Innovative new proposal to increase return on investment from health care spending

Friesen, Morin and Filmon lead the charge

A group of prominent Canadian health experts from all sectors is backing an industry-driven proposal for improving the health care system and increasing its social and economic outputs without a request for direct public funding. The Canadian Health Industries Partnership (CHIP) is the latest manifestation of efforts to leverage Canada’s $130 billion annual expenditures on health care into more private sector R&D investment, increased commercialization of Canadian knowledge and sustainability of the current health care system.

A high-level meeting to discuss CHIP was held in Gatineau PQ in late April, generating a game plan that, if implemented, would foster increased partnership between the relevant stakeholders, provide strategic advice and give industry a voice that will be heard at all levels of government. A steering committee has been established with recently retired senator Dr Yves Morin, Genome Canada chair Dr Henry Friesen and former Manitoba premier Gary Filmon. Their immediate task is to write a charter along with terms of reference and a mission statement, as well as determining the structure of an inaugural board of directors and its composition by the end of the year.

The first draft of the charter has already been written and meetings are slated through the fall. Some provinces have already come on board in support — particularly those from western Canada — and the Canadian Institutes of Health Research (CIHR) is a strong backer.

“CHIP has come along at the right time. There’s too much finger pointing at government. The solution is in industry’s hands,” says Morin. “We have good academic research and in the past there’s been a Canadian advantage on costs, but not so much now. Every drug that’s developed outside Canada, we lose $1 billion in research investment. That’s why I got involved.”

PICKS UP FROM HEALTH INNOVATION CANADA PROPOSAL

The CHIP proposal is a continuation of previous efforts led by Henry Friesen to convince government and others that there is huge untapped potential for wealth creation in health care spending. Friesen began to champion the issue in 2002, helping to establish the Canada West Health Innovation Council and spearheading the design of a proposal that became known as Health Innovation Canada (HIC) (R$, January 28/04). HIC gained considerable support from industry and various governments and was even mentioned in a key policy speech by Paul Martin to the Montreal Board of Trade (R$, October 3/03). But last year it slipped off the political radar and appears to have been replaced by CHIP.

“CHIP has its origins in what Henry Friesen has been saying for so many years. Health care is an economic opportunity and not only a cost. But Canada has a huge trade deficit in this area,” says Morin. “And there’s been a decrease in research funding by the pharmaceutical industry. In the US, UK and many European countries, spending has been going up so Canada is somewhat unique in this respect.”

A discussion document presented at the Gatineau meeting states that the concept for CHIP drew inspiration at least in part from the Canadian Automotive Partnership Council (CAPC) which brought together governments and the automotive industry to seek ways in which to increase R&D investment and production. The big difference, however, is that CHIP is not seeking government funding.

“CHIP is not directed toward government investment in Canada’s research-based health industries. Rather, CHIP will provide industry, government and other stakeholders with a forum to discuss ways to improve the existing policy and regulatory environment to foster increased private sector investment and performance in Canadian health innovation R&D and the successful commercialization of made-in-Canada health ingenuity in a fiercely competitive global economy,” states the paper.

Some of the challenges CHIP is designed to address include:

* intellectual property protection:

* regulatory approvals for new products;

* provincial cost controls of health innovation capital taxation;

* harmonization of Canada’s tax incentives with other global jurisdictions;

* increased immigration to ensure an adequate supply of human resources;

* new tax incentives to stimulate seed money; and,

* venture capital for start-ups and incentives to increase government-industry collaboration.

Morin says he recently addressed the Council for Health Research in Canada requesting that they support the whole spectrum of research, rather than just basic research. He says an example of the kinds of difficulties industry currently faces can be found in the operation of academic health care delivery centres. The time and complexity of negotiating research contracts are increasing at a time when other countries are streamlining their procedures.

Another area is ethics, with each province having its own regulatory guidelines. Unless industry comes together with other stakeholders to develop viable solutions to current roadblocks and convey those to the highest levels of government, Morin says he fears the situation will continue to deteriorate.

Morin notes CHIP will likely operate in a roundtable format and explicitly address industrial innovation in Canada. This must be done without appearing to advocate for industry, he adds.

INFLUX OF US VC A CONCERN

Perhaps the most disturbing recent development threatening health care innovation in Canada is the significant increase in US venture capital flowing into Canada, effectively supplanting Canadian VC. Morin contends that when US VC invests in start-ups, they often insist that R&D occur offshore. The combination of negative factors means Canada is losing its cost advantage for conducting health R&D.

“There’s nobody, no voice, in government for these issues. Industry Canada should take a stand and single out this area,” he says. “In the UK, (prime minister) Tony Blair got personally involved in this issue when it became evident that the UK was losing industrial research money to the US. Now they have five times the health research spending per capita than Canada does. Sweden has done the same thing with the same results. We need leadership from the top.”

Morin says the decision not to ask for federal funding was both deliberate and carefully considered.

“I see this as a national issue and a national program, in the same way that we fought to get CIHR off the ground. It’s of the same importance. It will be a partnership of equals. Nobody is taking the lead here.”

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