Ontario’s Biosicence Industry

By Gail Garland

OBIO RECONCILES ONTARIO BIOSCIENCE ECONOMIC STRATEGY (OBEST)

WITH THE COMMISSION ON THE REFORM OF ONTARIO’S PUBLIC SERVICES CHAIRED BY DON DRUMMOND 2012

Over the last several years numerous publications have emerged from government, academia and independent think tanks examining the state of Canada’s innovation sector and its relationship to prosperity.

Overall the general consensus has been that research and invention are strengths while commercialization, domestic economic benefit and productivity gains have lagged. This article reviews the recent recommendations in the report by the Drummond Commission, in light of the Ontario economy and the opportunity to address spending and extract greater value from the health sciences innovation sector.

The context within which the recommendations of the Drummond Report were presented was threefold: 1. The economic challenges faced by Ontario currently and moving forward; 2. The goal of achieving a balanced sustainable fiscal position and 3. The need for greater efficiencies within government.

In 2010-2011, Ontario had the largest deficit among the provinces, $14 billion or 2.3 per cent of gross domestic product (GDP). The 2011 Ontario budget targeted 2017-18 for a balanced budget, a timeframe that lags behind other provinces. At the same time as there is a need to restrain debt and balance the books, according to Drummond, Ontario’s economic growth is lagging the rest of Canada and reportedly has been for about a decade.

Healthcare has grown by 6.3 per cent per year and now represents $44.8 billion or 40.3 per cent of government spending. Unchecked, Ontario’s health care budget potential to create jobs in the knowledge economy, address health care costs, generate exports and wealth and improve outcomes and health of the population.

The Drummond Report lists a number of do’s and don’ts. The report suggests the do’s apply across the entire public sector but they also provide a framework to examine and build the health science sector in Ontario using private sector leadership and resources. The key recommendations made by the Commission and contextualized for Ontario’s health sciences sector include:

will rise to $62.5 billion by 2017–18, an average annual increase of 4.9 per cent. The Drummond Report recommends holding the rate of growth to 2.5 per cent by reforming programs as opposed to blanket cost cutting. The commission argues that Ontarians cannot rely on economic growth and productivity to pay for the increasing costs of health care. Instead, the health care system needs to be reformed. In fact, this creates an opportunity to develop the output, commercialize and put Ontario’s academic health research to work.

The data and forecasted trends for the economy overall and health spending in particular, support the need for a new economic vision for Ontario. In 2011,the Mowat Centre consulted with business leaders and made five recommendations covering: the need for innovation and risk taking; building a 21st century workforce; restoring fiscal balance by improving government function; pursuing global trade; identifying, championing, and strategically investing in our competitive advantages in the global economy. They identified the need for better results for the billions of invested dollars in the broader public sector, including hospitals and universities and suggested that public policy and public investment be re-oriented to promote strategic sectors which included healthcare, health service exports and biotechnology.

Ontario’s human health sector (HHS) has taken action to develop a strong biotechnology cluster in Ontario. In 2011, OBIO organized the Ontario Biosciences Strategy Team (OBEST) of volunteers in the development of a strategic plan, implementation teams and action plans. Given the context behind the Drummond Report, it is fully aligned with the objectives and strategic initiatives of OBEST. Using the industry to address health care priorities coupled with access to the right kind of capital and an innovation procurement policy that ensures adoption, has the Drummond: The government should issue a road map setting out its vision. Such a document would both inform the public about the changes that lie ahead and also serve as a script for all bureaucrats;

The 2011 OBIO survey revealed that industry leaders find the Government’s vision for the sector to be unclear (rated 2.4/7 on a scale measuring strength of clarity) and repeated the message that there is a need for policy change to create the right environment for companies to start up and grow in Ontario.

OBEST convened stakeholders from across the health science ecosystem and geographical regions; and prepared a vision and plan for the province to drive toward a sustainable, successful provincial health-biosciences sector. Nine strategies were selected and are a roadmap for building the industry.

Drummond: Higher priority should be given to programs and activities that invest in the future rather than serve the status quo;

A survey released by the Globe and Mail in January 2012 found that although the economic downturn worldwide has had a negative impact on the private sector’s expectations for innovation, Canadian

executives and the public overall are more optimistic about innovation and support for it within Canada. Energy and healthcare were the two sectors where Canadian executives believed more innovation would positively impact job creation and the economic outlook for companies; however these senior managers said they need more creative people, more employees with technical expertise, and more support from public authorities to increase innovation within their own organizations.

Moving New Products to Market: The OBEST team is working on innovation procurement to address the need for new product adoption including a pathway to get Ontario’s healthcare innovations to market and into regular use. Using adoption to backstop development has been proven to attract investment and enable value creation. Procurement thus becomes an integral part of building a successful sustainable industry and competitive cluster.

Flushing out more risk capital: Access to capital has been the number one issue for health science companies and indeed for Canadian venture capital firms that have health science funds for a long time. OBIO has had an access to capital Committee for three years and under the auspices of OBEST, is currently implementing strategies to attract novel and patient capital streams to health innovation companies in the province. There is a global trend for new venture funds supported or controlled by multinational pharmaceutical companies who have strategic reasons for investing, the expertise, and a strong basis for being in the market. The 2011 OBIO survey revealed that none of the responding companies had received funds from this new and potentially powerful source. The province needs policies and a plan to attract these funds.

Simplifying support programs: The annual Ontario health sciences leader consultation survey has pinpointed the need to improve and simplify support programs. An analysis by PWC of changes to the Federal SR&ED program indicates that although nationally the recent changes to SR&ED are expected to have a benign impact on small and medium CCPCs, Ontario’s low level of provincial tax credits will lead to the greatest negative impact among the provinces from the SR&ED changes.

Drummond: Governments must minimize the cost of operations, but they also need rules to ensure that taxpayers’ money is not abused. The pendulum has now swung too far towards excessive rules, with too many layers of watchers at the expense of people who actually get things done. The Ontario government must find a new middle ground;

As of 2011-2012 there are approximately 30 organizations, ministries, centres of excellence, regional innovation centers, institutes and funding agencies devoted to components of the health sciences sector. At the same time there are approximately 120 Ontario headquartered health technology and bioscience companies and 17 Ontario headquartered foreign owned multinationals. It seems that there are more people working on the domestic health science CONTINUED ON PAGE 36