New pharmaceutical clinical trial data is suggesting a surge in Australia’s attractiveness as a destination for global pharmaceutical investment, with an industry report showing Australian clinical trials have been growing at roughly 5% per year since 2010, outpacing the US, the UK, and the overall global average growth rate.
Attracting domestic clinical drug trials is seen as key to an ambitious 10 year turnaround plan to increase the economic contribution of the local medical technology, biotechnology pharmaceutical sector by $3.2 billion a year, driving an estimated 28,000 new jobs by 2025, mostly in the research sector.
The rise in the Australian dollar and the shift to low cost manufacturing regions had seen the sector contract, but the new MTPConnect report suggests this is now being turned around as part of major industry and government collaboration plan to grow Australia as a global destination for pharmaceutical investment.
MTPConnect is an industry and government initiative to grow the sector. It was established after the medical and pharma industry was identified as a major potential growth sector for Australia in the run up to the release of the 2015 Innovation statement.
Australian pharma research is consistently rated world leading — especially for complex therapeutic areas such oncology — but our level of commercialisation has been poor. The 2017 Global Innovation Index ranked Australia 73rd out of 142 countries in innovation efficiency suggesting Australia has not been able to exploit its industry leading research capability.
While this is up from the 116 position Australia ranked in 2013, the reality is Australia is still not getting the economic return from the major public investment in research.
The lack of commercialisation can also be seen in the low level of industry sponsored research. The pharmaceutical sector is considered one of the true global industries and internationally typically spends about 20 % of sales revenues on research. In Australia it is a quarter of this amount, underlying the opportunity to significantly increase both the amount of research and the commercialisation pipeline.
Research that connects
There is widespread agreement that clinical trials create the foundation of a healthy translational pharma research community. Trials are important drivers of global investment, accounting for 75 % of total sector expenditure.
The MTPConnect clinical trial report found offshore pharma companies were attracted by the high global standing of Australia’s medical investigators and research, compliance with good clinical practice, dedicated trial infrastructure, regulatory frameworks and the availability of R&D tax concessions.
But equally the report noted disparities in hospital site governance approval processes which led to significant variability in start up times. This is a critical factor for global players concerned about the lifecycle of their products. Australia’s small population size, lower average number of participants, and poor referral rates from the primary General Practice sector, are all combining to make our clinical trial costs high on a per patient basis. This is exacerbated by variability across individual hospital sites and different states. While this can reflect individual operational and business decisions, a COAG mandated committee is working to improve conduct of clinical trials.
At a headline level this means Australia is struggling with a reputation as a higher cost clinical trial location, made worse by the unpredictability across the hospital system. This is now very much the focus of government and industry efforts to remedy some of these sticking points, but in the meantime Australia faces strong competition from lower cost, high population countries, especially for less complex therapeutic trials.
Another clear issue has been the lack of a strong local venture capital market in the pharmaceutical sector. This has resulted in poor ecosystem depth, a relative paucity of start-ups, despite Australia’s strong research pedigree. This is now being addressed via a $500 million Biomedical Translation Fund, made up of $250 million federal government support and matched by private investors, including CSL Limited, Australia’s largest and most successful biotechnology company. The fund is being managed by venture capitalists Brandon Capital, BioScience Managers and OneVentures Management.
Investment therapy
The interaction of the monopsonist Pharmaceutical Benefits Scheme also creates a market dynamic which may impact on perceptions for global investment. The PBS is the main gateway for accessing the Australian market and is very focused on approving drugs with proven health outcomes. The PBS is widely considered an effective means of keeping the price of drugs economical, but frustrates global investors looking to fast track so-called wonder drugs. While there a many examples of innovative drugs getting PBS approval, the strict application process is often cited as a reason Australia is not getting its share of entrepreneurial pharma activity.
The PBS drives access and affordability and for nearly 70 years has been one of the tent poles for Australia’s internationally recognised health system. Australians enjoy world leading health outcomes, with health expenditure of 9.4 % of GDP in 2016. This compares with 17.1 % in the US and 12.3 % across the OECD. But while the constitutionally mandated PBS offers great community support it frustrates large pharma groups who argue its strict funding rules limit innovation and means Australia effectively free rides off other countries. Successive governments have long since recognised the need for balance, across all parts of the sector.
Most recently, we seen this in the Medicines and Medical Devices regulatory reforms, establishment of the Medical Research Future Fund and the policy guidance from the Research Infrastructure Roadmap and Innovation and Science Australia’s2030 Strategic Plan.
At a broader level the sharp focus on constraining health spending across the four year forward estimates militates against longer term initiatives and therapies that could lead to better health outcomes. A recent La Trobe University report found that only as a nation we spend a miserly $2 billion a year, or $89 a person on preventative health. That equals 1.34 % of a total annual public health budget of around $154 billion per annum.
New agreement
A new PBS funding agreement has recently been inked with the industry group, Medicines Australia, and there is hope this provides the platform for more local development and translational innovation.
Australia’s research base is very much founded in the public university system with pharma research coming primarily through the National Health and Medical Research Council (NHMRC) While this has been the bedrock for the country’s strong research standing, it also has limited deeper collaboration with global players with claims the academic focus of NHMRC has resulted in only a few translational projects. Similarly the requirement for significant partner contributions for collaborative research through the Australian Research Council limits early trial partnerships with local researchers that could mature into more significant partnerships.
The new $20 billion Medical Research Future Fund aims to partly remedy this issue, with disbursements over the first five years of the Fund are projected to be $1.4 billion, and when the fund matures it is anticipated that annual disbursements of up to $1 billion per annum.
