CAN Health Network to offer integrated market for high-growth SMEs

The Government of Canada has announced an initial investment of $7 million to create the CAN Health Network, a pilot project that seeks to help high-growth health companies scale faster in the domestic market by accessing consolidated procurement opportunities. An additional $13 million will be released to further support the network’s activities if the pilot succeeds.

The project originated from Minister Mary Ng’s office after she took over as head of Small Business and Export Promotion last year and hired NEXT Canada CEO Sheldon Levy to look at the question of creating more domestic scaleups. From the beginning, Levy’s engagement was intended to be action-oriented, such as by creating pilot projects, and one of the first opportunities he identified was the CAN Health Network.

The concept of the network is to enable the creation of a market, rather than directly funding companies. The idea originated with Dr. Dante Morra, the chief of staff at at Trillium Health Partners in Ontario, and now one of the leads for the network, along with Dr. Deepak Kaura, chief medical officer at quantum computing firm 1QBit in Vancouver. Soon after taking his special advisory role to Minister Ng, Levy discovered that Morra had already assembled a national network of people who supported the idea of building an integrated market for health technology and life sciences companies. The concept, Levy realized, was ripe for implementation and a perfect fit for Minister Ng's focus on quick action.

A massive opportunity for health innovators

Canada’s healthcare market represents a huge opportunity for startups and SMEs. In 2018, health care spending in Canada reached $253 billion, or 11% of GDP. But despite the enormous potential for scaling, innovative health companies in Canada face significant barriers to accessing procurement by large, risk-averse health authorities. Young firms with strong products may struggle to negotiate the “bureaucratic, overhead-heavy systems” at health authorities, explained Dr. Deepak Kaura, in a phone call with RE$EARCH MONEY.

It can take a year or more to access just one hospital, and adding each new customer can be just as daunting and time-consuming, making it hard or impossible to scale quickly in Canada. Consequently, domestic SMEs often turn to other markets with larger populations, such as in the US or Asia, where the return on investment is much bigger. The CAN Health Network will enable those SMEs to achieve the same degree of rapid scale here in Canada, by easily populating approved products across the network.

Kaura sees benefits accruing to network participants, because rather than relying on large foreign firms like GE or IBM, they can procure less-costly solutions from ”Canadian born, Canadian bred, Canadian tested entities [that are] solving Canadian needs.” Kaura also believes that domestic SMEs who’ve scaled up at home will be in a stronger position to take advantage of international markets, for whom the Canadian healthcare brand is “super strong."

”If we can create companies that have the capabilities to be in many health institutions around the country, that immediately creates a reputation and a Rolodex of customers that make global expansion of these companies a no-brainer,” says Kaura. According to Deloitte’s 2019 Global Health Care Outlook, global health care spending is projected to increase at an annual rate of 5.4 percent in 2017–2022, from US$7.724 trillion to $10.059 trillion.

Toward a national network

The first phase of the CAN Health Network pilot project will focus on building the infrastructure with the participating health organizations, whose investments in the network will be matched dollar-for-dollar by the regional development agencies operating the fund. The initial $7 million investment will be divided equally between the CAN Health Network in western Canada, by way of Western Economic Diversification Canada, and the CAN Health Network in southern Ontario, by way of FedDev Ontario. The western network will be led by Saskatchewan Health Authority and Dr. Kaura, while the Ontario network will be led by Trillium Health Partners and Dr. Morra. The project's creators hope that it will eventually become a national network incorporating all regions.

For the second phase of implementation, the CAN Health Network is developing close ties with Canadian incubators and accelerators, which will help identify fast-growing health firms that might benefit from the network, and then provide support when the companies start scaling more quickly via the network.

Proponents of the CAN Health Network also suggest that the integrated network concept could be applied to other markets, such as security and policing, or agriculture and agri-tech. Kaura sees the model as a potential solution for government procurement more broadly: "There should be no reason why the governments in this country can't come together and make an integrated market like this."

R$