An action plan for innovation: Coalition for action on innovation releases its action plan for prosperity

---

Compiled By: Shawn Lawrence

There has been a lot of discussion lately about Canada‘s track record for innovation and productivity. Most have heard by now about the Conference Board of Canada‘s latest report which gave Canada a failing grade on innovation, placing us 14th among 17 peer countries in the OECD.

Likewise, it has been reported by many other outlets that productivity in Canada is down, especially in the life sciences. In fact, over the last decade, Canada’s annual productivity pace has slowed to crawl of just 0.7 percent or half the pace we set in the previous two decades and dramatically short of the nearly 10 per cent growth rate in productivity racked up by the United States over the same time period.

To address this shortfall, a national roundtable featuring a diverse group of innovation leaders in the private sector and academia was brought together in October 2009. Discussions continued and before long, the Coalition for Action on Innovation in Canada (CAIC), a think tank co-chaired by GlaxoSmithKline Inc. (GSK) CEO Paul Lucas and former Liberal Deputy Prime Minister John Manley, which included more than 50 leaders from business, academia and supporting organizations was formed.

Through further discussion, this group identified seven key themes to take action on innovation including improving tax policy; nurturing start-ups; strengthening business-academic links; building the innovation talent pool; reshaping framework policies; developing innovation clusters; and ensuring effective ongoing advocacy for innovation. In October of this year, the CAIC took this plan and released a nine-page report, 10-Point Action Plan.

According to Paul Lucas, this action plan is focused on correcting the discrepancy between the more than $7 billion the Government of Canada invests annually to encourage business R&D and the amount business spends less per capita on research and development, innovation and commercialization than most other industrialized countries. For Lucas and other members of the coalition, it’s abundantly clear that Canada is not globally competitive on a number of fronts in relation to innovation, which explains the urgency to take action.

“This plan is more than just a blue-print, the steps are laid out with a plan of action in mind,” states Lucas. “Our industry has several R&D issues that go beyond just a simple capital shortage in Canada. For example, we’ve also seen significant losses of clinical research and clinical trials to other jurisdictions. With the help of academia and government, we have to drive a partnership here that’s going to help us maintain and build on clinical trial investment and on the broader research investment in Canada,” states Lucas.

The coalition has already rolled out its recommendations to different industry sectors as well as academia asking stakeholders through their own strategic and advocacy plans- to take the innovation discussion to their own board rooms to discuss what they’re going to do to move the recommendations forward.

Beyond these priorities, the report also offers a series of measures that will require government to act but not in the traditional sense of government spending.

Rather the report calls for tax relief for investors aimed at increasing the flow of capital to innovative companies; tax relief for individuals aimed at increasing the supply of talent; and increased financial support for research institutions targeted at greater commercialization of discoveries.

Essentially, the report recognizes that government can’t just close the innovation gap simply by throwing more money at the problem.

“I know that when a business leader talks about the need for innovation, the next thing you often hear is a call for government to lead the charge, but government is demonstrating its leadership.

You only have to look Canada’s first place position in the G-7 for supporting science and research at our universities and colleges. The fact is, our governments have shown a clear commitment to foster innovation,” Lucas explains.

But again, while Lucas stresses that he doesn’t expect government to contribute more cash into the research pot, the need from government is to ensure the right policy framework is in place, impediments removed and incentives aligned.

“Most of our recommendations for government action focuses on removing obstacles to innovation, or on realigning existing resources to get a bigger bang for the same buck,” explains Lucas. “This means creating a policy framework that is supportive to industry. Take intellectual property for example, you just have to look at a simple chart to realize that Canada lags behind in terms of its intellectual property protection framework for pharmaceuticals compared to other countries. If we’re going to be major players in the innovation game, we need to create a friendlier operating environment.”

Also of concern says Lucas is the fact that Canada’s reputation as a world leader in clinical trials throughout the last two decades has suffered with a continued year over year decline in these types of investments. Another concern is Canada places 20th out of 25 countries in OECD rankings, in terms of the percentage of pharmaceutical products that receive reimbursement from provincial government drug programs.

“I guess it comes down to two things here, the pharmaceutical policy framework is not supportive enough of innovation in the sector and it does not support us competing on the global stage. The health care system also looks at pharmaceuticals as a cost, and not as innovation tools to drive better patient outcomes and reduce costs in other parts of the health care system. It is important to recognize that brand name pharmaceuticals represent only 7 per cent of the total health care bill. So despite the fact that pharma is a major investor in R&D and an incubator of high-value, high-paying jobs, Canada‘s research-based pharmaceutical companies are not seen in that light by our biggest customers, the health care systems of Canada.”

Lucas goes further explaining that on the one hand, Canadian governments and citizens are investing in health sciences research capacity, but on the other hand provincial procurement policies, through the drug programs, are discouraging the commercialization of new medicines and capturing the potential fruits of this research.

“We’re not buying or nurturing the fruits of pharmaceutical innovation in Canada the way other countries are. We rank 23rd out of 29 countries in terms of country’s actually buying our products when we bring them to market. We rank 26th out of 29 countries for first in class products. Again, if you’re a major pharmaceutical company working on a global scale, or a start-up trying to operate in Canada, you can do all this good work, you can innovate, you create products, but the reality is that Canada’s probably not going to buy your product. This is a fundamental element of supporting innovation is that local jurisdictions, countries and provinces need to buy innovation because of their massive procurement capabilities, to support innovation in general. And so there is a dichotomy. The major consumer in Canada for pharmaceuticals is the government drug plan, but if they don’t buy your product, you’re not going to be successful from a financial point of view as a business. Put simply, if the government of Ontario told Ford they weren’t allowed to sell their cars in Ontario, do you think Ford would invest in Ontario? It’s the same in the life sciences/pharmaceutical business, and that’s the dilemma, that if you’re a pharma company, why would you actually invest here if you know that the jurisdiction probably isn’t going to buy your product.”

Another area that Lucas feels needs improvement with the help of government policy makers is Intellectual Property and Patent protection.

“If I’m a small start-up company or if I’m a major pharma company on the global stage, when I bring something to market, the patent protection that I get here in Canada is not equivalent to what I would get in other western nations. So I ask where is the incentive for me to actually innovate in Canada, as a start-up why don’t I move to some other jurisdiction that provides me with better protection for my intellectual property.”

While a major part of the Coalition’s recommendations are about creating a more favourable environment for investing and innovating, the responsibility of the business community and academia is to drive these recommendations and to actually implement them.

“That’s who they’re designed primarily for. Obviously public policy does matter in all that, but industry needs to lead this because it’s industry that’s not innovating the way it needs to in Canada. If you step back for a minute and look at all the money that’s being invested by government’s in research in our universities both federal and provincial, they’re investing billions of dollars. The intent of that investment is to create innovation, ideally to create start-up companies that will then be successful in creating jobs and wealth. What we’re asking is that the private sector and the people who are in this field to get together and to figure out how we are going to fix this problem. In the name of innovation in Canada, they need to find a way to help these companies emerge,” he said.

In addition to his role as CEO of GSK and co-chair of the Coalition for Action on Innovation, Lucas is also the chair of RX&D, an organization that represents Canada‘s research-based pharmaceutical companies. Not surprisingly as one of the key R&D sectors in Canada and the second biggest industry investor in R&D, Lucas in his position with both GSK and RX&D recognizes the role pharma can play in this process and that it is in their best interest to do so.

“I think the biggest challenge will be overcoming the lack of focus on business’s part to address the issues. This is bigger than just the life sciences. If the industries and companies in Canada don’t embrace the need to innovate, than they won’t innovate which is a serious potential problem because if we don’t innovate, we will become poorer both as a country and as individuals. We won’t pay as much tax, and therefore we won’t be able to fund our healthcare and education systems. This is bigger than most people think.”

The timing of the report’s release could not be any better. Frustrated that Canada doesn’t seem to be getting enough results from the roughly $7-billion it spends every year on R&D, directly and through tax breaks, the Government of Canada launched its own think tank panel to conduct a comprehensive review of all existing federal support for business R&D and to see how this support could be enhanced to make sure federal investments are effective and delivering maximum results for Canadians. It is the Coalition’s hope that this expert panel will take their suggestions to heart and aid in the implementation of the Action Plan for Prosperity.

For more information on the Coalition for Action on Innovation and the Action Plan for Prosperity please visit www.actiononinnovation.ca