Overview
10.1
Ongoing advances in medical research and development (R&D) are generating important new therapies and novel health technologies worldwide. These advances can target disease and lead to improved patient and survival outcomes. For patients, innovative medicines and advanced technologies can improve quality of life, relieve symptoms, delay disease, prevent health related complications, increase life expectancy and, in some cases, cure the disease.
10.2
The journey from initial research discovery to a new drug, therapy or technology is a long one. In the classic model, the pharmaceutical company is responsible for development of a drug, and its testing and commercialisation. The significant investment costs are recouped from the profits from the product’s subsequent sale.
10.3
International and domestic partnerships for research and development are becoming increasingly important. The COVID-19 pandemic and the global response to it has reinforced this notion that a global problem needs a globally supported solution.
10.4
Australia is already playing a valuable role in a growing global network of research and development in medical science and technology. Australia will need to continue to build upon its strengths in research and development to remain internationally competitive and attractive.
10.5
Global companies make decisions on investing in research and development in countries that have: a stable economy; streamlined laws and regulations; high returns; a highly skilled workforce and investments that are potentially scalable in other countries.
10.6
This chapter examines the research and development initiatives that the Australian Government has in place, including Commonwealth funding grants, tax incentives, intellectual property laws and protections. The chapter also considers the merits of horizon scanning, what it is and what is needed to strengthen the future of research and development in Australia.
Australian Government funding initiatives
10.7
The investment in supporting innovation, research and commercialisation is a state and national responsibility. Ongoing federal and state government support of growth and development across medical technologies, digital health, biotechnologies and the pharmaceutical sector remains critical for the future growth of this sector.
10.8
The Australian Government funds two main programs, the Medical Research Future Fund (MRFF) and the National Health and Medical Research Council (NHMRC).There are other research and development programs including programs funded by the Department of Education Australian Research Council (ARC) funded programs and Research Support Program; and programs provided by the Department of Industry, Science, Energy and Resources.
Medical Research Future Fund
10.9
The Medical Research Future Fund (MRFF) was established under the Medical Research Future Fund Act 2015 (Cth), providing long‐term sustainable funding for Australian health and medical research with an aim to improve health outcomes, quality of life and health system sustainability. The MRFF reached maturity at $20 billion.
10.10
The net interest from the fund is available to health and medical researchers across a range of 20 initiatives under four themes: patients, researchers, research missions and research translation. The Australian Government’s $5 billion, 10‐year investment plan for the MRFF, announced in the 2019‐ 20 Federal Budget, outlined how health and medical research would be funded over the next decade. Under the MRFF the Australian Government has funded the following different initiatives totalling over $1 billion.
The Frontier Health and Medical Research initiative is a program that will provide $570 million over 10 years to enable researcher collaborations to explore bold, innovative ideas and/or make discoveries of great potential and global impact, through research relevant to any area of healthcare.
The Genomics Health Futures Mission has been allocated $500 million from the MRFF over ten years and aims to improve the lives of Australians by accelerating research that delivers more effective testing, diagnosis and treatment; facilitates the adoption of new interventions; and consolidates Australia’s international leadership in genomics.
The Million Minds Mental Health Mission aims to support a million Australians with mental health issues access new approaches to prevention, diagnosis, treatment and recovery. The MRFF has allocated $125 million over 10 years for this mission.
The Global Health initiative will invest $28.4 million over 10 years to fund projects on understanding global health threats, including tackling antimicrobial resistance and drug‐resistant tuberculosis.
The Indigenous Health Research Fund is investing in Indigenous‐led research to tackle health issues facing Aboriginal and Torres Strait Islander people. It will provide $160 million over 10 years.
The Stem Cell Therapies Mission will invest $150 million as part of the 10‐year plan, to develop innovative, safe and effective treatments and to translate stem cell innovations into commercial products.
$5.9 million has been allocated to eight projects to find new innovative treatments for diseases. The Cardiovascular Health Mission will invest $220 million over 10 years to make transformative improvements in heart and vascular health, and stroke for all Australians.
The Medical Research Commercialisation initiative aims to support early‐stage health and medical research and innovation in Australia through to proof‐of‐concept and beyond, providing opportunities for commercialisation. It will provide $311 million over 10 years.
Two programs have been established under the Medical Research Commercialisation initiative to date – BioMedTech Horizons and Biomedical Translation Bridge.
The Biomedical Translation Fund (BTF) is a $500 million equity co‐ investment venture capital program to support the development of biomedical ventures in Australia. The BTF aims to help translate biomedical discoveries into high growth potential companies that are improving long term health benefits and national economic outcomes.
10.11
Recently, as part of the Government’s Coronavirus Research Response, $95 million from the MRFF has been invested in COVID‐19 research including for diagnostics, vaccine development, antiviral development, clinical trials, digital health research infrastructure, studies on the human immune response to COVID‐19 infection, community information needs and behavioural responses during outbreaks.
National Health and Medical Research Council funding
10.12
The National Health and Medical Research Council (NHMRC) is the Australian Government’s main health and medical research funding body. NHMRC supports excellence in research that meets the health needs of Australians, from basic science through to clinical, public health and health services research and research that reflects national, state and territory and community priorities. One of NHMRC’s key objectives is to support the translation of health and medical research into better health outcomes.
10.13
NHMRC’s Ideas Grant scheme funds innovative and creative research in any area of health and medical science from discovery to implementation. This scheme focuses on funding research that aims to challenge and shift current paradigms and/or have a major impact on a health research area through one or more studies that creatively develop novel concepts, improve applications or integrate technologies for a new purpose. In 2019, NHMRC funded 293 Ideas Grants to a total value of approximately $240 million.
10.14
NHMRC’s Development Grants scheme supports the commercial development of a product, process, procedure or service that, if applied, would result in improved health care, disease prevention or provide health cost savings. In 2019, NHMRC funded 31 of these grants to a total value of approximately $75 million.
Future funding challenges
10.15
The Association of Australian Medical Research Institutes (AAMRI) commented that ‘continued strong investment by the Australian Government in all stages of health and medical research will be needed to respond to the future health challenges facing the nation and to ensure Australia remains a world-class medical research nation. ‘
10.16
AAMRI added that Australia has the potential to be a world leader in medical research in the decades to come and emphasised that:
… a more strategic approach will be needed to ensure the right level of investment is being made at the different stages of the research pipeline.
10.17
Save of Sons Duchenne Foundation (SOSDF) commented that university research was a critical component in the fight to find a cure for rare diseases.
10.18
The SOSDF were pleased the Australian Government provided $1billion for the university research community in the 2020-21 Federal Budget. In addition funding included the following:
$2 billion and other revisions to the Research and Development Tax Incentive, and
$1.3 billion in the modern manufacturing strategy, of which medicines manufacturing has been identified as a key industry.
10.19
SOSDF was disappointed to note that NHMRC funding is declining in real terms:
… the largely unchanged budgets for the NHMRC and MRFF are disappointing with Research Australia highlighting the fact that researchers are dealing with extra costs due to the delays and disruptions caused by COVID-19. Further, that there is no research program support for researchers in Medical Research Institutes, and NHMRC funding continues to decline in real terms.
10.20
Research Australia suggested that a more coordinated view had to be taken in order to commercialise more drugs and novel medical technologies where there is an unmet need. Research Australia commented :
… the programs need to be reviewed to ensure that the guidelines better support the research and commercialisation process.
10.21
Research Australia added that:
… this requires an ‘end to end’ review, identifying what funding and incentives currently exist and where the gaps are. Consideration then needs to be given to what action can be taken to closing these gaps, including modifying existing programs to better support commercialisation, and providing a more streamlined progression through the pipeline for research that has commercialisation potential.
10.22
The Australian Cardiovascular Alliance (ACvA) proposed a review:
Undertaking an “outcomes review” of recent NHMRC grant activity to test linkages between research awards and translational pathways into clinical guidance and practice.
10.23
The Medical Technology Association of Australia (MTAA) stated it ‘strongly supports the focus of the MRFF on long term outcomes and this should receive ongoing support and not be subject to continuous change.
10.24
Stryker echoed this sentiment stating that some of the challenges for the health sector include:
A lack of continuity in funding for research and innovation due to the short political cycle leading to frequent changes in policy direction.
Fragmented and inconsistent support for industry and researchers via government tax incentives, funding schemes and research grants programs.
10.25
Similarly, the Centre for Law and Genetics highlighted the funding challenge for research and emphasised that the lack of continuous funding was a barrier to translational development:
Many referenced the fact that their research existed ‘grant to grant’, and that many innovative products that have clinical potential fall at the translational hurdle due to lack of industry funding.
10.26
MTAA described the challenge of Australia not being large enough to compete with itself to develop the next generation of innovation:
We particularly welcome the end-to-end model of national collaboration championed by the Australian Cardiovascular Alliance, which has the breadth of expertise and commitment to consider all phases of technology development and to determine which gaps need to be filled. This is a model that should be encouraged in other disease states, potentially through linkage grants.
10.27
MTAA added that the Australian Government may wish to consider funding ‘no fault’ investigations of past grants and programs as a critical review of these unsuccessful past programs may reveal some hidden gems.
10.28
Stryker suggested that ‘A MedTech “green paper” should be developed by the government in collaboration with industry and other stakeholders to canvas options for strengthening the MedTech sector through supporting the development of a sovereign MedTech research, development and manufacturing sector focussed on the commercialisation of new products and technologies which improve health outcomes, create high-skill jobs, attract international investment and deliver significant health and economic benefits.’
10.29
The ACvA suggested the Government should consider integrating funding between different industry schemes:
Innovative research through strong funding support across the whole research pipeline, that can bridge health and economic imperatives should be supported and mechanisms to integrate across the NHMRC, MRFF and TTRA should be developed and implemented. Small to medium biotech companies should also be better supported in Australia.
10.30
The National Aboriginal Community Controlled Health Organisation (NACCHO) suggested that the Government establish ‘a research fund specifically related to Aboriginal and Torres Strait Islander people’s access to medicines.’
Research incentives
10.31
Medicines Australia described how Australia needs to ‘reassert a place at the forefront of major innovation for pharmaceutical discoveries. Reinforcing our existing strengths, that underpin Australia’s capacity and capability in research and development (R&D), and improving policy vulnerabilities around intellectual property (IP), will be key to securing the early discovery and pipeline development for new, innovative, and advanced therapies in Australia.’
10.32
AusBiotech told the Committee that the biotechnology industry can play a significant role in our country’s economic future and healthcare, particularly when areas of innovation and opportunity are supported through the right policy levers and incentives.
10.33
Johnson & Johnson suggested that the successful research, development and commercialisation of new drugs and novel medical technology requires several key elements to create an eco-system for innovation. These include:
… quality scientific infrastructure, great research, a willingness to collaborate, a robust, respected and enforced intellectual property framework, an entrepreneurial mindset and a competitive funding base that is stable, consistent and knowledgeable. If one or more of those elements is missing, the chances of turning a great idea into useful medical innovation is significantly diminished.
10.34
Many stakeholders shared views on the importance of Government funding of the research and development ‘pipeline’ at critical points from end to end as well as ensuring the tax incentives remain stable.
Research and development tax initiatives
10.35
The Research and Development Tax Incentive (RDTI) helps companies innovate and grow by offsetting some of the costs of eligible R&D. The Committee noted that pharmaceutical companies invested around a quarter of their revenue per year in R&D.
10.36
The Committee did not go into the detail of RDTIs however it was aware that the 2020-21 Federal Budget introduced new RDTIs, effective 1 July 2021.
10.37
AusBiotech emphasised the importance of stability and predictability of the innovation environment. It commented that ‘the US system of R&D incentives has remained essentially unchanged for the past 30 years. In contrast, Australia has made substantive changes, on average, every five years.’
10.38
Mr Ian Burgess, Chief Executive Officer, MTAA admitted there had been concerns from industry about potential changes to the RDTIs.
Together with other organisations such as AusBiotech and Medicines Australia, we were concerned about the cutbacks that had been proposed. We consider it to be a very important program to provide assistance for local R&D.
10.39
Throughout the inquiry, the Committee realised there was broad agreement from industry that the retention of the RDTIs were very welcome.
10.40
Research Australia welcomed the Government’s decision announced in the 2020-21 Federal Budget that will reverse many of the changes it had proposed to the RDTI Scheme. The RDTI Scheme provides an incentive for further commercial investment, and the removal of the caps in particular could support the significant investment required for Phase 2 and Phase 3 clinical trials to be undertaken on a commercial basis in Australia.
10.41
AstraZeneca echoed its support for the ‘continuation and strengthening of the existing R&D tax incentive for small Biotech companies.’
10.42
Professor Ian Alexander, Head, Gene Therapy Unit, Children’s Medical Research Institute provided the Committee with an example of the success of tax incentives.
… at least one of the companies that has engaged with the CMRI for development of vector technology, set up Australian subsidiaries that were incentivised by tax incentives. So certainly making Australia attractive as a place to come and spend research dollars is very important.
10.43
At the public hearing, Professor Mackay, QIMR Berhofer Medical Research Institute (QIMR Berhofer), at a public hearing encouraged the Committee to consider the importance of really promoting Australia’s research and development tax incentives.
10.44
Medicines Australia added that the recently adapted RDTIs should be evaluated ‘to ensure that barriers have not been inadvertently introduced and that local and global pharmaceutical companies continue to invest in clinical trials within Australia, as this investment can be a key driver of economic growth.’
Taxation on Intellectual Property
10.45
A patent is a legally enforceable right for a device, substance, method or process. A standard patent provides long-term protection and control over an invention. It lasts for up to 20 years from the filing date of the application and up to 25 years for pharmaceutical substances.
10.46
The Centre for Law and Genetics commented that Intellectual Property (IP) is emerging as a major factor in whether research leads to successful outcomes. It described some of the challenges that are associated with IP in Australia:
difficulty in funding IP protection (particularly patents) and the fact that frequently, specific funding schemes need to be targeted to provide funding to allow a patent application; a lack of institutional knowledge about what is required to seek patent protection, and the fact that a focus on commercialisation necessarily impedes research outcomes, because it restricts researchers from publishing. This was viewed as a real catch-22, and a number of researchers had been ‘caught out’ by disclosing their research prematurely.
On the other side of the coin, gaining an understanding of the patent landscape in which researchers are operating (and must invent around), is often difficult, time-consuming, technical and costly. Researchers often lacked knowledge of the market in which they anticipated their research will have an impact.
10.47
MTAA outlined one of the problems it has had with IP in Australia including the translation of research into manufacturing. In its submission MTAA commented:
Currently, the Commonwealth, via the R&DTI, the MRRF, and NHMRC, spends more than $3B p.a. to support medical breakthroughs. However, the process halts as there are currently no incentives for onshore commercialisation of the resulting intellectual property. In effect, this is leading to the exportation of this IP just as it is beginning to become profitable and deliver value to the Australian economy. The exact cost to the Government could only be calculated once the specific parameters of this policy are set.
10.48
Dr Bruce Arnold, during a public hearing, was emphatic about not needing to extend IP protection. He informed the Committee he does not support extending the IP protection for pharmaceutical companies. He commented that ‘what you're getting by extending protection beyond the existing period is simply rent-seeking.’
10.49
Dr Arnold added ‘there is no justification for extending the period of patent protection for pharmaceuticals and medical devices to incentivise research and development.’
10.50
Dr Arnold highlighted the following issue with patents:
There are fuzzy indications of development through analyses of patenting (indicating that the bulk of patents are by/for overseas life sciences corporations rather than Australian-owned entities) and grants made by the NHMRC.
10.51
The majority of stakeholders did not have an issue with the IP laws in Australia other than stating the need to review them with a view to aim for a consistent approach between states and territories. The Committee heard from the Western Australian Department of Health who are in the process of finalising a new IP Policy for the WA health system:
Consistent practice (legal documentation, governance and incentives for inventors) across the Health Service Providers, and in collaboration with other institutions, are required for more effective translation of Department of Health research and innovation.
The ‘Patent Box’ tax scheme
10.52
The ‘Patent Box’ scheme also known around the world as the ‘Knowledge Development Box’, was foreshadowed by the Government in the 2021-22 Federal Budget to encourage investment in Australia’s biotechnology and medical technology sectors. From 1 July 2022, income derived from Australian medical and biotech patents will be taxed at a concessional corporate tax rate of 17%. This is lower than the standard corporate income tax rate of 30%, or 25% for small and medium companies.
10.53
In submissions received by the Committee prior to the above announcement, several submitters including the Australian Cardiovascular Alliance suggested that a ‘A Knowledge Development Box (KDB, also known as a patent box) should be implemented and funded.’
10.54
The Australian Cardiovascular Alliance at a public hearing, described the Patent Box tax scheme:
A patent box tax scheme allows the rate of company tax levied on income generated from qualifying patents to be effectively reduced. This would mean that an owner or licensee of a granted patent could obtain tax relief at a significantly reduced rate when compared to the normal company tax rates in the country within which the patentable invention is to be worked.
The Irish government introduced the world’s first OECD compliant patent box regime- the Knowledge Development Box (KDB). The KDB regime offers a 6.25% effective tax rate for profits arising from patents and copyrighted software. In the UK, their patent box offers a 10% effective tax rate.
10.55
The Australian Government hopes that this new incentive will encourage additional investment in Australia's biotechnology and medical technology sectors, and encourage companies to develop and apply their innovations in Australia.
10.56
Industry was overwhelmingly supportive of the introduction of the Patent Box tax scheme. During a public hearing held after the Budget, Ms Lorraine Chiroiu, CEO, AusBiotech, commented:
The federal government last week pledged a patent box, and AusBiotech warmly welcomes this. A lower tax rate for revenues derived from IP developed here creates an incentive to stay in Australia, as the benefits from manufacturing pay back into the economy. It impacts companies at a different stage but dovetails with the R&D tax incentive as its support diminishes. The key is that it helps create end-to-end motivation, bridging over extensive investments. Keeping the benefits of home grown, often publicly funded IP in Australia will enable Australia to economically and societally benefit and incentivise the associated manufacturing to stay here and boost our sovereign capability.
10.57
Pfizer Australia emphasised the importance of a strong patent system:
An intellectual property (IP) policy environment that includes, for example, a strong patent system and regulatory data protection, is critical to incentivize and drive the extensive investments and risks involved in the development of innovative medicines. A country's record on intellectual property is an influential factor when determining long-term investment decisions that drive local employment and patient access to breakthrough medicines.
A strong and effective IP system is of significant importance to the biopharmaceutical industry, where on average it takes at least 10-15 years to bring a medicine from drug discovery through approval to market. The term of patent protection is 20 years from the filing date, subject to extension in limited circumstances, leaving approximately 5-10 years for innovative companies to recover the extensive research and development investments and fuel the next generation of breakthrough therapies.
10.58
Noxopharm described an issue they have encountered in relation to the high costs of IP protection:
There are several grants in Australia that leverage both public and private funding. Part of this process is negotiating the proportional ownership of shared IP generated by the project. Access to government assistance to fund legal support for smaller MedTech companies to go into negotiations with large academic institutions would reduce the risk and expense of submitting applications for grants.
10.59
Dr Merrilyn Clancy, MTAA, described the benefits of having a Patent Box in Australia.
We currently have a 30 per cent tax rate for corporate tax. Obviously, five per cent sounds much better, so 'I don't want to go and make my things in Singapore, but it's so attractive and there are so many things. It just sounds easier to do that there.' One response from the government has been: 'That could be rorted. We're not going to give you carte blanche to have such a big tax reduction.' But the result is that you wouldn't get any tax income. Thirty per cent of zero is zero. Young manufacturers, young developers and large corporations who want to bring small enterprises here are looking at using Australia as a place to grow their business. Why? Because we have excellent safety, we have a quality workforce, and we have a system that really is very well set up to do that. But there are some key gaps in which we can do better.
Data exclusivity
10.60
In Australia, the Therapeutic Goods Amendment Act 1998 (Cth) (the Act) established a five year data exclusivity period for new products containing pharmaceutical actives approved after 17 April 1998. The data exclusivity period begins on the date of marketing approval.
10.61
Data exclusivity is only provided to new active components that have never been included in the Australian Register of Therapeutic Goods. Therefore, data exclusivity is not provided for new uses or new formulations of existing compounds.
Table 10.1: Data exclusivity laws around the world
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Australia
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5
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US
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Up to 5
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European Union
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6-10
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New Zealand
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5
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Japan
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4-10
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China
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6
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Source: findlaw.com.au (https://www.findlaw.com.au/articles/1576/data-exclusivity-further-protection-for-pharmaceut.aspx)
10.62
The United States only provides three years of data exclusivity for new indications of an existing drug. The European Union (EU) varies due to differing national registrations, however it is considering harmonising protection to 10 years for all EU countries. Interestingly, Japan’s exclusivity period varies from four years for new indications or formulations of a drug to six years for drugs containing new chemical entities, and up to 10 years for orphan drugs.
10.63
Medicines Australia suggested that Australia should compete in the global race for investments in this area of data exclusivity:
There is an opportunity, including through the current free trade agreement negotiations with the United Kingdom and European Union, to strengthen the intellectual property system to compete with those jurisdictions. In particular, the current system of five years’ data exclusivity is less attractive than comparable innovation and investment driven OECD countries.
10.64
Alexion Pharmaceuticals drew the Committee’s attention to the fact that in Australia ‘there are no orphan specific IP provisions. Alexion proposed that orphan drug specific measures receive: seven - 10 years data protection and an addition two years for paediatric indications.
10.65
Pfizer Australia pointed out how data protection (or data exclusivity) works in parallel with IP and called for an increase in data protection to drive local investment and affordable access to new medicines:
Regulatory data protection (RDP) is a separate mechanism that operates independently and in parallel to the patent system, protecting the disclosure and unfair commercial use of the clinical trial data submitted to regulators for the registration of a new medicine. A strong RDP regime can incentivise the development and local study of new medicines and drive timely patient access, and is particularly important in situations where patents may not be available due to the nature of a new medicine, or in situations where the time needed to develop, test and secure approval for a medicine is so long that little or no patent term remains.
Australia's RDP term for innovative biologics and small molecules is just five years from regulatory approval - low by global standards. In comparison the US offers 12 years for biologics and the EU offers 10 years, covering both biologics and small molecules, with an extra year available for new clinical indications. Australia offers no added protection for new clinical indications, which limits incentives to research and repurpose medicines to treat new conditions.
A strong RDP term is essential to drive investment incentives for new medicines, without which innovative companies are deterred from pioneering high-risk and high-cost breakthrough research and development.
10.66
Data exclusivity is discussed further in this chapter under the section titled ‘Repurposing of drugs’.
Generic drugs and the problem with expired Intellectual Property stifling innovation
10.67
The Medical Oncology Group of Australia (MOGA) illustrated a problem that exists in Australia when generic competition following patent expiry and Pharmaceutical Benefits Scheme (PBS) reform has combined to reduce the price of generic medicines:
In some cases, reference pricing methods have resulted in a price that fails to demonstrate cost-effectiveness of a new drug to the PBAC, or that is viable for the sponsor to list the on the PBS. The system should be structured to guarantee the supply of generic cancer medicines, which are more costly in Australia than in other countries, including identifying appropriate remuneration to ensure consistency of supply.
10.68
ViiV Healthcare discussed some problems that the Australian Health Technology Assessment (HTA) system has with price referencing and comparator price erosion. Viiv stated:
In the case of the generic pricing policy changes, this can influence access to new medicines, when innovator medicines are compared to older, inexpensive medicines. The benchmarking method for determining new medicine pricing should be made more equitable.
10.69
Viiv highlighted a problem with the current system for niche areas such as antibiotics.
These medicines have been in use for many years, are no longer on patent and are distributed at low prices via a range of generic manufacturers. This is how our intellectual property system is intended to operate. Once a medicine is off patent, generic medicines are permitted to enter the market and deliver savings to government and the consumer through increased competition. However, these low prices and the application of the reference pricing policy acts as a barrier to continued innovation with respect to antibiotics. Antimicrobial resistance is an increasing public health concern. However, it will be difficult for a new antibiotic to come to market in Australia due to the reference pricing policy as it will not be possible for the manufacturer to generate a return on investment (as discussed above, the development costs are approximately US$2.6 billion), particularly when combined with the careful, low-volume, use of the antibiotic to conserve its effectiveness and slow resistance.
10.70
Viiv Healthcare continued by stating that:
… the policy doesn’t recognise that some individual consumers may have better or worse outcomes from medicines that are considered clinically equivalent on average across the whole target population. For example, a patient may have side effects from the old medicine but not from the new one. So, patient choice is also important at a personalised level.
One option to improve the current system is to adopt the process that is currently utilised by the National Institute for Health and Care Excellence (NICE) in the United Kingdom. Under this process, a scoping document is developed with the input of clinicians and patient groups to determine patient population, place in clinical practice and most appropriate comparator for the therapy. This mechanism would allow for independent recommendation and ensure the proposed therapy is assessed within a framework that is appropriate for the patient need. This ensures transparency in the process and allows companies to understand their likely prospect of success before submitting to the PBAC and incurring the costs that such an application entails. Additionally, by involving independent expert opinion specialised in the disease area, the process may help to prevent re-submissions, which are often the result of a difference of opinion on the comparator between the sponsor company and the PBAC.
Antimicrobials
10.71
Whilst generic drugs are effective in reducing the cost of medicines for consumers after their IP has expired, it has created a problem for the innovation of novel antimicrobials in response to the growth of antimicrobial resistance (AMR). The MTAA raised this issue as an area requiring immediate attention.
Despite the huge societal costs of antimicrobial resistance (AMR) and urgent need for antimicrobials, there is no viable market for new antibiotics in Australia and therefore few incentives and little funding available to support clinical research in this important area. The lack of commercial return for antibiotics has resulted in a decline in the number of companies undertaking antimicrobial R&D and a weak pipeline of new therapies to address AMR. This pipeline is unlikely to be sufficient to successfully keep up with the pace of AMR development globally.
10.72
The World Health Organization (WHO) has described AMR as one of the key global health issues facing our generation. If no action is taken, it has been estimated that by 2050, 10 million lives a year could be lost as a result of AMR by 2050, exceeding the number of deaths caused by cancer (8.2 million). In Australia, the estimate is 10 000 lives per year. DMTC Ltd submitted that:
According to the OECD, Australia is particularly vulnerable as our antibiotic usage is significantly higher than global averages. The OECD has estimated that nearly 10 per cent of infections in Australia are antimicrobial resistant and that an average of 290 people die each year due to multidrug-resistant bacterial infections. It forecasts that this number is likely to grow significantly in coming years.
DMTC noted that it is currently working with its research and industrial partners on two projects ‘specifically targeted at combating antimicrobial resistance in Q fever and the bacterium behind a disease called melioidosis.’
10.73
Despite Australia’s high-quality research capabilities, there remains a gap between research and commercialisation. In addition, there is a lack of coordination of AMR research into novel antimicrobials, diagnostics and surveillance.
10.74
Early stage research and development at research and academic institutions is supported by current government research funds, including specific funding for AMR from the National Health and Medical Research Council (NHMRC). However, while connections between the research sector and industry are improving, closer collaboration would facilitate product development, capture the value of the investment in the research and position Australia as a leader in AMR research. MOGA commented that ‘Australia needs a National AMR research agenda to ensure that there is a focus on translatable research resulting in commercially available, novel antimicrobials and associated diagnostics. A national capability audit would be a first step.’
10.75
Lowest cost comparators for new antimicrobials are often generic, so they are generally undervalued by reimbursement systems. In addition, they are often held in reserve by clinicians until resistance has emerged to older treatments, so the volumes used are small. This lack of commercial return means there are few companies still investing in antimicrobial research and development. The dire need for new treatments has resulted in international funding agency support (e.g. CARB-X) to go some way to fill this gap.
10.76
The Australian Antimicrobial Resistance Network (AAMRNet), which described itself as ‘an industry-led, inclusive collaboration of stakeholders which is committed to addressing the growing problem of antimicrobial resistance,’ made a submission to the Inquiry on this issue. It commented as follows:
A number of countries around the world are investigating how to assess the value of novel antimicrobials to include the broader value they bring to society. In the United Kingdom, the Government has partnered with industry to pilot a model of reimbursement that will de-link the revenue of an antimicrobial from the volume sold, and base it instead on the antimicrobial’s value to the NHS and wider public health. This means companies will be paid for antimicrobials based on how valuable they are rather than by the quantity being used or sold: the so-called ‘Netflix subscription model’. This pilot will also help to reduce the financial uncertainty in antimicrobial research and promote responsible stewardship of antimicrobials.
10.77
AAMRNet noted that other countries including the US and Sweden are also developing new payment models for these medicines. It made three relevant recommendations:
Regulatory pathways and incentives are required to facilitate the registration of novel antimicrobials and diagnostics, such as an adapted orphan drug category, a fast-track process specific to novel antimicrobials, strengthening Australia’s regulatory data protection (RDP) provisions for new antimicrobials and the waiving of registration fees. An appropriate regulatory pathway is also required for the repurposing of existing antimicrobials.
New reimbursement and procurement models should be explored such as socalled ‘Netflix subscription models’ where value is de-linked from volume, or a separate fund or formulary for novel antimicrobials.
A review of Australia’s HTA processes is required with the aim of expanding methodologies to capture the broader value of medicines. Particular consideration should be given to Australia running its own pilot scheme, based on a model where value is de-linked from volume.
10.78
RESULTS International referred to the British, American and Swedish examples of responses to this issue. In addition it drew attention to a successful Australian pilot of a ‘Netflix model’ for hepatitis C drugs, which involved the Commonwealth Government making a lump $1 billion payment in return for unlimited access to these drugs for five years. It recommended that the Government ‘establish an incentive to introduce new drugs that rewards the expected value of a treatment to society, rather than the volume of drugs sold’ and ‘develop a roadmap for promoting the adoption of new antibiotics with milestones to launch such an incentive.’
10.79
Merck Sharp & Dohme noted this issue and the British response to it. AusBiotech similarly identified this as an area of concern and while not referring to any specific overseas examples, it submitted that the Government should:
…continue to build and implement on the national strategy and actively work to support research development and commercialisation of new therapies to address AMR through:
Evaluation of international funding models for novel antimicrobials and evaluate the potential for implementing a similar model in Australia.
Review and assess existing medical and pharmaceutical funding streams in relation to antimicrobials and consider implementation of a national system for reimbursement.
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Pfizer argued that ‘novel regulatory and reimbursement policies are needed to bring back investment by [large pharmaceutical] companies to ensure the antibiotic pipeline is refilled to prevent the predicted AMR crisis,’ and made two recommendations on this issue:
Designated pathways and incentives are required to facilitate the registration of novel antimicrobials and diagnostics, such as an adapted orphan drug category. An appropriate regulatory pathway is also required for the repurposing of existing antimicrobials.
New reimbursement and procurement models, at both state and federal level, should be explored encompassing both in-patient and out-patient use. This should include consideration of funding models where value is de-linked from volume, or a separate fund or formulary for novel antimicrobials.
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When asked whether there is any potential for Australia to join in the British pilot scheme, Ms Louise Graham, Director and Head of Market Access, Pfizer, replied that:
From what I know about that trial, I don't see it as a joined up trial, but I think there are elements of the trial framework that could be applied here to run similar kinds of trials….the concept is that you value so highly the opportunity of having the antibiotic when you need it. It's like saying, 'Break glass in case of emergency.' You have it there and you have a system of incentives around it so that, in case of emergency, you've got these things.
Manufacturing
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The Committee was interested to find out how Australia could encourage more innovation in the medical health sector especially for local manufacturing.
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Throughout the inquiry it was noted that the COVID-19 pandemic had challenged the Australian Government to reconsider whether Australia should be considering more local manufacturing of medicines and medical devices.
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Adjunct Professor John Skerritt, Deputy Secretary, Health Products Regulation, Department of Health (Adjunct Prof Skerritt), who leads the Therapeutic Goods Administration (TGA), told the Committee that the TGA has responsibility for managing but not solving the issue of medicine shortages:
Our role is in providing advice to those companies about what is required to manufacture according to the requirements of the Therapeutic Goods Act and, therefore, for a product that can be supplied. … But the bigger question of whether the government should invest a couple of billion dollars in a greenfields manufacturing site is really one for industry policy, for government.
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Mr Jason Aldworth, Chair, 3DMEDiTech said ‘Australia has the opportunity to build on this leadership position and become a global centre for development and manufacturing and even as a gateway for global regulatory market access pathways for patient-matched medical devices.’
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The Centre for Law and Genetics, highlighted that the current uncertain HTA pathways of precision medicine was a barrier for commercialising some products in Australia:
The nature of personalised medicine means that making decisions about taking clinically important products forward are based on their commercial viability and to a large extent, opportunism. A number of interviewees were cognisant of the fact that decisions to fund translation is often premised on the likelihood a Pharmaceutical Benefits Scheme (PBS) listing. Given that this scheme (and decisions to list products) has its own quirks and problems, this is an important aspect that will affect manufacturers’ decisions to develop products.
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MTAA discussed the potential to increase development and local manufacturing of new medical devices within Australia.
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Mr Burgess, from the MTAA illustrated this point:
… we do believe that there is opportunity to increase local manufacturing, recognising that more than 80 per cent of medical technology is imported to Australia. We have quality global supply chains that, despite the pressures of COVID-19, did work. We were certainly planning around global supply chains for worse outcomes in Australia than we, fortunately, did face. So, we do have a quality global supply chain, but, in the context of COVID-19 but also more broadly, there is substantial opportunity to strengthen local manufacturing and improve patient access at the local level. Strengthening the local capacity of the industry also improves the whole medtech industry in Australia, but ultimately for the purposes of providing patients quicker and better access.
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Dr Clancy from the MTAA discussed with the Committee the challenges of manufacturing and keeping intellectual property here in Australia. She commented that ‘the initiation is not the hard part,’ and went on to say:
The harder part is going from commercialisation to manufacturing, but also procurement. Who will buy it? If access to a particular device is dependent on a tender at the state level, then it doesn't matter how well we give a tax incentive or protect the IP.
We need to look at the whole system to address long-term outcomes and be more focused on improvements in the whole system rather than just the price of a device or the fact that it was invented here. That brings me to value based procurement. To say it more clearly, Queensland might be inventing a pacemaker that doesn't have any wires, which is better for infection control et cetera, but, if it's not being purchased in Australia, then that's a barrier for manufacturing.
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The MTAA added in their submission:
The measures to support medical research and advanced manufacturing are welcome. However, there is opportunity to further enhance the local industry’s ability to address unmet clinical need. In particular, the current strong financial incentives at the early stage research end need to be matched with better incentives at the commercialisation end.
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At a public hearing, Mr Burgess commented that ‘there is substantial opportunity to strengthen local manufacturing and improve patient access at the local level. Strengthening the local capacity of the industry also improves the whole Medtech industry in Australia, but ultimately for the purposes of providing patients quicker and better access.’
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One suggestion Mr Burgess made was to improve Australia’s procurement processes to support local manufacturing:
It's about ensuring that there can be appropriate incentives provided for local production and there is appropriate recognition of that in procurement processes. As I mentioned, 80 per cent of our devices are imported and that quality global supply chain won't change, in terms of its relative importance in Australia, but there are still opportunities to improve our procurement processes to support local manufacturing.
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AusBiotech commented:
The policy relationship between advanced manufacturing and innovation is important. While comprising just eight per cent of the economy, manufacturing is one of the major sources of innovation in Australia, responsible for a quarter of all investment in R&D. In addition, the current pandemic has revealed that we have significant gaps in capability locally and this leaves (and has left) our country in a vulnerable position in term of supply of key medical products.
Research funding along the value-creation ‘pipeline’: Competition for Business Expenditure on Research and Development (BERD) as it relates to advanced manufacturing will become increasingly intense, as policymakers all over the world seek to use micro and macro-economic levers to compete for job-creating investments and skills.
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At a public hearing, Professor Alexander from the Children’s Medical Research Institute commented that leaders in Australia must be engaged with an entrepreneurial spirit:
You'd be aware that the New South Wales department of health has put $25 million into a GMP viral vector manufacturing facility. That process is still in the early days, but, for example, around that, there are big biotech companies that might be the suppliers of the manufacturing equipment or ones that could benefit from a stake in the facility. Those sorts of initiatives, configured and initiated in the right way, have massive potential to engage the international community. You could get very big players coming in and looking to be involved in that. But you have to have attractive enterprises happening. Skills are a big attractant; they want to come and work with people they know are cutting-edge, and we've got lots of those.
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Stryker commented that Australia’s HTA pathways were not ‘fit for purpose’ and therefore despite the many comparative advantages that Australia has for R&D and manufacturing, many international companies won’t invest in Australia. Mr Maurice Ben-Mayor, President, Stryker, illustrated this systematic problem:
I'm often asked, 'Why doesn't Stryker bring more R&D and manufacturing to Australia?' There are many reasons why we should. We've got a great hospital system. We have great clinicians and universities. The trends in individualised medicine favours us. There are favourable government grant programs such as the MMI and the MRFF. But the biggest issue is the uncoordinated and not-fit-for-purpose access pathways. At the moment, it's just too risky to invest when we have a system that could require eight years’ worth of evidence before we can even begin supplying in our local market, if we're lucky.
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Ms Jaime McCoy, of Gilead Sciences, suggested that the access challenges to medicines and devices was a barrier to local manufacturing as well as the unpredictable access to novel medicines such as cell therapy.
I think it's really hard, in my mind, to talk about manufacturing and also remove it from the access challenges that we face in Australia, because the reality is that all countries want manufacturing of pharmaceutical in their country. It's incredibly competitive. Certainly for Gilead and for most pharma companies, Australia is not considered a major market. We are one of the smaller markets. When we have unpredictability of access to things like cell therapy it's very hard for me or somebody in my position to be positioning Australia as a priority for manufacturing of cell therapies because, of course, there are other countries that also would like to have manufacturing locally.
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During a final public hearing, Adjunct Prof Skerritt, told the Committee:
The final area where people felt that we needed to have clearer guidance, especially around clinical trial requirements and manufacturing standards, was medicines made through gene technology. We've commenced a targeted stakeholder consultation to identify those issues and to see if there's a need for regulatory changes or explaining the current system better.
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Professor Alexander, CMRI discussed the need for more of a research and funding to target gene and phage therapy.
I'd like to see that whole pathway in Australia massively strengthened, because you not only get the patient benefit, but you get the economic benefits that flow with that—jobs and Australian IP being commercialised—and you get the economic returns.
In the space of GMP manufacturing of a recombinant virus, say, our workforce is not well developed. People who are interested in developing themselves in that space have many more opportunities overseas, and this is an area that we would really like to improve. We had a lot of trouble recruiting people for our efforts in that space. That was one of the major challenges we had in getting the right people for advanced therapeutics manufacturing.
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Professor Skerritt, discussed with the Committee during a public hearing the idea of the Australian Government offering vouchers as a research incentive:
What some governments have done is look at things like vouchers. In the same way we have an R&D tax concession and now we've got the patent box lower tax rate, it would be open to government to say, 'If you're a start-up here, why not get a voucher for your first couple of products?' That's a decision by government, of course.
Translational partnerships
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The Committee received evidence from two translational partnerships Monash Partners Research and Translation Centre and the Monash Institute of Medical Engineering (MIME) together with the Sydney Partnership for Health, Education, Research and Enterprise (SPHERE). These translational partnership groups provide advice and networks within Australia to support the translation of a new drug or device going through the commercialisation process, including clinical trials, registration and reimbursement.
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Monash Partners Research and Translation Centre and the MIME is a unique collaboration of university cross faculty collaboration along with government and industry that seeks to identify clinical unmet needs that are developed to deliver healthcare innovation for the Australian community. Its submission stated:
From modest start-up funds, we have delivered products now valued at $30 million and created IT innovation, now integrated into routine healthcare around the world.
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The aim of the MIME translation hub is to:
…turn real-world problems into solutions that are then out to market and into care. It's been in place for seven years and it models off international models that are very effective. It essentially, effectively, puts engineers in scrubs alongside a surgeon while he or she is doing an operation to see how they could do it better. Engineers see things very differently to what clinicians do. That's just one example. They see firsthand what the clinical problems are and how they could innovate and do it differently.
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MIME provided an example of what they can achieve using the translational approach:
An example of the sorts of things we've done is in our trauma departments, a new pulmonary decompression device, when people collapse their lungs in trauma. It used to be prehistoric what we did to them in terms of trying to get the air and fluid out of their lungs. Clinicians knew there must be a better way. Our engineers helped design a better procedure. There was a $50,000 seed grant to develop that device. It has just been valued at $30 million, and that has taken 18 months. The reason it happens is that we start with a problem. We don't start with a research issue; we don't start with a manufacturer. We start with a clinical unmet need, and then they pull that out to practice very quickly.
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SPHERE was established in 2016 as a collaborative partnership across 14 academic and healthcare delivery partners, including four health services, three universities and seven medical research institutes.
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SPHERE aims to integrate research and initiate top-quality education and professional practises across its partnership organisations to improve health outcomes, deliver better health care, generate economic benefits and be a magnet for recruitment, retention and investment.
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In 2020, SPHERE launched the HealthHatchery, a collaborative program to source, facilitate and fund the development of innovative healthcare technologies.
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Dr Peter Spencer, HealthHatchery informed the Committee that ‘our projects include products and services aimed at improving childhood and adult brain cancer outcomes, reducing post-operative pain for children undergoing tonsillectomy, enabling better outcomes for people with defecation disorders and optimising the clinical pathway for managing childhood genetic disorders.’
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Noxopharm suggested more support was needed from Government in connecting a number of biotech start-ups with universities, venture capitalists and business advisors:
Investment in the extension of this concept, tailored to specifically support early stage drug and MedTech companies, would benefit government and the companies alike. For government, the risk is lowered as the companies have completed the early proof of their scientific, design and business concepts, but still have a long road ahead in the clinical trial, registration and reimbursement processes. For companies, the benefits of an interconnected supportive development environment with access to clinical trial, registration and reimbursement expertise would streamline the development and commercialisation process.
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It suggested the following incentives could be offered to pharmaceutical companies seeking to develop new drugs in Australia:
Offer better benefits to the OS partner ‘if’ they team up with local companies – this may be biotech, vendors, CRO’s; extend to clinical studies. These biotech/vendors would then get the exclusivity with the investment money coming in.
Offer a financial incentive (broader funding opportunities and Australian market exclusivity) that specifically supports repurposing the off-patent and/or novel formulation of existing drugs
Set up an ‘automated’ network of collaborators - linking Advocacy groups with Biotech groups, Corporations and academic institutions to facilitate research in specialised areas such as orphan drugs, rare diseases or tailored therapies. By automated we mean using AI to link and notify collaborators of projects and funding opportunities.
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MIME highlighted the need for better coordination of the medical research sector across Australia. Professor Teede stated:
We have all these initiatives on a dartboard and there are very few people whose job it is to sit above them and link it up. We have spectacular bits of that dartboard in Australia. It is about how we create a system to bring it together in a timely way and out into manufacturing. There are many opportunities: the Modern Manufacturing Strategy, the $1.5 million, the road map that has been designed. But, again, it is putting money in silos; it is funding individual products.
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The Australian Cardiovascular Alliance proposed that:
Financial incentives or bonuses could be developed for Universities and Research Institutes, rewarded on the translational capacity of the research and level of partnership with translators, including industry, rather the current, primary measure of success- peer-reviewed publication.
Work visas
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Several stakeholders called for a change to the current restrictive 457 visas. The Australian Cardiovascular Alliance called for an increase to the Global Talent Independent Program:
Recruitment of talent in the specific area of pharmaceutical manufacturing is restricted with the current 457 VISA. The Global Talent Visa Program, also known as the Global Talent Independent Program, is an excellent streamlined visa pathway for highly skilled professionals to work and live permanently in Australia and covers 7 areas, including MedTech. However there are only 5,000 available.
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AstraZeneca also called for new work visas to attract global talent, since it is currently restricted with the 457 Visa.
Horizon scanning
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In recent years, there has been an emergence of medicinal products based on genes, tissues or cells. These emerging technologies provide new treatment options, including potential for patient‐centric and preventative medical interventions.
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The Department of Health (the Department) discussed the importance of horizon scanning and highlighted the need for it to ensure the Department has the capability to review emerging technologies.
Horizon scanning to determine the therapies that are likely to be submitted for regulatory review in the short to medium term is important, so that the Department (through both the Therapeutic Goods Administration and the Health Resourcing Group) has the right capability and capacity to either review, or commission for review, products based on new technologies.
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Mr Dale, MTAA, informed the Committee that in the past there had been a Council of Australian Governments horizon scanning unit that was called ‘HealthPACT’:
Its role was to essentially scan and look for new technologies that were on the horizon, particularly in the device area, and were likely to have an impact on state healthcare systems. They did an analysis—an initial analysis, if you like—of what the technology was, how it was used, and also some of the evidence base that was supporting it. In some cases, they went into much greater detail and those reports were actually published. I'm not completely sure the year that they stopped, but I think it was around 2011. Subsequent to that, the process continued, but their results weren't published. I assume they were shared within the state authorities. I've recently been advised by one of the state health departments that, in the most recent National Health Reform Agreement, which has many elements that we would welcome, the idea is that it will be reinstated in some form. Many submitters agreed there was an immediate need for an horizon scanning unit for all novel drugs and medical devices within the Department of Health.
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Mr Stuart Knight, General Manager Roche, was very supportive of the need to be more strategic and engage with companies that are developing new products early in the process before they go through the regulatory process. Mr Knight stated:
I certainly think there would be benefit in greater focus on horizon scanning—perhaps on showing what the areas of research are that we have and what might then be of particular clinical or medical interest to Australia. For example: we could then look at attracting greater clinical trials in areas that are seen as strategically important, or begin to think about what we would need to do to introduce new technologies or medicines in areas of disease priority that we'll have to overcome more quickly.
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Professor Andrew Wilson, Chair, Pharmaceutical Benefits Advisory Committee (PBAC) commented that:
Currently there is an absence of a nationally coordinated approach to horizon scanning for new important medicines that should be considered for health technology assessment. Given the boundaries between hospital and ambulatory care are becoming increasingly blurred, there is an increased need with some medicines to consider the shared benefits and costs between state health systems and the Commonwealth PBS/MBS. The PBAC notes the agreement of the Australian and State and Territory governments to explore a nationally cohesive health technology assessment approach and recommends medicines horizon scanning be included in this approach.
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Research Australia suggested that the Government should fund a joint Commonwealth and state and territory horizon scanning program:
This is essential to allow for Australian HTA process to have an up to date understanding of new medical technologies and devices. This will bring the latest medicines and technologies to Australians at a time when health technologies and therapies are rapidly changing and bringing exciting new treatments to patients worldwide.
It requires a regulator that is well placed to collect information about emerging trends in Australia and overseas and is able to consult quickly and effectively with product manufacturers, innovators, health professionals and consumers.
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Luminesce Alliance informed the Committee about the International Horizon Scanning (BNeLuxA) Initiative and suggested that Australia consider joining.
This is currently a pilot project involving eight European countries, that aims to seek successful ways of collaborating on pharmaceutical policy, anticipating the impact of high cost medicines. By utilising a central database to continuously gather data, analyse research and literature and facilitate information sharing about new and developing medicines, the framework serves to enable policymakers to identify future challenges, set priorities, improve insight in expected costs, and facilitate timely decision and joint negotiations for lower drug prices.
Repurposing drugs
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The repurposing of ‘old’ drugs to treat new conditions presents a regulatory challenge for government. The Department explained to the Committee what some of these challenges are:
the medicine has broader regulatory approval in other countries than in Australia and the only limitation is an Australian sponsor’s willingness to pursue an application to match the TGA approval with the overseas one by collating existing evidence; and b) the formal evidence to support a broadening of the registration needs to be generated.
There may be little incentive for a sponsor to generate the data required to support an application to register a new indication, and to pay regulatory fees for extension of indications to cover an additional indication. This is because some medicines are routinely used ‘off‐label’ for other conditions, and have become part of the standard clinical paradigm without having formal regulatory approval. If the medicine is cheap, or used in in‐patient situations there may not be sufficient incentive to seek TGA registration for the particular indication (and thus possible PBS reimbursement).
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Rare Voices Australia (RVA) informed the Committee that there are many examples of a medicine approved for a more common condition also demonstrating benefits for a rare disease. However, due to small numbers, it is not always commercially viable for companies to seek reimbursement for a rare disease indication. RVA stated:
It is difficult, if not impossible, for a non-pharmaceutical sponsor to submit an application. Without government reimbursement, many rare disease medicines are unaffordable for people living with a rare disease and their families.
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Medicines Australia (MA) suggested there needs to be incentives, to encourage innovative companies to invest in the level of research required to enable older, legacy products to be repurposed for new uses:
The costly and uncertain regulatory and reimbursement requirements contribute to this dilemma which ultimately denies patients benefit...
There needs to be a framework to rapidly update and/or repurpose older medicines via a simplified regulatory and reimbursement pathway to facilitate improved clinical outcomes for Australian patients.
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Amicus Therapeutic commented that for many Australians living with rare diseases, the promise of repurposing therapies is a symbol of hope that new treatments will be discovered and lead to better health outcomes:
In repurposing therapies, effective treatments for diseases may be discovered in a process that is faster and less expensive than starting from scratch, and often with a reduced risk of failure as the safety profile of the medicine is typically well-established.
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Amicus Therapeutics added that there are currently no incentives in Australia to encourage the repurposing of medicines:
While mechanisms such as orphan drug designation reduce the cost to register and reimburse a new indication, it doesn’t support the medicines industry to undertake critical R&D work that enables us to repurpose a medicine.
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The Committee asked Professor Skerritt if it would be possible for someone, other than a sponsor, to put in a submission for a drug to be reimbursed on the PBAC. He commented:
For repurposed drugs, for an indication where a company may not be interested, but the patient group and the prescriber group are certainly interested. I wouldn't want to bury the possibility of seeking public expressions of interest, but I do realise that companies are protective of their intellectual property and there would be a need for legislative and regulatory changes. There were other things, such as working on evidence generation.
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MOGA suggested making allowances for clinicians to make submissions to HTA processes for off-patent drugs:
We strongly recommend legislative reform that makes it easier for clinical groups like MOGA make submissions to regulatory bodies for approval of drugs especially for older, off-patent drugs with new indications, or for drugs to treat rarer conditions for which the budget impact is expected to be minimal.
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MA pointed out that the Australian Government is unable to compel a sponsor to make an application under the current provisions of the Therapeutic Goods Act 1989 (Cth). MA stated:
It is possible for non‐commercial entities, such as clinical colleges or patient organisations to become a sponsor of a product but they would need to take on the medico‐legal responsibilities for product stewardship that sponsorship of a particular medicine involves.
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MA added that ‘without a sponsor application to repurpose an established medicine, there is no basis upon which to initiate a formal assessment.’
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Adjunct Prof Skerritt informed the Committee that the TGA had recently explored different options on the issue of repurposing of drugs, including that the TGA held several workshops with industry and intends to propose options to Government:
Some people said it actually needs to start at the other end. If its repurposed use doesn't have the potential for reimbursement then, if it's an expensive drug, you wouldn't put it into the regulatory system. Another idea was to provide exclusivity periods. These are all the ideas, the kites that have been flown. Many of them will require changes to either laws or at least government decisions. A further idea was open access to real-world usage data and an international evidence basis.
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Mrs Nicole Millis, Chief Executive Officer, Rare Voices Australia highlighted the need for a new pathway to encourage drug repurposing for people living with rare disease:
For the average person on the street, where they have a common condition, the doctor will say, 'Take medicine A.' Maybe they've got a healthcare card and it costs them $6. For the person with a rare condition who takes medicine, their doctor will say, 'This will help.' It's not reimbursed. It might cost them $6,000. It sets up an alternative system which is uncertain and inequitable.
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Ms Delaine Smith, CEO, Australasian Leukaemia and Lymphoma Group encouraged the Government to establish a new pathway that would include Government support for research and data collection:
For therapies and technologies that have insufficient evidence to support reimbursement in the Australian market, enable a pathway whereby the PBAC or MSAC could commission the research on that new agent only, in order to collect and support the reimbursement data.
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MA suggested to the Committee that the Australian Government should hold a series of workshops with industry to co-design a way forward for repurposing drugs. This included to:
explore the full scope of repurposing that would be of benefit to Australian patients e.g. including closely related indications for oncology medicines
fully identify the barriers to repurposing
co-design policy, regulatory and reimbursement solutions to overcome these.
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Ms Sharon Winton, CEO Lymphoma Australia shared her concern that some patients are turning to the black market to purchase medicines:
We also feel that we need a pathway for the repurposing of some medicines, for example, biosimilars. They are proving to be more cost effective and can bring wider access to a much broader cohort of patients.
Pharmaceutical perspective
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Several of the pharmaceutical companies explained that there are a number of challenges with the repurposing of medicines. Essentially, the repurposing of a medicine occurs late in its lifecycle, with multiple brands and a price that reflects very low margins. This, combined with the uncertainty of pathways and high costs of TGA and PBAC submissions, act as disincentives for repurposing medicines.
There are number of hurdles including long assessment timeframes, high costs to the sponsor in multiple hundreds of thousands of dollars with no guarantee of fee waivers, or successful evaluation due to lack of conventional clinical trial evidence. These challenges need to be addressed through further system changes to make repurposing medicines for rare conditions a more viable option for sponsors.
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Roche made the following suggestion in relation to potential changes that could be made to incentivise sponsors to repurpose medicines for rare disease. This included reviewing real world evidence (RWE) and using it to support indication expansions:
A regulatory and HTA review could be expanded to consider both the evidentiary requirements and how evaluation processes need to change to ensure that the value of repurposing medicines for rare conditions is recognised and that price reductions aren’t a disincentive to providing repurposed treatment options. This review could include how RWE could be used as sufficient evidence to support further indication expansions of current medicines.
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AstraZeneca suggested promoting the registration of new and off-patent indications for rare diseases and giving consideration to the following incentives:
Voucher Program: Register an indication for a rare or less common disease in return for a priority review of a subsequent marketing application.
Market exclusivity: A period of market exclusivity will renew interest in medicines/ devices that are either off-patent or have potential for repurposing.
Where IP is expired, as in the case of re-purposed medicines, a cost neutral approach to meet an unmet need is appropriate.
Better clarity on how PBAC/ MSAC committees treat real world evidence (RWE) and secondary tiered data sources when addressing off-label and/or pan-cancer treatments.
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Amicus Therapeutics provided the following international examples of repurposing incentives to highlight ways in which the Government could encourage repurposing drugs for rare diseases:
The incentives includes an Orphan Disease Tax Credit, which offers a tax credit equal to 25 per cent of clinical trial costs for the development of orphan drugs, seven-year market exclusivity arrangements that prevents generics entering the market for these orphan indications, as well as fast-tracked and accelerated approval processes including for paediatric indications. The FDA states the program has successfully enabled the development of over 600 therapies for rare diseases.
The European Union offers 10 years of market exclusivity with an additional two years if the company complies with a paediatric investigation plan at the time of orphan medicine designation. Companies also receive reduced fees for regulatory activities as well as protocol assistance and access to the centralised procedure.
Taiwan provides a three-to-five-year data exclusivity period for a new indication; depending on whether clinical trials were conducted in Taiwan, as well as a 10-year exclusivity period for orphan drugs.
The Republic of South Korea offers de-facto data-exclusivity through its post marketing surveillance requirements, effectively combining the need for a local phase 4 study with a period of data exclusivity that can last up to 10 years, depending on the medical need.
Hong Kong provides an eight-year data exclusivity period as part of its patent system to provide incentives for new uses.
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Amicus Therapeutics suggested that the government could consider the ‘waiving of PBAC and TGA submission fees for orphan drug designations to five years [as opposed the 12 months] to encourage the repurposing of medicines.’
Additionally, we would suggest extending the waiving of all PBAC and TGA submission fees related to orphan drugs from the current timeframe of 12 months to the length of the exclusivity period as we believe this would encourage and support companies to continue investigating and following up with expanded populations such as paediatric indications for a therapy.
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Johnson & Johnson suggested extending data exclusivity could incentivise sponsors to repurpose certain drugs:
There is an existing mechanism, currently only for medicines, data exclusivity, which provides for a form of non-patent intellectual property protection for new data required to list a new treatment. This concept could be extended, where required, to ensure any new use of an existing product would be protected for a period sufficient to secure investment sufficient to produce new data. We note that Australia currently provides only 5 years of data protection whereas comparable jurisdictions provide between 8 and 12 years to better support research and development.
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Noxopharm suggested the Government could ‘offer a financial incentive (broader funding opportunities and Australian market exclusivity) that specifically supports repurposing the off-patent and/or novel formulation of existing drugs.’
Off-label prescribing
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Western Australia’s Department of Health told the Committee there is currently no mechanism that captures off-label prescribing practices or patient outcomes. It suggested:
This is untapped knowledge and there is potential for clinical risk. We recommend consideration be given to building a national mechanism to accurately capture off-label use and reasons for use, as well as to capture the outcomes (analogous to post-market surveillance).
Clinicians who have patients with rare diseases or clinical unmet need may prescribe off-label, however without a mechanism for data capture, the knowledge is lost and the benefit for future similar patients remains unknown.
It is suggested that any requirement to input and capture data of off-label prescribing needs adequate workforce resourcing and options investigated, such as mining of natural language processing and automatic data capture from electronic medical records, to ensure burden on clinical staff is minimised.
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PFIC Network were frustrated with the Australian system in that off-label medicines for PFIC patients can be very expensive and take a long time to be approved. PFIC raised the following two issues:
For rare diseases, lack of transparent and equitable pathways for repurposing existing treatments that are reimbursed for more common conditions.
Lack of clear pathways and length of time for rare disease patients to access orphan drugs, new treatments and personalised medicine.
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The PBAC commented that it is ‘aware of and concerned about situations where condition-specific clinical practice guidelines recommend medicines listed on the PBS but which are not PBS listed for those indications. This includes both on- and off-patent medicines. Such situations may lead to inequity in access to treatments.’
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The Children’s Cancer Institute explained that ‘in paediatric oncology there is a heavy reliance on off-label use of drugs, [however], appetite for risk of off-label use of drugs differs at different centres, again resulting in equity/access issue for patients nationally.’ The Medical Oncology Group of Australia likewise submitted that ‘the different coverage of on-label and off-label indications in hospital and PBS formularies may affect the continuity and affordability of treatment for patients.
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The Western Australian Department of Health expressed concern that ‘there is currently no mechanism that cumulatively captures off-label prescribing practices or patient outcomes,’ and that without such a mechanism while some patients can access the medicines, ‘the knowledge is lost and the benefit for future similar patients remains unknown.’ It recommended this be remedied by the creation of ‘a national mechanism to accurately capture off-label use and reasons for use, as well as to capture the outcomes (analogous to post-market surveillance.’
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The Centre for Law and Genetics noted that off-label use poses a number of difficulties due to the lack of evidence for the safety, efficacy and cost-effectiveness of the medicines in question, and the potential for it to ‘undermine regulatory and research processes’ by bypassing the TGA and diverting patients away from clinical trials.
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At the same time the Centre for Law and Genetics argued that it has a number of benefits, including helping to fill the gaps in medicine development caused by the commercial imperatives that drive the work of pharmaceutical companies, and ‘provid[ing] clinicians with the ability to respond dynamically to clinical challenges.’ Their proposed solution to the off-label dilemma was to enable a medicine’s registered indications to keep pace with its clinical use better.
Updating indications
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The challenge of keeping a medicine’s registered indications up-to-date, thereby minimising off-label use, was discussed by several submitters. In their joint submission the Medical Oncology Group of Australia and the Private Cancer Physicians of Australia wrote that:
TGA indications do not keep pace with evidence development. This is due to many factors including the complexity of the approval process; only drug sponsors can lodge an application for a new indication; lack of commercial incentives; off-label prescribing is clinically acceptable if supported by evidence; and, new evidence can be developed without the involvement of the original sponsor. Addressing these issues may improve the responsiveness of the registration process to changes in the clinical setting.
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The Centre for Law and Genetics commented that regulators should ‘take a more proactive approach’ to aligning a medicine’s registration with current clinical practice. It proposed ‘facilitating stakeholders other than the original drug sponsor to apply for extended uses of a medicine.’
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The Australian Amyloidosis Network identified the same difficulty with updating indications, and suggested providing an inexpensive process relying on overseas approvals for sponsors to use, or a pathway ‘without undue cost or complexity’ for clinician and patient groups.
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Medicines Australia argued that ‘there needs to be a framework to rapidly update and/or repurpose older medicines via a simplified regulatory and reimbursement pathway to facilitate improved clinical outcomes for Australian patients.’
Committee Comment
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The Committee understands that Australia has the potential to grow and capitalise on its research and development (R&D) sector for novel medicines and technologies over the next decade. Australia has a highly skilled workforce, a strong university research sector, valuable translational innovation hubs, and supportive cross jurisdictional funding and R&D initiatives.
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There was overwhelming industry support for the recent updates to the RDTIs for the healthcare sector in the 2020-21 Federal Budget. The Committee recognises that uncertainty around RDTIs or continuous tax adjustments creates disincentives for industry to invest in Australia. The Committee recommends the Australian Government ensure that the RDTIs remain stable and competitive internationally. In addition, the Committee encourages the Australian Government to promote the newly instated RDTIs to industry around the world.
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The Committee congratulates the Australian Government for introducing the Patent Box scheme in the 2021-22 Federal Budget. This is a strong measure that will attract international industry to invest in Australia for years to come. The Committee recommends the Australian Government review the implementation of the patent box every two years to ensure it is operating effectively.
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The Committee believes the Australian Government should focus on several more initiatives to continue to strengthen Australia’s R&D sector for health care. This includes the better coordination of the R&D sector to commercialise novel drugs and medical technologies. The Committee encourages the Australian Government to undertake a review of the sector across Commonwealth, state and territory funding with a view to having funding initiatives distributed in a methodical way throughout all stages of the R&D pipeline. Noting the work underway through the Modern Manufacturing Program. This review would feed into the development of an updated roadmap to facilitate the manufacturing and commercialisation of novel drugs and technologies in Australia.
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The Committee believes there is merit in extending the data exclusivity for orphan drugs and vaccines. The Committee encourages the Australian Government to investigate the benefits of increasing data exclusivity for orphan drugs and vaccines to a period of up to 10 years. This would encourage on-shore innovation and manufacturing of novel drugs and medical technologies.
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Manufacturing of medicines and medical devices requires further critical consideration in light of the COVID-19 pandemic. The Committee believes there are significant opportunities for Australia to capitalise on our world class research and university sector. This includes supporting the commercialisation and manufacturing of novel therapeutics and medical technologies. The Committee encourages the Australian Government to consider funding initiatives to support translational partnerships and the manufacturing of health care products for all Australians over the next decade with long-term funding initiatives.
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Overall, generic drugs have been beneficial for Australian consumers. However, the Committee heard evidence that suggested generic drugs were inhibiting innovation of certain medicines such as antimicrobials. The Committee commends the Australian Government’s pilot scheme for payment for hepatitis C drugs, which appears to have been successful, and urges the Government to consider implementing a similar pilot for payment of antimicrobials, in cooperation with the states and territories.
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The Committee believes there is an immediate need for the Australian Government to fund an horizon scanning unit within the Department of Health. The Committee suggests the Department of Health consider the creation of a partnership with the National Institute for Health and Care Excellence (NICE) in the United Kingdom to develop learnings that will assist Australia to establish an appropriate horizon scanning unit within the Department of Health, which is linked appropriately into the HTA process.
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The Committee acknowledges submitters’ concerns about the role that off-label use currently plays in the treatment of Australian patients for many diseases, and the inconsistencies and uncertainties that result. The Committee hopes that the recommendations it makes throughout this report to improve patient access, particularly access for patients with rare diseases, will go a large way to alleviating this problem. The Committee’s view is that, while it has its downsides, the system of off-label use provides necessary flexibility to clinicians and should be retained in its current form.
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The Committee acknowledges that reforms are needed to the way in which indications of already listed therapeutic goods are updated under the current system. The Committee believes that its recommendation for the Australian Government to establish an annually capped fund to support submissions without a commercial sponsor, and a recommendation to establish a new pathway that incentivises the repurposing of drugs for all diseases, will improve the way already listed indications can be updated in the future. The Committee believes that this should be considered as part of the broader rethinking of how the system supports repurposing.
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The repurposing of drugs has been an issue that interested stakeholders have been grappling with for several years. The Committee is emphatic that a solution needs to be arrived at that satisfies all parties, with the outcome ensuring that there is equitable access to drugs listed on the PBS for rare diseases.
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The Committee sees merit in the suggestion from Medicines Australia that encourages the Australian Government to undertake workshops with industry to co-design a way forward for the repurposing of drugs. Although some initial workshops have already been held by the Department of Health on this, the Committee believes it would be worthwhile undertaking a more comprehensive review to allow for an acceptable co-design option to be agreed upon between government and industry.