CANADIAN MEDICAL DEVICES INDUSTRY - LifeSciences BC

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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
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CANADIAN MEDICAL DEVICES INDUSTRY - LifeSciences BC

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