What to know about the reimbursement and procurement of medical devices in Canada

Grant Worden (00:07): Hello and welcome to the next installment in Torys’ eight-part medical device series, “So you're coming to Canada, eh? A overview of Canada's laws affecting the medical device industry”. My name is Grant Worden. I'm a Partner in the Litigation Department and lead the Product Liability Practice at Torys. I'm joined today by Teresa Reguly, Tom Yeo and Adam Banack, who'll be speaking about the procurement and reimbursement of medical devices in Canada.

Grant Worden (00:32): Teresa, let's start with you. How are medical devices reimbursed in Canada? Who pays?

Teresa Reguly (00:37): Yeah, well it's a great question, Grant, and it depends on what kind of medical device we're speaking about and what's the setting it's used in. So unlike prescription drugs, where there's an overriding framework in Canada for list prices, you don't have that for medical devices. So what that means is a manufacturer can decide what they want to pay, set a list price, and go ahead and start selling. If it's a medical device that's used in the hospital setting, effectively what happens is it's paid for by the provincial and territorial governments through their health care budgets. And of course, to manage those budgets, they certainly want to look for creative ways to keep costs down. And we'll hear from Adam and Tom shortly about how most devices that are used in hospitals are procured through competitive procurement processes. If it's a medical device that’s used in a clinic setting, so where a health care professional or a group of professionals own the clinic, those are usually direct customers of the manufacturer, and the manufacturer will often offer volume-based discounts or creative offers to try to get them to select their product over another. And again, theirs are actually paid for through the clinic’s operating budget. There's some devices that are sold to consumers, you know, to patients directly. If patients have a chronic illness or a disability. So think for example, wheelchairs and other mobility aids, or home oxygen supplies. Most of the provincial governments have actually created programs where patients can access those devices either for completely free or at least for a lower cost. And part of the cost is then reimbursed by the provincial governments to medical device manufacturers that sell to those patients. So the provinces will have a framework where a vendor can register with the province. Eligible patients can also register, and then you can receive your products from your vendor of choice that is approved through the province. Other medical devices that are for patient use will be purchased either from their health care provider in a retail setting, and they're effectively paid out of pocket by the patient.

Grant Worden (02:57): Tom, what does a typical procurement process look like for a Canadian hospital?

Thomas Yeo (03:01): Well, I think the first thing to understand is that more and more procurement is being done on a centralized basis. So take Ontario, for example. There's a number of large group purchasing or shared service organizations that represent groups of hospitals and run the procurements on behalf of those hospitals, not just for medical devices, but for all sorts of goods and services. And the provincial government in Ontario has recently created a new Crown Agency, Supply Ontario. And part of its mandate is to ensure more coordination and collaboration across the broader public sector in procurement, including hospitals. And it's similar in Alberta. You've got Alberta Health Services there, which does procurement on behalf of the hospital system in Alberta. Québec has moved to a more centralized procurement for the hospital sector as well. In terms of the contracts themselves, I would say in our experience, the contracts tend to be fairly hospital-friendly. The competition really comes down in most cases to price and value-adds, and value-adds can take a few forms, in particular, training for hospital and staff. And this is all assuming that the medical device meets the technical specifications, because to be eligible to be awarded the contract, you've got to make sure that you meet those minimum mandatory technical requirements. And so it's important when an RFP first comes out that you review those technical requirements and make sure you can satisfy them. And if you can't, use the question and answer period and hopefully try to get those technical requirements changed. In certain circumstances, if you find that the technical specifications really aren't designed specifically with the hospitals need in mind, or perhaps they're biased in a way to favour a particular product, then there are avenues to challenge that, but the timeframes are quite short to do so.

Grant Worden (05:09): Adam, do most medical device procurements take place on a competitive basis?

Adam Banack (05:14): So when it comes to hospitals and hospital buying group as a base proposition in Canada, they are required to run a competitive procurement. This obligation is grounded in both the domestic and international trade treaties, and also provincial directives. Taking as an example, the Broader Public Sector Procurement Directive in Ontario. That said, sole source contracting, which is also referred to as limited tendering, is permitted in certain limited circumstances. These circumstances include low dollar value procurement, where there's a pressing emergency in which the delay would be injurious to the public interest, where there's only one supplier capable of providing the goods or services, and where the nature of the work is such that it would not be in the public interest to solicit bids. This is an important tool for authorities to effectively run its organization without being bound by the competitive procurement rules. However, it is an exception that can be used too liberally, which is to the detriment of both members of industry who would have otherwise been willing competitors in that given procurement, and also to the public as the procuring authorities’ main driver should be getting best value for taxpayer money in the sole source context. When an authority wishes to sole source a contract which it would otherwise been required to compete, the authority bears the onus of justifying those contract decisions by issuing what's called an advanced contract notice. That Advance Contract Award Notice describes the goods and services, and also explains the conditions that justify the use of the limited tendering or sole source contract. Given the risks, that challenge could result in a court ordering an authority to re-evaluate the results of a procurement, or in extreme cases, run a new procurement process entirely. Authorities would be wise to carefully assess whether proceeding with the sole source contract is defensible in the circumstances. For members of industry, on the other hand, we always recommend that they track the relevant Advance Contract Award Notices issued with respect to sole source procurement contracts, and where applicable and as a first step, engage the applicable authority in dialog if they don't agree with the authority's sole source decision.

Grant Worden (07:37):

Thanks Adam, Teresa, and Tom. And thanks to you for joining us today. We hope you'll join us for our next installment in the eight-part medical device series, “So you’re coming to Canada, eh? A overview of Canada’s laws affecting the medical device industry”.