The Promise of Innovation Procurement to Canada's Health Care and Biotechnology Sectors

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By Gabriela Prada

The sustainability of Canada’s health care depends in large part on innovations that can enhance the efficiency, safety, quality, and productivity of health and healthcare services. Biotechnology advances in life sciences offer great promises in this regard. New knowledge and applications in this area are already supporting the production of cheaper and safer drugs and the development of replacement tissues and organs to treat diseases that severely limit the lives of Canadians and impose a high economic burden to our health care system. Moreover, biotechnology is also facilitating a shift towards personalized and preventative medicine, which no doubt will have a great impact on the future burden of disease in Canada.

However, the ability of these innovative treatments and products to improve the health care system and the quality of life of Canadians is directly related to the ability of our health care system to appropriately and timely integrate them into health care services. Therefore, Procurement—what governments and public institutions buy and how they buy it—can be a powerful tool for driving the development and adoption of innovative biotechnology products and processes. Despite its importance, our recent report, Innovation Procurement in Health Care: A Compelling Opportunity for Canada, suggests that concepts of innovation and procurement are still poorly connected in Canada. Recent policy papers have highlighted the need for greater innovation at the federal and provincial levels, but the use of the purchasing power of governments has not been emphasized in documents aiming to guide and coordinate health innovation policy or practices.

What is innovation procurement?

Innovation procurement involves the development of innovations and/or purchasing of existing innovative products or services to improve the performance and functionality of public services and to solve important socio-economic challenges . Leading OECD countries are increasingly using innovation procurement in three key roles in boosting innovation , :
•     Public procurement of R&D (or pre-commercial procurement): used when there is a perceived need without a commercially available solution. In these cases, procurement becomes a R&D service contract that involves exploration, feasibility, prototyping and commercialization.
•     Innovative procurement: used to specify a requirement that cannot be met by an off-the-shelf solution but it can be developed within a reasonable period of time. It stimulates innovative private procurement by catalysing private demand.
•     Procurement of innovation: used when an innovative product already exists but is not widely adopted, driving a need to establish processes to speed up adoption and diffusion.

Through these roles, innovation procurement can improve quality of services and enhance health care system performance while increasing business investments in R&D and economic activity, which drive Canada’s competitiveness.

In the United Kingdom, innovation procurement has resulted in significant transformations to the health care system that are driving major improvements. Implementation of the innovation procurement strategy in this country has led to new accountability frameworks and governance structures and the creation of new government divisions and organizations mandated to support the development and uptake of innovative health technologies. The analysis of the successes to date revealed that spurring innovation is cost-effective and practical and can have a meaningful impact in a relatively short period of time, not only on people’s lives and health care but also on businesses and economic competitiveness. This strongly supports the argument that health care can add to our country’s growth rather than simply eating into our available tax revenue.

Innovation and innovation procurement in Canada’s health care: What do healthcare executives think?
In Canada, however, innovation procurement has yet to be embraced as an effective innovation policy tool. Although there have been some recent discussions to modernize procurement in Canada, innovation and procurement are mostly still disconnected. Part of the reason might be a limited understanding of innovation procurement processes and practices and their potential to advance health and healthcare in Canada. To assess this, a survey was launched among health care executives in Canada.

Canadian health administrators, like their counterparts in many leading countries, recognize that innovation is fundamental to the improvement and sustainability of the health-care system, but Canada has been relatively slow to integrate innovation policies and strategies. The survey results illustrate this disconnect. Respondents were almost unanimous in agreeing that innovation is essential for improving organizational performance in the health sector and for the sustainability of Canada’s health-care system. They were much less likely to say that innovation is a recognized priority within their organizations or to see procurement as a lever for innovation.

Strikingly, although 60 per cent of respondents agreed that innovative products and services were very important or important in achieving their organizations’goals, over half said that procurement approaches in their organization do not support the development and uptake of innovative products and services.


Where do we go from here?

The Canadian division of responsibilities between the federal and provincial/territorial governments makes implementation of the U.K.’s top-down approach to driving change more difficult. However, Canadian efforts over the past decade to revamp primary care demonstrate that it is possible for jurisdictions to work together, and the key lessons from the U.K.’s experience with innovation procurement could be adapted to the Canadian context. The U.K.’s successes suggest the potential for action in Canada on four fronts:
1.     Federal leadership: The expiry of the current federal/provincial/territorial health transfer agreement in 2014 provides an opportunity for the federal government to ensure that the next agreement is structured to encourage innovation. In addition, as seen in the U.K., a central department overseeing progress and being accountable for results would also be fundamental to advancing health innovation in Canada. A National Health Innovation Office could be created for this purpose.

2. Targeted funding: As always, what gets rewarded will get done. New approaches to procurement aimed at driving innovation in health care will require new funding up front to encourage greater risk taking, to shift the focus of procurement to value generation, and to invest in the development of the skills needed to manage a more innovative process. Governments also should consider the use of competitive funding mechanisms that would reward those who lead the way in achieving key health outcomes. In addition, a Health Innovation Fund, which has successfully stimulated competition to address important healthcare challenges in the U.K. (e.g., Design Bugs Out to address hospital-acquired infections) and other countries, could be contemplated.

3. Regional implementation: While there is a need for a coordinated federal and provincial/territorial policy framework for innovation procurement, the U.K. experience suggests the need for a strong regional focus. Governments should give health regions an explicit mandate as health-care innovators and should support the development of regional innovation hubs. By tying regional health funding to the achievement of innovation goals, governments could quickly drive the kind of progress that has been seen in the U.K. over the past decade.

4. Culture and attitudes: Funding arrangements can provide important incentives, but the survey responses in this study suggest the need for a more fundamental shift in the culture of Canadian health care. A more innovative and entrepreneurial culture would drive a higher-quality and more cost-effective health-care system and could make the health-care sector a key factor in building a more competitive Canadian economy.

Changing the culture of individual organizations and the health-care system as a whole will not be easy and will require sustained effort at all levels, but the U.K. experience suggests that significant progress can be made quickly and that the payoff for all Canadians could be substantial.

Conclusion

Innovation through procurement offers a compelling opportunity for Canada to generate better value for public health-care spending. To capture this opportunity, Canadian governments must make stronger efforts to identify health innovation goals; help health-care administrators and professionals understand their crucial role in driving innovation through procurement; shift the emphasis in procurement practices from cost reduction to value creation; and ensure that administrators and professional staff have the tools and knowledge necessary to support this shift.
As resources become scarce and demand for health services continues to increase, health care has no other choice but to focus on products and services that bring increased return on investments. This can be achieved through innovation growth. And while it is difficult to innovate in tough economic times, long-term sustainability and growth should be a priority. A shift in procurement practices from emphasis on cost control to value generation is required to enhance healthcare system sustainability. But this shift can’t be made without changing how procurement processes are viewed, designed, and implemented. The innovation procurement mindset should be encouraged at all levels (organization-wide and system-wide) in order to become more strategic and tightly integrated with other innovation efforts. These efforts would not only boost the flourishing Canadian biotechnology sector, but would improve our health and health care services and the health of Canadians.