Budget’s $1.5b prescription for making medicines in Australia

Public funds will be poured into projects to make medicine and medical devices for the global market under a $1.5 billion federal plan that deepens a political row over industry subsidies.

The federal government will release the blueprint for its looming investments in healthcare manufacturing after Prime Minister Anthony Albanese ignited a debate on industry aid with a “made in Australia” policy pledge last week.

The new plan clears the way for public investment in high-value therapies where Australia holds a big advantage in medical research, naming cancer and heart disease as key areas that deserve government funds.

But the federal document rules out putting cash into large-scale facilities to produce common medicines because Australia will struggle to match the lower transport and labour costs in other countries.

Industry Minister Ed Husic will outline the plans for medical manufacturing in a co-investment plan that will guide the National Reconstruction Fund on how it should invest a share of its reserves in health projects.

A key part of the new document warns that Australia has lost huge opportunities because it could not manufacture the drugs discovered by local researchers, naming the Gardasil cervical cancer vaccine as a prime example.

Professor Ian Frazer, who led the development of Gardasil and was named Australian of the Year in 2006, said the pioneering medicine had to be outsourced to Merck in the United States because Australia did not have the manufacturing capability.

“We demonstrated very clearly with Gardasil that we could do the research, but the manufacturing had to be done overseas,” he said.

“We need to invest in the infrastructure to do this. We are not there yet, and we ought to be.”

Frazer, a professor at the University of Queensland, said Australia did not even have the local manufacturing to make medicines for large-scale clinical trials, saying it needed this capacity as well as broader capabilities to keep up with other countries.

The federal plan assumes that $1.5 billion from the National Reconstruction Fund will be put towards making medicine and medical devices in Australia, although Husic will not make the decisions and the investments will be chosen by the NRF board.

“Too many great Australian ideas have left our shores only to return as an import from another country,” Husic said.

“Gardasil is a prime example of the terrible cost of lost opportunity – brilliant Australian medical research ended up being manufactured overseas because we didn’t have the capabilities, or the drive, to make it here.

“As the NRF looks to revitalise manufacturing capability in key priority areas, we need a clear picture of the challenges and opportunities we face in each sector.”

The government is yet to reveal the full cost of its industry policy but is vowing to put a new law to parliament, to be called the Future Made in Australia Act, and is expected to unveil specific measures before the May 14 budget.

Labor has already pledged $42 billion to investment schemes including a $1 billion subsidy for solar panel manufacturing earlier this month, a $2 billion subsidy for hydrogen producers, the $15 billion National Reconstruction Fund, the $2 billion Critical Minerals Facility, and a $2 billion expansion of the Northern Australia Infrastructure Facility last year. It has also added $20 billion to the Clean Energy Finance Corporation.

The pledges do not erode the budget surplus, but they add to commonwealth debt in the hope that the investments will turn into profitable assets in later years.

The co-investment plan says Australia is a world leader in therapeutic research fields, including cardiology, oncology and gastroenterology.

“These emerging fields present opportunities for Australia to carve out a market niche as the global pharmaceutical industry shifts to focus on higher value and more personalised therapies,” it says.

The new plan cautions, however, against trying to match other countries on commodity products.

“Australia’s labour, input and transport costs mean that Australia is at a cost disadvantage relative to its international competitors for large-scale production,” it says.

“Standing up new production capabilities for high-volume, low-value, small-molecule medicines in many cases will not be an economically viable option for enterprises operating in Australia.

“However, by focusing on high-value, innovative, complex therapeutics that have lower production volumes but can generate high revenues, Australia can strategically leverage its advantages in therapeutic research and precision manufacturing.”

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