Australia is a leader in niche life science segments with strong global markets, including plasma therapies, hearing implants, and sleep apnoea devices. Yet, despite billions in public and private investment, Australia continues to underperform in translating its world-class life science research into commercial success.
Why Funding Isn’t Enough
Australia has made significant investments in life sciences, yet our global market share and innovation outcomes don’t reflect our strengths. Public R&D spending in Australian life sciences (~0.1% of GDP) lags behind the OECD average (~0.2%). While VC dominates private life sciences investment, its share of GDP (~0.02%) remains far below the US (~0.1%).
- Government Investment: AU$2-3 billion annually, with key funding sources including:
- NHMRC: ~AU$1 billion
- MRFF: ~AU$600 million
- CSIRO: ~AU$300 million
- MTPConnect: ~AU$50 million
- Private Investment: We estimate that AU$2–3.6 billion goes to Australia’s life science sector annually, fluctuating with deal flow and market conditions.
- VC: ~40-45%
- Private Equity (PE): ~20–25%
- Corporate Investment: ~10–15%
- Superannuation/Institutional: ~5–10%
- Public-Private Partnerships and Co-investments: ~5–10%
- Angel Investors/HNWIs: ~5%
Investment alone does not guarantee impact. Australia’s research excellence is widely recognised and it is ranked 9th globally in life sciences research. Australia contributes around 3% of the world’s research output but capture only 1-2% of the global life sciences market. The United Nations WIPO Innovation Index ranks Australia 18th for inputs but 30th for outputs. We rank 21st among OECD countries on the Global Innovation Index, despite being the 11th largest economy. Overall, we excel in research but fall short in commercialisation. This gap is a missed opportunity, and closing it is imperative.
Industry Advocacy in Action
In August 2024, Pfizer proposed a 10-point plan for how the life sciences sector can drive Australia’s health and wealth. Pfizer recommended that the government formulate a vision for the Australian life sciences sector, drawing parallels to the UK’s 2021 strategy. The company highlighted that despite Australia’s strong research institutions and public hospital system, the absence of a clear governmental vision has limited the country’s appeal for life sciences investment. The plan proposed actionable recommendations across five themes, including prevention, equitable patient access, accelerated access to new medicines and vaccines, enhancing Australia’s attractiveness for life sciences investment, and achieving a net-zero health system.
In a similar vein, just this week, AusBiotech and MTPConnect are calling for a more coordinated national approach to unlock the industry’s potential. It is proposed that this can be achieved by:
- A National Life Sciences Strategy & Council – The Australian Government, in partnership with industry, should develop a National Life Sciences Strategy, supported by a new National Life Sciences Council.
- Prioritising Life Sciences in the Future Made in Australia Act – Recognising life sciences as a priority industry will enhance investment and global competitiveness.
- Strengthening Industry Capability with Data – Investing in data collection will drive better decision-making and industry growth.
Competing on the Global Stage
Significant challenges hinder Australia’s ability to compete on a global scale. Our small domestic market, with a population of only 26 million, limits the ability of local companies to scale. As a result, many must seek early international expansion, which introduces additional complexities and costs.
Another major challenge is Australia’s complex and fragmented policy landscape for life science productisation.
The Therapeutic Goods Administration (TGA), responsible for assessing the safety and efficacy of new drugs, seems to operate out of sync with other major global regulators and largely in isolation from the National independent expert bodies for reimbursement (e.g. PBAC and MSAC). TGA’s approval rate for FDA-approved breakthrough therapies fell from 95% (55 of 58 applications) during 2013–2017 to only 67% (54 of 81 applications) in 2018–2022. In 2023, the TGA approved 37 novel active substances, while the FDA approved 55, Swissmedic 90, and EMA 39. This highlights that Australia’s approval pace remains considerably lower than that of other major global regulators.
The PBAC/MSAC processes present well-documented hurdles to market entry and reimbursement, making it more difficult for companies to achieve sustained commercial success. The PBAC/MSAC negotiation process can lead to lower product prices compared to other major markets and HTA agencies globally. For instance, a PBS listing typically results in discounts of 30–50% off the list price for many new drugs entering the Australian market. One reason behind this is the 5% base discount rate set by PBAC in 1990 to model the cost-effectiveness of new therapies.
NOTE: In stark contrast to Australia’s 5% base discount rate, similar HTA agencies in other countries use lower rates:
- 1.5% in Canada
- 1.5% in England
- 2.5% in France
- 3.5% in New Zealand.
Our national 5% discount rate for new medicines has contributed to delays in patients accessing vital therapies like vaccines for HPV in adolescents, meningococcal disease in children and adolescents, zoster virus for 60-year-olds, and medicines to treat hepatitis C and spinal muscular atrophy in children.
For local and multinational life science companies looking to push out their newly developed product and maximise market access to recoup R&D expenditures, aggressive HTA discounting outcomes mean that while the Australian market offers a streamlined pathway for product reimbursement, it may be perceived as a lower-margin market. This could influence their investment decisions and market entry prioritisation as part of global scaling strategies.
Moreover, differing approaches among state and territory health systems regarding funding and innovation support add another layer of complexity, forcing companies to navigate a labyrinth of administrative hurdles. This multi-tiered, disjointed regulatory environment inhibits timely commercialisation of ground-breaking research and ultimately hinders Australia’s global competitiveness in the life sciences.
How to Overcome Commercialisation Barriers to Effectively Scale
To navigate Australia’s complex life sciences landscape and enhance global competitiveness, innovators can implement several strategic approaches:
- Conduct a Feasibility Study
By performing a feasibility study early on, companies can spot potential gaps in the evidence they need and understand the requirements of regulatory approval by the TGA and reimbursement recommendation by PBAC or MSAC. This proactive approach facilitates the development of robust evidence packages and expediting time-to-market. - Develop a Comprehensive Market Access Strategy
Early planning for market access is crucial. By prioritising go-to-market pathways and identifying key stakeholder groups, companies can create structured approaches that reduce risks and maximise the likelihood of commercial success. This includes understanding pricing strategies, reimbursement landscapes, and the negotiation processes with expert bodies like the PBAC and MSAC. Additionally, implementing comprehensive product lifecycle planning and management ensures that all stages, including post-market growth activities, are effectively coordinated. - Foster Collaborative Partnerships
Building alliances with academic institutions, healthcare providers, and industry partners can enhance innovation and resource sharing. Collaborative efforts can lead to shared insights, pooled resources, and accelerated development timelines. - Leverage Government Initiatives and Incentives
Staying informed about and utilising government programs designed to support life sciences innovation can provide financial benefits and support. This includes grants, tax incentives, and funding opportunities aimed at fostering R&D translation, including research commercialisation, within the sector.
Pulse Economics is an AusBiotech member and has worked with MTPConnect to cultivate the next wave of cutting-edge Australian technologies aimed at delivering meaningful impact for patients. We specialise in guiding life science innovators through the complexities of Australia’s healthcare market, offering tailored strategies for successful commercialisation and market access. To learn how we can support your organisation’s specific needs, please contact us at [email protected] or call 02 8985 7308.
