Industry profile

1. Background

In Canada, medical devices are regulated under the Food and Drugs Act as a Class I, II, III or IV with Class I representing devices that present the lowest risk and Class IV the highest. The Food and Drugs Act provides a definition of a regulated medical device.

Examples of medical devices include pacemakers, artificial heart valves, diagnostic and imaging equipment, in vitro diagnostics, dialysis equipment, hip and knee implants, synthetic skin, surgical tools, infusion pumps, life support machines, catheters, bandages, as well as some information and communications technologies.

Firms in the medical devices sector are research and development (R&D) and technology intensive, and the complexity of medical device products continues to increase with the inclusion of multiple technologies into a given product. Technologies such as advanced materials, microelectronics, biotechnology, big data analytics and artificial intelligence (AI) are now routine technologies featured in medical devices. Canadian and international companies continue to innovate further to develop new products and enhance the features of existing medical devices.

2. Global medical devices industry^{Footnote 1}

Globally, the medical devices industry has a low level of industry concentration, with no single large firm controlling the sector. Small companies are common and typically specialize in developing niche technology. During the past five years, the trend toward consolidation has continued, leading to a further reduction in the number of large companies.

Medical device companies are expected to realign their business structures and strategies to compete in the changing global environment (characterized by growth of emerging markets, health care reform and cost containment). Anticipated changes include company restructuring and consolidation as well as an increased reliance on strategic alliances and outsourcing for marketing, distribution, research and manufacturing activities. Rapid adoption of emerging technology such as artificial intelligence (AI), virtual and augmented reality, and digital health are likely to be important drivers for growth.

3. Medical devices industry in Canada^{Footnote 2}

Similar to the global industry, Canada’s medical devices industry is highly diversified and low in concentration. The majority of firms are small and medium-sized enterprises (SMEs).

The medical devices industry is an export-oriented industry that manufactures equipment and supplies. Purchasers include Canadian and international hospitals, physician’s offices, laboratories, clinics, as well as patients (through direct purchases).

The industry is driven by product innovation. It is able to draw on the world-class innovative research being conducted in Canadian universities, research institutes and hospitals. Some of these research project are then spun-off into Canadian medical devices companies.

The majority of establishments in the medical devices industry are located in the provinces of Ontario, Quebec, British Columbia and Alberta.

4. Canadian and international market for medical devices^{Footnote 3 Footnote 4 Footnote 5}

The medical devices market was directly impacted by the COVID-19 pandemic which resulted in an increased demand for devices to diagnose and treat COVID-19; decreased demand for some devices used in non-COVID-related procedures; global medical device supply chain disruptions; and changes in regulations to allow for speedy authorization of devices to address COVID-19 (such as those put in place by Health Canada and the U.S. FDA).

Canada's medical devices market

Canada’s medical devices market (excluding in vitro diagnostics) had an estimated value of US$7.5 billion in 2020, accounting for about 1.8% of the global market.

In 2020, the key business segments of the Canadian medical device market were:

• Diagnostic imaging (21%)
• Consumables (15%)
• Patient aids (16%)
• Orthopaedic and prosthetic (10%)
• Dental products (8%), and
• Other, including wheelchairs, ophthalmic instruments, anaesthesia apparatus, dialysis apparatus, blood pressure monitors, endoscopy apparatus, hospital furniture (30%)^{*
  *}( Note: may not add to 100% due to rounding)

International medical devices market

In 2020, the global market for medical devices was valued at US$419 billion, excluding in vitro diagnostics. With a market of US$177 billion or 42% of the global market, the United States is the world’s largest and most developed market, as well as the leading supplier of medical devices.

In 2020, the key business segments of the global medical device market were:

• diagnostic imaging, such as MRI and CT-scan (24% of world market)
• dconsumables (18%)
• dpatient aids (such as hearing aids and pacemakers) (13%)
• dorthopaedic products (10%)
• ddental products (7%), and
• dther medical equipment (28%)^*.
^*(Note: may not add to 100% due to rounding)

Emerging markets are seen as a very promising market for medical device manufacturers for their less complex regulatory frameworks and potential for growth. More modern technologies, such as telehealth, are also beginning to be adopted into these markets. Low cost, generic orthopedics, have an opportunity for growth in emerging markets and there may be an uptick in acquisitions with companies looking to get access to these demographics.

5. Trade^{Footnote 6}

From 2015 to 2020, Canadian medical device exports increased from CAN$3.2 billion to $4.4 billion and imports increased from $8.6 billion to $9.9 billion. The trade gap increased from $5.4 billion in 2015 to $5.5 billion in 2020, an increase of just under 2%. This brings the import to export ratio down to 2.25 in 2020, from 2.7 in 2015. Canada’s largest trading partner for medical devices is the United States.

Imports

In 2020, medical device imports from the United States were valued at CAD$4.2 billion, representing 42% of Canada’s total medical device imports. Following the U.S., the leading countries for medical device imports were China (10%), Mexico (8%) and Germany (6%).

Exports

In 2020, Canada’s medical device exports to the United States were CAN$3.08 billion, or 70% of Canada’s total medical device exports. The next three leading destinations for Canada’s medical device exports were the Netherlands (4%), Germany (3%), and Japan (3%).

6. Global trends^{Footnote 7 Footnote 8}

• Demographic shift will continue to play a major role in the growth of the medical device industry: UN projections show the percentage of elderly people increasing from 8.3% in 2015 up to 17.8% by 2060. This will continue to drive demand for medical devices and new technologies.
• The prominence of digital health in the form of telehealth, or remote monitoring technologies, has been magnified by the pandemic and this rise may continue in the long term due to customer preference towards its inherent convenience. However, hesitancy to adopt new technologies by the older segment of the population may curb short-term growth.
• The disruptions to the global medical devices market are likely to persist due to COVID related challenges, a resurgence in elective surgeries will allow orthopaedics and dental markets to begin recovering.

7. Industry associations in Canada

A number of national and regional associations represent companies in Canada’s medical device industry, including:

National:

• Medtech Canada

Regional:

• BioAlberta
• BioNova
• Bioscience Association Manitoba
• LifeSciences British Columbia
• Life Sciences Ontario
• Ontario Bioscience Innovation Organization
• PEI Bio Alliance

8. Federally-funded research support and tax incentive programs ^{Footnote 9}

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). The NRC delivers the Industrial Research Assistance Program (IRAP) which helps firms develop and commercialize technologies though funding and advisory services.

The Canadian Scientific Research and Experimental Development (SR&ED) tax incentive program, administered by the Canada Revenue Agency, encourages Canadian businesses of all sizes, and in all sectors to conduct R&D in Canada. It is the largest single source of federal government support for industrial R&D. It provides claimants cash refunds and/or tax credits for their expenditures on eligible R&D work done in Canada.

9. Research and Translational Centres

In addition to the National Research Council Medical Devices Research Centre, Canada counts a number of networks and centres for research and commercialization that support the growth of the medical device sector. A number of these networks are not-for profit corporations that match research expertise with business/hospital needs in order to stimulate commercialization. These networks and centres include:

• adMare BioInnovations Canada, which merged with the Accel-Rx Health Sciences Accelerator – Accel-Rx, in 2020 (Vancouver, BC)
• The Centre for Probe Development and Commercialization (Hamilton, ON)
• The Quebec Consortium for Industrial Research and Innovation in Medical Technology (MEDTEQ) (Montreal, QC)
• The CAN Health Network (national)

Examples of Canadian translational centres:

• The Lawson Health Research Institute (London, ON)
• The McEwen Centre for Regenerative Medicine (Toronto, ON)
• MaRS Innovation (Toronto, ON)
• The Montreal Heart Institute (Montreal, QC)
• The Ontario Brain Institute (Toronto, ON)
• Princess Margaret Hospital Global Cancer Centre (Toronto, ON)
• Sunnybrook Health Sciences Centre (Toronto, ON)
• The Toronto Rehabilitation Institute (Toronto, ON)

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