This survey covers Ontario’s medical device sector, focusing on business opportunities and challenges facing U.S. exporters. The medical device industry is worth $1 trillion (USD) worldwide and growing. Canada is known for its large but stable medical device market worth approximately $6 billion USD annually of which most is concentrated in Ontario. Aging populations and demand for minimally invasive technologies continue to push growth in this industry. Ontario already imports half of its medical device products from the U.S.
Industry experts suggest that U.S. – Ontario partnerships, mergers or acquisitions are the best way to enter the Ontario market. Ontario province’s healthcare procurement is open to countries worldwide where the use of Group Purchasing Organizations has resulted in high – volume medical device orders. Obstacles to exporters include navigating Canada’s regulatory system as well as Ontario’s reimbursement scheme. U.S. companies are encouraged to focus on per – patient cost in order to obtain medical device licenses and sell their products to Ontario hospitals.
Market Demand and Data
Canada has a large and mature medical device market with stable but relatively low growth at 3 to 5 percent annually. The Canadian medical device industry is valued at approximately $6 billion USD consisting of over 1100 facilities and approximately 1000 firms at 90 percent domestic ownership. While 47% of Canadian businesses are considered small, 45 percent represent medium sized businesses and only 1% are considered large businesses. Approximately half of the Medical Device industry is concentrated in Ontario which includes a prominent research community and several world–renowned hospitals and medical institutes in the Toronto area alone. Other city hubs for this sector include London, Kingston and Hamilton in southern Ontario as well as Ottawa, the nation’s capital.
The Ontario market; with its strengths in biotechnology, advanced materials manufacturing, microelectronic, telecommunications, software systems and informatics is considered a supportive environment for medical devices. Even during economic downturns or times of government spending constraints, most agree that the industry in Ontario is virtually recession proof because healthcare simply cannot be delivered without medical devices. With aging populations, the demand for innovative medical devices continues to increase.
In 2009 over 71 percent of Canadian medical device exports went to U.S. markets, while U.S. imports accounted for more than half of all imports in this sector. In recent years there has been a shift toward imports from China, Mexico and Ireland whose Canadian market share has doubled since 2000. Since 2007 the largest amount of U.S. imports have originated from California, Tennessee, Indiana, Texas, Massachusetts and Pennsylvania with strengths in cardiovascular and diabetes products, monitoring devices, diagnostic imaging and medical laboratory equipment. These states are currently experiencing export recovery after the 2009 economic downturn which reduced U.S. exports to Ontario slightly.
Examples of opportunities, based on total Canadian imports in 2011, could be mentioned for product groups such as Medical electric diagnosing and patient monitoring apparatus, total import US$ 300.5 Million (up 8%), Ophthalmic instruments and appliances, total import US$ 95.8 Million (up 8.4%), Magnetic resonance imaging apparatus, total import US$ 61.8 Million (up 62%).
Ontario is also home to world-class medical device companies with strengths in biotechnology, advance materials manufacturing, microelectronic, telecommunications, software systems and informatics coverage and form innovation. Canica, based in Ottawa, markets and distributes products for acute care facilities and is known for its elastic traction technology which is able to close wounds previously deemed unclosable. Mitomics, in Thunder Bay, is considered a leader in the development of mitochondrial genome-based products and technologies. Nordion, of Ottawa, provides leading disease prevention as well as diagnostic and treatment products including medical isotopes and sterilization technologies. Leading U.S. companies with a presence in Ontario include Johnson and Johnson, GE Healthcare, Baxter, Medtronic and Covidien. Healthcare coverage in Ontario is provided by the Ontario Healthcare Insurance Plan (OHIP) governed under the Canada Health Act. OHIP is a universally public funded health insurance system wherein the insured persons are all legally permanent residents of the province regardless of income status, and are entitled to receive insured services. Seventy percent of healthcare expenditure is covered by OHIP, funded from public sources. The rest is privately paid (through private insurance or out of pocket payments). All the people in Ontario, with populations including many recent immigrants and seniors, use publicly funded healthcare services.
In Ontario, 99 percent of physician services and 90 percent of hospital care, including diagnostic, treatment and preventative services, are covered by the publicly funded OHIP. Most dental, vision, naturopath, cosmetic and mental health services are not covered by OHIP. Like all provinces, Ontario is assisted by large transfer payments from the federal government through the Canada Health Transfer. Currently, privately owned and operated hospitals that allow patients to pay out of pocket for services cannot obtain public funding in Canada as they contravene the equal accessibility tenets of the Canada Health Act.
The advantages of NAFTA, similar business practices and geographic proximity provide U.S. firms with a step up on international competitors. The United States and Canada are each other’s oldest, closest and largest trading partners, and the Canadian market is most similar and familiar to the U.S. market. NAFTA provides a very favorable framework that eliminates trade barriers such as tariffs or import quotas on a variety of goods that would otherwise impede U.S. exports to Canada. Additionally, the standards used for product certification in Canada are the same or similar to the ones used for U.S. certification. The process of obtaining Canadian certification for U.S.-manufactured products does not present a significant difficulty if U.S. certification is already obtained. Additionally, there are many opportunities for U.S. exporters to establish working relationships with Canadian-based companies with an already established market share and strong industry knowledge.