ARCHIVE: TECHNOLOGY AND INNOVATION
Leveraging the Buying Power of Government for Innovation in Health Care
Gabriela Prada, Associate Director, Technology and Innovation Winter 2009
Governments have tremendous purchasing power that they can use to stimulate the creation and adoption of health innovations and to transform health-care services. Canadian governments, however, have not given much attention to developing the strategies and tools they have at their disposal to stimulate health innovations. Canadian procurement processes still play their traditional role—acquiring goods and services at the lowest cost—instead of stimulating development of new or improved products and services, and creating new markets for these innovations. Governments have tremendous purchasing power that they can use to stimulate the creation and adoption of health innovations and to transform health-care services. Procurement Sparks Change In other countries, however, public procurement has played a major role in many revolutionary innovations. Defence procurement in the United States, for example, led to the emergence of commercial aircraft, nuclear energy, computers, the Internet, and the civilian space industry. Some European nations have recognized procurement’s importance in creating innovation-friendly markets. Ireland, Spain, the Netherlands, and the United Kingdom have already started using public procurement as a policy measure to stimulate innovation. Public procurement also accounts for a sizable part of economies in developed countries; it contributes about 15 per cent to the gross domestic product of the members of the Organisation for Economic Co-operation and Development (OECD). Health care takes up a large proportion of this total because, in countries with national health systems, the public sector is a major purchaser of goods and services. In the United Kingdom, for example, the National Health Service accounts for approximately £40 billion or 25 per cent of total public procurement activity. A more strategic use of health-care procurement processes in Canada could stimulate the development of technologies and create markets, while improving health-care productivity. What Governments Can Do Governments can leverage their procurement strategies to boost innovation in three ways: - through direct procurement of innovative goods—governments induce innovation by asking suppliers to provide them with levels of performance or functionality that off-the-shelf solutions cannot;
- through indirect stimulation of private procurement—industries share technologies to meet a government need, leading to the development of innovative products and services for wider markets; and
- through pre-commercial procurement—the public sector partners with firms to purchase goods and services that are in the research and development stage (the United States has successfully employed this approach).
These strategies, when integrated into comprehensive health innovation policy frameworks and plans, have the potential to create demand for health products and services, and to assimilate them into the market. In other words, procurement has a “pull-through” effect. These innovations can raise the quality of health-care services and improve quality of life. To take advantage of these opportunities, Canada needs to simplify the regulatory and legislative frameworks that govern public procurement; link procurement practices to health-care and innovation goals; and improve the procurement skills of public servants. Other OECD countries have already started to leverage procurement in health care; for both health and economic reasons, Canada cannot afford to be left behind.
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