Canada's Medical Device Industry Faces Cost Pressures, Regulatory Reform

Medical Device & Diagnostic Industry Magazine
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An MD&DI August 1997 Column

VERBATIM

An interview with Kevin Murray, director of regulatory
affairs and communications at Medical Devices
Canada (MEDEC).

Estimated at $2.8 billion, Canada's medical device market is a small but significant part of the $120-billion worldwide market. And in Canada, major changes in medical device regulation are on the way. These changes, which will increase the effort and expense for bringing products to market, come at a time when manufacturers are already feeling the pressure of a tightening market. As the Canadian government looks to save money in many areas of its health-care system, medical device manufacturers are being called upon to produce less-expensive products. The new medical device regulation, which will take effect in February 1998, will make gaining product acceptance much more difficult. The time and effort required by the new regulation, not to mention user fees, will add to a manufacturer's difficulties.

Kevin Murray, the director of regulatory affairs and communications at the MEDEC trade association, spoke with MD&DI about the state of the industry in Canada and about the major changes that are reshaping its future.

What is the state of the health-care system in Canada?

Well, Canadians have always prided themselves on having the best health-care system in the world, because our system guarantees all Canadians access to health care, regardless of economic status. But the system has been publicly funded and the funds have been running out, so we're now going through a rather painful restructuring. Health-care providers are having to find ways to work with less money, and that is causing some difficulties.

In terms of market opportunities for industry, it's obviously having an impact because the hospitals are having to cut back, and one of the ways that they are cutting back is to purchase less or to force manufacturers to provide less-expensive products. So it is also having an impact on the industry.

What is the status of the recently proposed new medical device regulation, and what changes will it bring about?

The proposed regulation was published in the Canada Gazette 1 in February. This is the formal process by which regulations are brought along in Canada. After the proposal is published, there is a formal response period. The deadline for that response period was June 1. The Therapeutic Products Directorate may make changes based on these comments. Once all the changes have been made, the proposal has to go through the Justice Department and before the parliamentary committee. Finally, the minister of health will sign it, and it will be published in the Canada Gazette 2 in February 1998, at which point it becomes law.

The new regulation proposes a risk-based classification system consisting of four classes. Manufacturers and distributors are going to have to decide to what risk class their products belong. Also, all devices will be subject to some premarket requirements. Currently in Canada, manufacturers of most devices simply have to notify regulators within 10 days of putting the devices on the market, and this attests that the devices satisfy requirements. Under the new regulation, manufacturers will not be able to put a product on the market until they have demonstrated that it satisfies the relevant requirements.

Another major change is that all devices with the exception of Class 1 devices will have to be manufactured under a quality system based on ISO 9000. Also, all devices are going to have to be registered, and all establishments operating in Canada will have to be registered.

How will the regulatory changes affect Canadian manufacturers?

The regulatory burden is going to go up. And added to that is cost recovery or user fees. In addition to the increased regulatory requirements, which are going to drive costs up, manufacturers are also going to face user fees. The fees haven't been determined yet, but we assume that they're going to be fairly substantial. So the cost of bringing a product to the Canadian market is going to go up significantly.

Are user fees a source of contention among members of industry, and what is MEDEC's position on them?

User fees are a source of contention for every manufacturer, but we recognize that they are government policy and we're not able to change the government's position on them. The government of Canada is moving more and more toward cost recovery in many different departments, not just Health Canada, the department that regulates the sale of medical devices. We have tried to get the government to drop cost recovery on medical devices and have not succeeded, so what we've done now is to recognize that cost recovery is an inevitability and to work with regulators to develop an affordable cost-recovery fee schedule.

Will the new regulation have a major effect on U.S. manufacturers who market products in Canada?

Yes. Any U.S. manufacturer who is selling to Canada now will find that the regulatory requirements are going to go up significantly. To sell in Canada, manufacturers will have to be using a quality system that is based on ISO 9000. FDA's quality system regulation is based very much on ISO 9000, and if manufacturers are already following it they may have no problem. But if they aren't, they will have some very tough economic decisions to face in terms of the cost of exporting a product to Canada. Also, U.S. manufacturers must choose Canadian distributors who can meet the new requirements.

On the plus side, Canada is working to harmonize regulations with the European Union and with the United States. A number of projects are under way, such as a mutual recognition agreement that is being considered with the EU. Canada is also engaged in joint review with FDA for some high-risk devices. Somewhere down the road, if FDA reviews are recognized in Canada and vice versa, that's going to make things easier for manufacturers.

What is MEDEC planning to do to help manufacturers deal with the upcoming changes in device regulation?

We are lobbying the federal government to make sure the interests of industry are considered. In terms of cost recovery, for example, we're working to try to lessen the impact of the fees. We want to ensure that a fee schedule will be found that will be reasonable for industry. This kind of lobbying is what we've been doing for the last two to three years, and we will continue to do that.

In terms of educational programs for manufacturers, we have had some sessions for our members and have been providing them with newsletters to keep them current on what's happening. We also plan on doing a general regulatory informational session, probably sometime in the fall, which we would open up to all members and nonmembers.

How can Canadian manufacturers remain successful?

Canadian manufacturers have a lot of opportunities in the global medical device market. Some of the emerging markets in Asia and Latin America, for example, probably represent a great opportunity for Canadian manufacturers because Canadian manufacturers do provide unique and very effective device technologies. I certainly feel that if you're a Canadian manufacturer, you've got to be exporting, because the home market is relatively small. Most Canadian manufacturers see the United States as the first foreign market, because it is right next door, but the U.S. regulatory system is going through some changes now that may present some future barriers. I would say that Canadian device makers should be looking at emerging markets.

It's getting harder to sell in this country, because health-care reform in Canada is definitely going to have an impact on companies' ability to bring products to market. It's getting harder to get products through the system. We are seeing more and more buying groups; we're seeing hospitals' purchasing departments demanding more and more of suppliers. Hospital budgets are very limited, so it's getting more difficult to sell a product. That's not to say that there aren't opportunities, but the combination of health-care reform, new regulations, and cost recovery is going to see a restructuring of the companies that are operating here and the products they are going to bring into the market.

What is your overall prognosis for Canada's medical device industry?

I don't want to paint a gloomy picture. It's going to get tough, and you know there are times when we've said on the record some very strong things about what the government is doing. But we recognize that federal regulators have a job to do. We try to represent the interests of the industry, and we act as a buffer between the interests of the industry and those of the federal government. Companies should be prepared for the changes that are coming, but it's not going to be all doom and gloom. Companies will survive; companies will do what they have to do. Regulatory reform is happening all over the world, not just in Canada. Health-care reform is happening in the United States and it's happening overseas, and the medical device industry is going to change to adapt to it.

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