Australia needs foreign investment because it is a key driver of economic growth and prosperity.
What is the issue:
Australia competes against other countries for investment – this is relevant for advanced manufacturing as well as research and development (particularly clinical trials). Medicines Australia companies contributed approximately $9 billion to the Australian economy in 2016-17, which supported the employment of 23,000 Australians1. The medicines industry continues to be a significant investor in Australian research and development (R&D) including almost 2,000 clinical trials initiated in 2021 (an average growth of 5% p.a. over the last 5 years)2 generating $1.4 billion to the local economy.
To support this ongoing contribution to the Australian community and economy, Government needs to maintain not just a well-funded PBS, but also continue to support industry-focused policy settings and incentives, while at the same time removing obstacles to investment.
Why is it important:
Australia is at a potential competitive advantage for investment post the COVID-19 pandemic. Australia’s rapid recovery compares well internationally. GDP is projected to be 6.6% larger by the end of 2022 than in pre-pandemic 2019. This increase is higher than the average for the OECD (4.2%). Australian Government’s net debt to GDP ratio in 2022 is less than half that of the OECD average. And Australia ranks within the top 10 countries for contributing to life sciences research3. With these conditions, better than ever before, Australia is well placed to now focus on how investment can be increased through coordinated strategic planning, incentives for advanced manufacturing and R&D, and removing obstacles which limit investment opportunities.
- Create a stable policy environment that supports business opportunities, while avoiding changes that could reduce Australia’s competitiveness in attracting investment for priority areas such as medical research.
- Grow export opportunities in both established and emerging markets, including through free trade agreements (which include a pharmaceutical chapter) and other trade liberalising mechanisms.
- Develop and implement a coordinated, long-term plan for the medical technologies and medicine sectors to attract greater investment to Australia. This could be initiated by establishing a high-level, Government-Industry, life sciences roundtable forum that will drive increased investment in innovation, create jobs and ensure better health outcomes for Australians (as agreed by the Labor Party during the 2022 Federal Election).
- Removing or reducing investment obstacles and seizing opportunities for improvement:
- Reform for Health Technology Assessment (HTA) processes used for determining reimbursement of medicines (which undervalue medicines). Refer to Medicines Australia’s HTA reform fact sheet.
- Address the issue around the lack of early notification to the innovator company when generic/biosimilar medicines apply for TGA registration. Refer to Medicines Australia’s briefing on Intellectual Property (IP)
- A lowered discount rate to recognise the value of preventative treatments and cures, and speed up access to them. Refer to Medicines Australia’s discount rate fact sheet.
- Proposed 17% concessional tax rate under the Patent Box Regime announced in 2021 (well above global equivalent jurisdictions). Refer to Medicines Australia’s briefing on Intellectual Property (IP)
- Market size damages awarded to Government if an innovator company wrongfully (as determined by the courts) withholds the entry of a generic/biosiomilar medicine onto the PBS. Refer to Medicines Australia’s briefing on Intellectual Property (IP)
- Regulatory Data Protection (5-year Data Exclusivity; a duration significantly less compared to the EU and USA). Refer to Medicines Australia’s briefing on Intellectual Property (IP)
- Clinical Trial Harmonisation that removes unnecessary duplication, complexity, and inconsistency across the different states and territories. Refer to Medicine Australia’s briefing on Clinical Trials.
- Increase the number of R&D Incentives (from just one) to be more aligned with countries like Canada, Netherlands, Ireland or Singapore.
As of June 2022, many Federal Government reviews are currently underway or have recently been completed which will impact investment decisions of the medicines industry in Australia. These include, the House of Reps “New Frontier” report4 (stemming from the 2020 HOR Inquiry into access to new drugs and novel medical technologies); the National Medicines Policy Review; the Health Technology Assessment (HTA) Review; The Australian Commission for Quality and Safety in Healthcare (ACQSHC)’s consultation on clinical trial harmonisation via the “One Stop Shop” and “National Front Door” platforms; and finally the Department of Industry and Science’s consultation on the R&D Tax Incentive on Clinical Trials.
It is critical that the Government recognises the investment opportunities that could eventuate should these reviews focus on the outcomes that relate to driving economic growth, delivering more high-skill jobs, and providing Australians with improved access to medicines
- In 2019-20, locally manufactured pharmaceutical products generated approx. $3.6 billion in exports5 (a growth of 22% over previous year)6.
- In 2019-20, the majority of exports of locally manufactured pharmaceutical products were destined for APEC and OECD countries7.
- Comparing 132 economies, Australia’s Global Innovation Index ranking has slipped from 23rd (2019) to 25th (2021)8. In 2018, Australia’s ranking was 20th.
- During 2019, Australia spent $1.4 billion on clinical trials, of which only 5% were global industry sponsored trials9.
The international innovative medicines industry focuses on three key points when making significant capital investment decisions: research and development (R&D), the reimbursement processes and location of manufacturing operations. There is intense global competition for this investment and both Federal and State government involvement is essential to promote Australia as a premier destination for both.
- PwC Consulting (2017), “The economic contribution of the innovative pharmaceutical industry to Australia” accessed via https://medicinesaustralia. com.au/wp-content/uploads/sites/52/2018/07/Economic-Contribution-Innovative-Pharma-industry-Australia.pdf
- https://www.mtpconnect.org.au/images/2022_MTPConnect_SectorCompetitivenessPlan.pdf (p. 11)
- DFAT Trade and Investment at a Glance 2021, accessed via https://www.dfat.gov.au/sites/default/files/trade-and-investment-glance-2021.
- Australian Government Department of Foreign Affairs and Trade, ‘Composition of Trade 2018-19’, Country and TRIEC pivot table 1989-90 to 2018-19, accessed via https://dfat.gov.au/about-us/publications/pages/composition-of-trade.aspx
- Department of Foreign Affairs and Trade. Trade statistical pivot tables: Country and commodity 2005-06 to 2020-21, last updated March 2022 (using Dec 2021 data). Available at: https://dfat.gov.au/about-us/publications/pages/trade-statistical-pivot-tables.aspx