How To Structure Your Medical Device Business (Video) – Healthcare

A successful business needs a solid foundation, especially in a highly developed market like medical technology. What is the best way to build your medical device business so you can do business in Canada with confidence?

Cheryl Reicin, Teresa Reguly and Grant Worden share key insights including:

• the different business models for the distribution of medical devices in Canada




• if a company needs to be incorporated in Canada to sell medical equipment




• tax and labor law considerations

Click here for more videos and webinars in this series.

video transcript

Grant Worden (00:07): Hello and welcome to the next installment of the eight-part Torys Medical Devices series: “So you’re coming to Canada, huh? An overview of Canadian legislation affecting the medical device industry. My name is Grant Worden. I am a partner in the Tories’ Litigation Department and the firm’s Product Liability Practice Chair. I’m joined today by Cheryl Reicin and Teresa Reguly who will be speaking on how to structure your medical device business in Canada. Teresa, let me start with you a company that wants to sell medical devices in Canada needs to consider as a first step?

Teresa Regly (00:40): The first thing I would think about is what is the classification of your medical device? So it could be a Class I device, a low risk device, or it could be a higher risk Class II, III, IV. The reason I say this is because you need a different type of license from Health Canada depending on the class of device you sell. The other thing you want to think about is where are you selling this device? So do I sell it to hospitals for use within the hospital? Am I selling it to physicians for use in a clinical setting, or am I selling it retail? And the patient consumer will buy it and use it at home. So depending on the answers to these questions, from a Health Canada perspective, you have different licensing considerations to work through.

Grant Worden (01:27): And does a company wanting to sell medical devices in Canada need to have a physical presence in Canada?

Teresa Regly (01:33): No, not necessarily. Again, it depends on your overall marketing strategy. So when I’m the manufacturer of a class II, III or IV medical device, and when I say manufacturer, I mean my name is on the label and, you know, I’m the one putting the product on the market. If that person is me, I can sell directly to specific customers in Canada, where those specific customers are retail stores or hospitals. If you have a lower class device, which is again a Class I device, you can sell directly to certain customers, but there is a different licensing system and associated obligations. So that’s something you’ll want to work through. If you actually want to work with a distributor, meaning you don’t want to be responsible for the actual sales and distribution in Canada, then you may want to incorporate a company in Canada to do that, as Cheryl will talk about shortly. Or you can find a third party that is already licensed by Health Canada and work through that third party.

Grant Worden (02:35): Thanks Teresa. Cheryl, based on what we heard from Teresa, under what circumstances would a company want to establish a physical presence in Canada?

Cheryl Reichin (02:42): If you have an office here and if you have employees, you either want to set up a company or have a branch. In general, we consider a company, a corporation, to be more appropriate in most cases. There are also certain tax benefits to incorporating a business here, particularly if your business conducts research and development in Canada and depending on how many employees you have. There are also significant tax advantages in owning your intellectual property. I’m talking about worldwide IP. In Canada, held by a Canadian subsidiary as opposed to a US company. And these advantages are becoming more and more evident. Of course, the circumstances of each company are different and must be assessed individually. There is no one size fits all, but in general, if properly structured, a company can reap significant benefits and incentives by locating a corporation in Canada.

Grant Worden (03:50): Cheryl, what else should a company incorporating in Canada consider?

Cheryl Reichin (03:54): The fact is that corporations in Canada, particularly those incorporated in Ontario and certain other provinces, are very similar, and becoming even more similar, to Delaware corporations in terms of corporate governance. For example, corporations in Ontario, BC or Nova Scotia are no longer required to have Canadian directors. This is intentional as Canada wants more investment from US investors and is trying to make investors feel more comfortable.

Grant Worden (04:28): Any other considerations?

Cheryl Reichin (04:30): Yes. Certain provinces have special tax rates for foreign workers and for Canadian expats returning to Canada, such as B. in the province of Quebec. French language laws in the province of Québec that must be considered and there have been recent changes to these laws. Businesses will be pleased to know that Canadian healthcare is socialized as the burden of healthcare costs on businesses is significantly lower than in the US. But employees also have rights that are superior to those in the US, such as B. Enhanced termination rights and extended maternity and paternity leave.

Grant Worden (05:14): Teresa, let’s talk about advertising. Is it legal to directly publicly advertise medical devices in Canada?

Teresa Regly (05:21): Yes, that’s a really good question, Grant. Some of our viewers may know that prescription drug advertising in Canada is quite restrictive, these rules do not apply to medical devices. So you have much more flexibility if you want to publicly advertise medical devices directly. There are certain restrictions that prevent you from promoting medical devices or other products as a cure or treatment for certain diseases. So think cancer, heart disease, something like the big ones. But aside from that, there’s a lot of flexibility in how you market your product to the public. And of course, you can market to healthcare professionals in Canada just as you can in other jurisdictions. So all of this should go into your marketing plan and decide how best to run your business. If you take the plunge and come to Canada.

Grant Worden (06:07): Thank you Teresa and thank you Cheryl. And thank you for being with us today. We hope you’ll join us for our next installment of our eight-part medical device series: “So you’re coming to Canada, aren’t you? An overview of Canadian legislation affecting the medical device industry.”

The content of this article is intended to provide a general guide to the topic. In relation to your specific circumstances, you should seek advice from a specialist.