As the tech leaders have argued it’s time to turn to “building together” post-election, Canadian healthtech leaders described in a panel conversation this week how the country’s approach to procurement drives innovation out of the country.
The virtual discussion between AlayaCare CEO Adrian Schauer and Mimosa Diagnostics CEO Dr. Karen Cross was hosted by the Council of Canadian Innovators (CCI) to commemorate the release of its “Mandate to Innovate” report. The report provides various branches of Prime Minister Mark Carney’s soon-to-be-named cabinet with recommendations to stimulate Canada’s innovation economy.
Procurement reform is among the report’s many suggestions. Specifically, it asks the incoming Minster of Health to “work with their provincial colleagues to simplify and standardize procurement,” with the goal of making it easier for healthcare providers to use innovative technology.
Many provinces don’t have a centralized procurement system, instead relying on third-party group purchasing organizations, which effectively control almost all of the purchasing volume of hospitals and long-term-care homes, Canadian Shield founder Jeremy Hedges told BetaKit in a 2022 podcast episode.
“I would not describe the procurement processes as being very welcoming to younger, growing companies.”
Adrian Schauer
Schauer founded care management platform AlayaCare in 2014, and has grown it to a Series D stage company with just under 600 employees. Two-thirds of those employees are Canadian, and so is 91 percent of the company’s cap table, he said.
Despite AlayaCare’s deep roots in its home country, Schauer said that selling into the Canadian public sector has “been a long and frustrating” experience.
He said procurement reform is a non-monetary form of support the federal government could provide startups, describing its momentum generating properties for young Canadian businesses.
“I can raise money on my growing top line,” Schauer said. “One dollar of investment is one dollar of investment [but] one dollar of procurement can be 10 dollars of investment.”
But Schauer said the provincial healthcare authorities in charge of procurement are “uncoordinated,” with different challenges in each province (healthcare is a provincial responsibility, and each province and territory has its own health system). He added that there is a lack of risk appetite, coming with rigid requests for proposals, that are still subject to being lost to the lowest bidder, “even when we succeed in convincing our prospective buyer we’re the solution they want.”
“I would not describe the procurement processes as being very welcoming to younger, growing companies,” Schauer said.
Cross said Mimosa Diagnostics, which provides a handheld tissue imaging device that claims to detect skin injuries before they become visible to the naked eye, has come across all the barriers that come with procuring into the health system. One way the health system can improve is making the pathway to procurement more transparent, Cross argued.
She said that the health system needs to understand that startups do not have the resources of multinational giants to guide them through the procurement process. Without transparency into a procurer’s requirements, she added, startups can waste time and resources pursuing a lead that, unbeknownst to them, requires certifications they haven’t achieved yet.
For example, she said, a small company trying to strike a deal with a health authority may not realize they don’t meet the necessary cybersecurity certification until they start the procurement process.
“‘We didn’t understand this was going to be a barrier, and then all of a sudden the barrier pops up,’” Cross said.
When it comes to navigating regulations, Cross also describes Health Canada as existing on an island of its own on the world stage.
Cross said Mimosa elected to seek certification in the United States (US) because they knew clearance from the US Food and Drug Administration (FDA) was going to be “faster, easier, and less expensive,” than Health Canada approval. On top of that, FDA clearance comes with more upside, as it is accepted in many other countries around the world.
“You’re going to make a decision, as a young company to say, sorry, this is not worth the $80,000 or $100,000 I’m going to spend that a large multinational, global corporation [can] spend to get that certification,” Cross said. “I’m going to go to the US.”
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Cross’s comments echo what PragmaClin founder Bronwyn Bridges told BetaKit last May. She decided to forgo dealing with Health Canada and launch straight into the US to get the “gold standard” of FDA approval so it’s easier to get approval elsewhere.
While Canadian companies may be used to pursuing US regulatory approval, the Trump Administration has been dramatically reducing the footprint of the agency with thousands of job cuts. Experts have called the cuts a big problem for the agency’s ability to regulate, and multinational law firm Skadden warned that the layoffs and other policy changes will “result in a paradigm shift for the way industry interacts with FDA.” Companies with products in development may see less guidance and feedback and slower updates on applications, the firm said.
CCI’s Mandate to Innovate report stretches beyond recommendations for healthcare and procurement reform, to several of the government’s different other portfolios.
The report asks the Prime Minister’s Office to tackle internal trade barriers and create a single market for public procurement for all provinces and territories. It also requests the Minster of Finance to increase the risk appetite of investments from crown corporations like the Business Development Bank of Canada.
Even the report’s request to the Minister of National Defence to increase military spending and build out Canada’s “dual use” sectors, referring to those that have applications in both military and civilian life, such as the minerals and manufacturing industries. This policy could also benefit the country’s healthtech sector, Cross said, noting the US has “set themselves up for success” with similar policies.
“Almost every month I’m approached by someone from the US military who wants to offer me a grant to do ‘X, Y, Z,’” Cross said. “I’ve never, ever talked to anybody in the Canadian military because, again—it’s connections, it’s pathways. How do you get there?”
Feature image courtesy AlayaCare.