OPINION: Taking advantage of our clinical strengths

Australia, take a bow -- you've proved you can compete in the global clinical trials market. But let's not get too complacent, writes Graeme Blackman.

Being ranked up with the best in the world is one thing. Staying up there is another.

The release of the long-awaited Economist Intelligence Unit benchmarking report into the pharmaceutical industry has -- on the surface at least -- presented a very strong picture for Australia. Against six other countries and competitors, Australia ranks number one in the key area of clinical trials. Overall, it came second behind Singapore, and ahead of the United States, United Kingdom, Japan, Germany, Singapore and India.

As a $12 billion industry, the pharmaceutical and biotechnology industry is already a major contributor to the Australian economy. It employs 35,000 people across more than 300 firms and institutions, more than $500 million is invested each year in research and development and with exports of almost $3 billion a year it is the second largest contributor among manufactured goods, overtaking wine.

This study is an important yardstick for pharmaceutical companies in Australia in terms of going forward with our Pharmaceutical Industry Action Agenda. The hard-headed businessmen and women who run multinational pharmaceutical companies need to see that Australia is a positive, competitive and high-technology environment in which to direct their investments.

And if we intend meeting the Action Agenda target of doubling our share of the world pharmaceutical market by 2012, then we cannot stand still.

Potential

The story for clinical trials has certainly been good so far. The report finds that not only do we do well on low average costs for clinical trials, with a relatively large number of recognised trial sit

Yet the warnings are there: some very cost-competitive locations to conduct clinical trials are emerging in the Asia-Pacific region and in Central and Eastern Europe. There are also concerns about possible regulatory changes Australia, adding new costs and delays to the commencement of trials.

These challenges could easily turn a competitive advantage into a competitive disadvantage.

Australia also shows up strongly in intellectual property, but with no particular advantages over any other market except India (at present). The study did not consider IP provisions associated with the Free Trade Agreement with the United States and the impact of these provisions on Australia's investment attractiveness remains unclear.

Meanwhile, India has a new IP-compliant regime, making it all that more attractive to international companies in the very near future. India significantly outperforms Australia on salaries and other employment costs, so we will need to keep a very keen eye on this enormous competitor. The same goes for China, which was not among the benchmarked countries.

While we're rated highly, the country that's better than us across the majority of factors studied is Singapore. This is all the more problematic because it is in our region, and Singapore's low business and personal tax regime adds another layer of challenges.

One surprise is Singapore's considerable outranking of Australia on skilled personnel in the pharmaceutical industry. Australia is highly regarded for its scientific and medical research expertise and the quality of its infrastructure. Does this observation sound a warning to Australia about the skilled personnel and knowledge-based industries generally? Will this limit the ability of start-up companies, particularly in biotechnology, to purse medicines development at home?

Tax incentives

We may also rate well on government support, but again Australia falls behind Singapore. The general lack of taxation and other incentives being offered by competitor countries means Australia cannot compete in attracting large-scale manufacturing and research and development plants.

The report was launched recently by the federal Minister for Industry, Tourism and Resources, Ian Macfarlane, which the industry warmly welcomed. The focus on investment needs to be maintained, especially in research and development.

The other challenge is to ensure our regulatory system remains competitive and matches best practice in terms of timeliness. Our intellectual property must remain among the strongest in the world, and industry and government must continue to work in partnership to make sure the pharmaceutical and biotechnology industries operate in a globally competitive fashion.

Failure to act will see Australia's pharmaceuticals industry fall behind, with increased flight of researchers and their research to more lucrative markets, limitations to the abilities of start-up companies to pursue drug development at home, and dissipation in manufacturing activity and exports.

Australia will never be able to compete with increasingly geared-up countries, like China and India, in mass production. Our future lies in using the advantages we have, such as a highly skilled and committed workforce, and partnerships with world-class medical and biotech researchers, to continue to produce the innovative drugs that consumers here and abroad will increasingly need and demand.

Full implementation of the Action Agenda is essential for industry growth and can deliver major benefits for Australia. Industry investment is based on long research and development lead times and high risk expenditure, which require a steady and consistent policy environment and the express support of governments.

This speaks to the need for government to renew and enhance its commitment to industry development; otherwise Australia will slip very quickly down that ladder of competing countries.

Dr Graeme Blackman is chairman and managing director of Institute of Drug Technology Australia and chair of the Pharmaceuticals Industry Action Agenda Implementation Group. Medicines Australia, of which Dr Blackman is a director, represents research-based pharmaceutical, biotechnology and contract research companies.