December 5, 2014 Hon. Joe Oliver Minister of Finance Department Of

405 The West Mall, Suite 900 Toronto, Ontario M9C 5J1 t: 416.620.1915 f: 416.620.1595 toll free: 1-866-58-MEDEC www.medec.org

December 5, 2014

Hon. Joe Oliver Minister of Finance Department of Finance Canada House of Commons Ottawa, Ontario K1A 0A6

Re: MEDEC 2014/2015 Pre-Budget Submission

Dear Minister Oliver,

MEDEC is the national association representing the Canadian medical technology industry. Our member companies employ well over 35,000 Canadians in communities across the country with expertise across multiple disciplines, including manufacturing, sales and marketing, biomedical engineering, biological science, regulatory, professional services and health economics.

A thriving economy and a sustainable, high quality health care system go hand in hand. At MEDEC, we operate at the intersection of these two imperatives. Our members create technologies that save patients’ lives, improve the quality of patient outcomes, reduce costs in the health care system, and create thousands of high paying jobs.

The timely adoption of medical innovation and technology is essential to enhancing patient care, improving patient access to health care, enabling heath care sustainability, while at the same time driving jobs and economic growth in Canada.

Our 2014/2015 pre-budget submission focuses on the following 4 key areas:

1) Support for key Federal Government initiatives related to medical technology, in particular: a) The Federal Health Innovation Advisory Panel b) Free Trade Agreements – CETA and CKFTA c) Acknowledgment of Health Canada’s ability to regulate reprocessed single-use devices

2) Regulatory environment in Canada, in particular: a) Processing timelines for medical device approvals b) Global regulatory harmonization and the Regulatory Cooperation Council (RCC) c) Use of Standards (International and Canadian)

3) Changes to SR&ED and its impact on the medical technology industry in Canada

4) Reuse of Single Use Medical Devices in Canada

MEDEC Federal Pre-Budget Submission 2015 – 4 Key Areas of Focus

1) Support for key Federal Government initiatives related to medical technology, in particular: a. The Federal Health Innovation Advisory Panel b. Free Trade Agreements – CETA and CKFTA c. Acknowledgment of Health Canada’s ability to regulate reprocessed single-use medical devices

MEDEC would like to affirm its support to the federal government on recent key initiatives, and to offer its ingoing interest in being included in the ongoing discussions of these collaborate initiatives and important issues facing the medical technology industry in Canada.

We would like to thank the federal government for all of their hard work and commitment on the below initiatives, which will help contribute to a thriving medical technology industry in Canada, and an improved health care system for all Canadians. a. The Federal Health Innovation Advisory Panel

MEDEC strongly applauds the federal government on today’s announcement regarding the creation of Health Minister Rona Ambrose’s Advisory Panel on Innovation in Healthcare.

As the national association representing Canada’s Medical Technology Companies, we understand the value that innovative medical technologies can contribute to our healthcare system by improving health outcomes and enabling enhanced methods of care. The announcement of this Panel is recognition by the Government of Canada of that value, and the need to ensure that Canadian patients can access world-class health innovations in a timely manner.

MEDEC is looking forward to engaging with the panel and working towards recommendations that improve the adoption of high quality innovative health care solutions in Canada. b. Free Trade Agreements – CETA and CKFTA

MEDEC strongly supports the Government of Canada’s recent announcements of the successful conclusion of negotiations surrounding the Comprehensive Economic and Trade Agreement (CETA) and between Canada and the Republic of Korea on a bilateral Free Trade Agreement (CKFTA).

Export is critically important to the success of Canada’s medical technology companies and this agreement will have a positive impact on our industry. We are confident that these free trade agreements will support and enhance the Canadian medical technology industry, which will benefit Canadian patients and contribute to increased economic growth, and job creation. c. Acknowledgment of Health Canada’s ability to regulate reprocessed single-use devices

MEDEC members are committed to providing safe and innovative medical technologies that enhance the quality of patient care, improve patient access to health care, and help enable the sustainability of our publicly funded health care system. It is important to MEDEC members that patients and health care providers have confidence in the safety of our health care system.

2 We all benefit when public trust is at its highest. This is a crucial component to the ability of innovators to bring better, new medical innovations into the system – which ultimately enable better health outcomes and health care system sustainability.

In an effort to save money and reduce medical waste, hospitals in Canada are reusing medical devices that are licensed by Health Canada to be used only once or on a single patient during a single procedure and then be discarded.

As many provincial policies are written to prevent hospitals from reprocessing single-use medical devices in-house, hospitals are shipping used devices to U.S. based companies for reprocessing without any federal regulatory oversight for the devices that are then being shipped back for use in Canadian hospitals.

On July 30, 2014 – after receiving verbal confirmation from Health Canada officials, MEDEC received written confirmation from Heath Canada that the federal government has the legislative authority to regulate reprocessed single-use devices in Canada.

The letter stated that “As discussed in our meeting dated June 16, 2014 the current provisions in the Food and Drugs Act do not preclude the Governor in Council from making regulations with respect to the commercial reprocessing of a single use device or ones that impose conditions on the sale and advertising of a reprocessed single-use device.”

“Changes to legislation are not required: regulation of the commercial reprocessing of single use devices could be accomplished with the existing authorities in the Food and Drugs Act and Medical Devices Regulations.”

MEDEC would like to thank the federal government for acknowledgement of this important first step in moving towards a framework for regulating the reprocessing of single-use devices in Canada.

We have outlined our ongoing concerns around this issue, and suggested solutions, further down in this pre-budget submission. We look forward to working with the federal government in this important patient safety issue.

3 2) Regulatory environment in Canada, in particular: a. Processing timelines for medical device approvals b. Global regulatory harmonization and the Regulatory Cooperation Council (RCC) c. Use of Standards (International and Canadian)

The medical technology industry is highly globalized – 80+% of applications for Medical Devices licenses come to Health Canada from manufacturers/licence holders abroad and come to Canada after being approved in other jurisdictions (mainly the USA and Europe).

MEDEC suggests making efforts with utmost priority to foster Canadian regulatory alignment in the medical technology sector, and to improve processing timelines for medical device regulatory approvals – and, in relation to improving processing timelines, that Health Canada should receive additional resources in 2015 to address these needs.

Foreign market regulatory approval and clearance is more-often-than-not less cumbersome and costly for small-to-medium enterprise (SME) medical technology companies to obtain than regulatory approval from Health Canada. As such, our Canadian healthcare system cannot offer these leading edge medical technologies that were discovered and developed at home, in Canada, to patients in Canada.

A more globally harmonized regulatory framework would provide faster processing timelines for regulatory approval in Canada, and with it provide a higher ROI for the taxpayers’ investment in publicly- funded R&D: increase employment in Canada’s medical technology industry, augment Canada’s competitiveness in the global market, and ensure that Canadians receive the latest in healthcare that can be provided. a. Processing timelines for medical device approvals

While Health Canada reports that it meets its target timelines required under the Cost Recovery Regulations of 2011, there is significant disagreement by industry regarding the definition of these targets (time to first decision) and the actual ‘time to license’.

Only 50% of all Medical Device licence applications submitted to Health Canada comply with Canadian requirements. Applicants need better support from Health Canada to improve this status as it will provide higher efficiencies for Health Canada and the industry. Some tools that Health Canada could use to accomplish this are:

 Provision of regulatory workshops/webinars with national and international reach, and  Development of effective guidance that clarifies expectations and requirements that enables applicants to file submissions that can be approved in a single loop.

Reports provided by Health Canada show that the proportion of submissions with screening deficiencies and additional information requests has also been increasing fairly steadily over time (e.g. from 25% of all submissions in 2003–2004 to 55% of Class III and IV submissions with additional information requests in 2014–2015). Health Canada suggested that the increase could be linked to implementation of Good Review Practices and increased scientific scrutiny of applications – both insufficiently communicated to manufacturers.

Combination products – a small but steadily increasing number of medical devices which combine more than one type of regulated health product (e.g., drug-device combinations, or biologic-device combinations) – present a number of challenges for premarket review. Issues include inconsistency in

4 classification as a medical device resulting in difficulties in completing reviews of combination products in a timely fashion.

There is an urgent need for Health Canada to develop and implement policy and guidance relating to the review and licensing of combination products. Although the US Food and Drug Administration (FDA)’s general approach to combination products is similar to Health Canada’s, unlike Health Canada, the FDA has developed a considerable body of policy and guidance for industry in this area.

b. Global regulatory harmonization and the Regulatory Cooperation Council (RCC)

The Canadian regulatory framework for Medical Devices is generally similar to the framework used in other jurisdictions, particularly to those used in the US, Europe, and Australia related to

 The pre-market o Product evaluation to obtain market authorization o Quality Management System (QMS) verification  The post-market o Vigilance and adverse event reporting.

As founding member if the International Medical Devices Regulators Forum (IMDRF) – formerly Global Harmonization Task Force (GHTF) – Health Canada has participated in projects and made strides to align in order to benefit from synergies and to avoid duplication of effort and additional burden to the regulated industry.

However, regarding pre-market evaluation no effort has been made or is considered other than harmonizing the submission format which is only a small portion of the available co-operation among regulators, the major part being the option to move towards ‘mutual recognition’ of evaluation results.

Concerning regulatory harmonization with Canada’s main trading partner, the US, MEDEC has made a submission to the Regulatory Cooperation Council (RCC) regarding the next steps in the development of the Canada‐United States regulatory initiatives.

MEDEC is a strong supporter of the RCC and we are very interested in further engaging with the RCC in order to work cooperatively to find solutions to regulatory challenges that have unnecessarily added burden to the medical technology industry. This is important to our members given the highly integrated nature of their businesses in North America and beyond that, globally.

The medical technology industry is aware of and understands the challenges that exist regarding the implementation of changes to the regulatory frameworks for Medical Devices in Canada and the US. These frameworks have been operating for more than 15 years with the same objective on both sides of the Canada/US border, to provide for ‘safe and effective medical technologies of the highest possible quality.

MEDEC has identified the following areas (details attached) in the regulation of Medical Devices in Canada and the US where further alignment can be achieved and will reduce the burden for the regulator and the industry without unreasonable impact on safety, effectiveness and quality of the concerned products:  Modification of the Definition of a ‘Recall’  Modification of the Definition of a ‘Manufacturer’

5  Web‐based e‐Labeling, i.e. electronic Instructions for Use and User Manuals  Reuse and Reprocessing of Single‐Use Medical Devices  Investigational Testing  Classification and Regulatory Requirements for Disinfectant Products  Classification and Regulatory Requirements for Hemodialysis Concentrates  Alignment of the definition/regulation of Surgical Instruments/Devices

In these areas, we believe that the RCC can successfully drive further alignment of existing regulations and set the stage for processes which can ensure the alignment of future regulations in Canada and the US.

Attached to this letter is the MEDEC submission to the RCC. We encourage the federal government to provide Health Canada with the resources required to devise policies and procedures to move as much as possible from a national regulatory framework to a global framework that integrates work done by trusted partner jurisdictions. We also encourage the government to do whatever it can to help facilitate this process, and – through the RCC – simplify and align the Canadian regulatory environment with the US. c. Use of Standards (International and Canadian)

Standards play a major role in the regulation of industries, products, and services as they establish consensus based best practices to which subjected parties can declare conformity which is verifiable by 3rd-party certification bodies.

Standards provide the opportunity to create a level playing field within a jurisdiction (as well as internationally) and significantly augment regulatory frameworks and their harmonization. The importance of a standard and its impact on the regulated industries, products, and services is greatest if all relevant stakeholders (e.g. regulators, industry, academia, users, etc.) contribute to the standards development process.

In order to ensure the applicability and recognition of standards in a regulatory framework it is of utmost importance that regulators of all government levels engage. This is of special importance when it comes to the federal regulator, e.g. Health Canada, regarding standards that help align Canada with other jurisdictions as intended by the work of IMDRF and RCC and impacts the execution of oversight and market access.

On international (e.g. ISO Technical Committee) and national level (e.g. CSA Standards Committee and Mirror Committees) standards committees, the participation of experts from the federal government (e.g. Health Canada) is perceived at times to be lacking.

MEDEC recommends making participation of federal government experts on international and Canadian standards committees a priority subject to government funding.

6 3) Changes to SR&ED and its impact on the medical technology industry in Canada

The Scientific Research & Experimental Development (SR&ED) tax credit program is a very important component of offering a competitive advantage to Canadian medical technology companies. As a direct result of the SR&ED program, Canada is an attractive global destination for R&D for medical technology. The result is very positive. Medical technology companies choose to invest in R&D in Canada resulting in the development of life saving medical technologies, further investment into our hospitals and health care system by companies, and growth in jobs and economy.

MEDEC would like the federal government to create a forum where medical technology companies can provide feedback to the federal government on how changes to the SR&ED program are impacting the medical technology industry, and to find solutions to the inconsistent application of the SR&ED guidelines, and how they are being applied to the medical technology industry. We ask that the federal government move forward with the commitments to the medical device industry made by Minister Flaherty – in a letter dated August 9, 2014 – in a timely manner.

MEDEC understands the challenges that have been faced by the federal government as a result of the SR&ED program and that changes were needed to the program in order to combat abuse and misuse of this tax credit. We fully support federal government initiatives to ensure that the SR&ED tax credit provides a high return on investment for Canadians.

The medical technology industry differs greatly from other sectors in Canada that access the SR&ED program. Our R&D creates globally recognized lifesaving technologies that improve quality outcomes for patients and also can enable substantial long-term savings to the health care system.

Recent changes to the administration of SR&ED program have created a great deal of difficulty and uncertainty for the medical technology industry. These changes have result in the following challenges for medical technologies companies:

 The guidelines are being applied inconsistently in the audit process

 Timelines for the audit process have gotten much longer, are highly inconsistent, and the information that is now being asked for is very onerous

 There is a lack of understanding about the medical technology industry specifically, with most auditors coming from technical fields, without life sciences background, applying their background incorrectly around long-held best practices regarding things such as clinical trials, etc.

 Small Canadian companies are relying on the refunds for cash flow and often to pay back investors. As a result, the SR&ED program is now hurting these companies instead of helping them.

 The lack of certainty in the audit process now makes the chance of success on dollar amount refundable entirely unpredictable. This results in a high degree of difficulty to do successful business planning in Canada.

 The definition of “government assistance” is being inconsistently applied.

7  There is inconsistency across each regional auditing office – in both timelines and in the application of the new guidelines

 While there is an appeal process, there is no external mechanism to deal with these problems. Companies are faced with the dilemma of being forced to pose challenges directly to staff that are auditing returns, which creates a discomfort with the possibility of facing perpetual retribution on future returns. There is no mechanism to provide feedback into the process and to highlight these ongoing challenges and inconsistencies.

 And while there is an appeal place in process, appeals can take from 12-48 months, while small companies are often depending on that income in order to continue to stay in business.

Prior to the announced changes to the SR&ED program, MEDEC was in communication with Hon. Jim Flaherty, Minister of Finance at the time. In response to MEDEC’s concerns over possible changes to the program, Minister Flaherty – in a letter to MEDEC addressed August 8, 2012 – committed the federal government to the following:

 Conducting a pilot project to determine the feasibility of implementing a formal preapproval process as well as through enhancements to the existing online self-assessment eligibility

 Working in collaboration with industry representatives to address emerging issues

 Making more frequent and effective use of “tax alerts”

 Improving the Notice of Objection process to allow for a second review of scientific eligibility determinations

We would ask that the federal government move forward with Minister Flaherty’s commitments in a timely manner.

8 4) Reuse of Single Use Devices in Canada

Hospitals in Canada are outsourcing the reprocessing of single-use medical devices to third party companies based in the United States without Health Canada providing any regulatory oversight, raising concerns about patient safety and legitimate questions regarding legal liability.

a. Health Canada should require all third-party reprocessing companies to submit safety, efficacy or quality data for the devices they are selling and/or shipping back for use in Canadian hospitals.

b. The Medical Device Regulations, specific to adverse event reporting and recall requirements, currently do not apply to third-party reprocessors. In the event of a product recall, unlike original equipment manufacturers regulated by Health Canada, third-party reprocessing companies aren’t required to provide a proposed strategy to the Health Minister as to how the recall will be conducted and a proposed action plan to prevent a recurrence of the problem.

Health Canada should regulate third-party reprocessing companies as manufacturers in the context of Canada’s Medical Device Regulations as has been the case in other countries, including the United States. This is an important patient safety issue for Canadians. The current federal government has been a strong champion of patient safety in Canada and we look forward to moving forward together in a swift manner to resolve this long-standing issue.

In the interim, MEDEC is asking the federal government to take the following actions:

1) Notice to Stakeholders – for Health Canada to clarify their position regarding the reuse and reprocessing of single-use devices including detail outlining the responsibilities of the provinces, territories, device manufacturers and third-party reprocessing companies.

2) Adverse Event Reporting – for enhanced vigilance and market surveillance, MEDEC suggests Health Canada revise both the Mandatory Medical Device Reporting Form and the Health Product Complaint Form in order to clearly identify and track events with reprocessed single-use devices, as is the case with the Canadian Medical Devices Sentinel Network Report Form.

3) Clarification of Medical Device Regulations – there are terms within the current Food and Drugs Act and Medical Device Regulations that are important to this issue and require further definition given the different reprocessing business models. MEDEC is asking Health Canada to clarify the definition of a sale, owner, original device, and refurbishing or modifying the device.

Thank you for your consideration of our recommendations. If you have any questions or would like to discuss further, please contact me directly at [email protected], (416) 641-2750.

Sincerely,

Brian Lewis Nicole DeKort President & CEO, Vice-President of Government Affairs, MEDEC MEDEC

9 ATTACHMENTS: - MEDEC Advisory Panel on Innovation in Healthcare - MEDEC CETA Statement - MEDEC CKFTA Statement - MEDEC Letter RCC final - MEDEC RCC Supporting Documentation - Letter to Minister Flaherty re SR&ED Signature - Response from Min Flaherty to MEDEC re SR&ED - Letter to K Stitz July 2014

c.c. Hon. James Moore Ministry of Industry C.D. Howe Building, 235 Queen Street Ottawa, ON K1A 0H5

Hon. Ed Holder Minister of State (Science and Technology, and Federal Economic Development Initiative for Northern Ontario) C.D. Howe Building, 235 Queen Street Ottawa, ON K1A 0H5

Hon. Rona Ambrose Minister of Health Brooke Claxton Building, Tunney's Pasture Ottawa, ON K1A 0K9

Hon. Ed Fast Minister of International Trade Room 105, East Block Ottawa, ON K1A 0A6

The Honourable Kerry-Lynne D. Findlay PC, QC, MP Minister of National Revenue 7th Floor, 555 MacKenzie Avenue Ottawa ON K1A 0L5

Ben Lobb Chair, Standing Committee on Health 914 Justice Building Ottawa, ON K1A 0A6

About MEDEC: The medical device and technology industry in Canada is comprised of multinational enterprises (MNEs), small and medium enterprises (SMEs) and local Canadian companies. It is estimated that there are more than 1,000 medical device and technology companies in Canada; the vast majority are small, local, Canadian-owned companies employing over 35,000 people in more than 1,500 corporate facilities with sales of over $7 billion per annum.

10 SUMMARY OF MEDEC PRE-BUDGET RECOMMENDATIONS:

2) Regulatory environment in Canada, in particular: a. Processing timelines for medical device approvals b. Global regulatory harmonization and the Regulatory Cooperation Council (RCC) c. Use of Standards (International and Canadian)

3) Changes to SR&ED and its impact on the medical technology industry in Canada

4) Reuse of Single Use Devices in Canada