances, used in dental science, nes 0.15 3%
Appliances which are worn or carried or implanted in the body nes 0.15 3%
App based on the use of x-rays, for medical, surgical or veterinary uses, nes 0.13 3%
Contact lenses 0.13 3%
Pacemakers for stimulating heart muscles, excluding parts and accessories 0.11 2%
Top Ten Imports by HS code 1.95 45%
All other HS codes 2.38 55%
Source: Statistics Canada, World Trade Atlas

Canadian Technology Strength Supports
Innovation
• The manufacturing of medical devices involves the
application of diverse biomedical and engineering
disciplines. The Canadian medical device industry
benefits from the strengths of associated Canadian
industries including biotechnology, advanced
materials, microelectronics, telecommunications, and
software and informatics.
• In addition, the industry is able to draw on worldclass
innovative research being conducted in
Canadian universities, research institutes and
hospitals. Nearly 10 percent of Canadian medical
device firms are spin-offs of universities, other firms
or laboratories 4 . A number of medical device firms
work in collaboration with other organizations
(universities, hospitals, smaller or larger firms,
government departments, etc.).
Medical Device Manufacturing Costs Lowest in G7
• Total annual costs to establish and operate a medical
device manufacturing facility in Canada are the
lowest in the G7. (Source: Competitive Alternatives:
KPMG’s Guide to International Business Costs, 2006
Edition) Canada holds a 4.1 percent cost advantage
over the United States in medical device
manufacturing.
• Canada’s lowest labour costs in the G7 contribute to
this advantage. KPMG estimates that labour cost
accounts for over 50% of location-sensitive cost in
manufacturing and over 75% location-sensitive cost
in services operations.
Low R&D Costs
• Canada offers the most favourable tax treatment for
R&D among the G7 with a system of tax credits and
accelerated tax deductions for a wide variety of R&D
expenditures (including salaries, overhead, capital
equipment and materials). (Source: Warda, Jacek,
Rating Canada’s R&D Tax Treatment: A 2003
Update, October 2003).
• The federal and provincial tax-based incentives
permit firms to significantly reduce R&D costs
through direct investment or subcontracting in
Canada.
3
Biotechnology
Software and
Informatics
United Kingdom
United States
Canada
Canada
France
Italy
Japan
Germany
Telecommunications
Medical Devices
Advanced Materials
Microelectronics
G7 Medical Device Business Costs,
(Index: US = 100)
95.9
96.6
98.4
98.5
100
106.1
107.2
90 95 100 105 110
Source: Competitive Alternatives: KPMG's Guide to International Business Costs, 2006
Edition
U.S.
Japan
U.K.
France
Italy
Germany
Relative Generosity of R&D Tax Incentives*
(Index: Canada = 100)
0 20 40 60 80 100 120
* Does not include Ontario's 2003 cuts to corporate income tax rates.
Source: Warda, Jacek, Rating Canada's R&D Tax Treatment: A 2003 Update , October 2003.
71
71
77
80
85
84
100

Regulatory Process Emphasizes Harmonization
• Canada’s regulatory process for medical devices
increasingly emphasizes harmonization and
reciprocity. Canada has a risk-based system of
regulation in keeping with international trends.
• The Food and Drugs Act permits Canadian
manufacturers to export product in accordance with
the receiving country's laws, irrespective of domestic
approval status. This export provision has prompted
some foreign-owned companies to establish export
manufacturing from a Canadian base.
Supportive Network of Industry Associations
• Companies in Canada’s medical device industry
are supported by a number of national and regional
associations, including: MEDEC - Canada’s Medical
Device Technology Companies; Alberta Health
Industry Alliance; Association of Health
Technologies Industry (Quebec); BioNova (Nova
Scotia); BC MedTech (British Columbia); Health
Care Products Association of Manitoba; Ottawa Life
Sciences Council; and Trillium Medical Technology
Association (Ontario).
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)
(www.htx.ca), Westlink Innovation Network Ltd.
(www.westlink.ca), and NRC’s Centre for
Commercialization of Biomedical Technology
(http://ibd.nrc-cnrc.gc.ca/ibd_external/ccbt/index.html).
2 Statistics Canada, Medical Device Industry Survey 2000.
3 Based on the average of estimates by Rozinski ($3.7 billion) and E&B
Data ($4.5 billion).
4 Statistics Canada, Medical Device Industry Survey 2000.
Hot Links of Interest
Industry Canada - Life Sciences Branch
www.strategis.gc.ca/lsb
Invest in Canada
www.investincanada.gc.ca
The Canadian Trade Commissioner Service
www.infoexport.gc.ca
Innovation in Canada
www.innovation.gc.ca
Medical Device Companies and Associations
http://strategis.ic.gc.ca/epic/internet/inlsgpdsv.nsf/en/h_hn00041e.html
Contacts: Mary Boreskie boreskie.mary@ic.gc.ca
Robert Squires squires.robert2@ic.gc.ca
1 Source of data unless otherwise specified: E&B Data collected in 2004 and
2005 and Canadian International Merchandise Trade Database. The latter
presents data using the Harmonized System (HS), thereby allowing for
detailed analysis on a product/country basis.
4