Opposition grows in face of PIIP axing rumours

Industry protests are coming loud and long following reports that the federal government's PIIP (Pharmaceutical Investment Incentive Scheme) may be axed in the next budget.

But Dr Graeme Blackman, chairman of the Pharmaceuticals Industry Action Agenda, asserted that rumours that PIIP or its successor would be axed were pure speculation until the federal budget is handed down in May.

"We need significant planks in place, part of a plan that aids the industry and the economy," Blackman said in defence of PIIP. "A policy going forward is essential -- the whole industry spoke at the highest level and was united in its consensus to move forward towards a model plan."

Blackman, who is also managing director of Melbourne-based company Institute for Drug Technology (ASX: IDT), referred to a recent report on PIIP by the Productivity Commission which he described as "quite decisive" in its recommendations for a continuation of an R&D-based incentive for the major drug companies in Australia.

Nonetheless, some sections of the industry are still lukewarm about the benefits PIIP has brought to the biotech sector. Chris Naughton, managing director of local biotech Novogen, claimed that PIIP was not really directed at the biotech sector anyway, even though he admitted that it had caused a trickle-down effect of funding.

"It basically addressed the issue of an incentive to attract big drug companies even with low [retail] drug prices. It was purely about bringing big pharma and their infrastructure to Australia," he said.

Naughton asserted the usefulness of the scheme was limited mainly to companies that had existing product, not to researchers. "The tax break was only an incentive if you already had a product. That doesn't apply to biotechs," he said.

Alan Evans, former Medicines Australia board member and self-confessed architect of the PIIP scheme, was less keen to divide the pharma and biotech aspects of the scheme, and said it would be a "major disappointment" if PIIP was to be axed.

"If no scheme was to follow on from PIIP the major drug companies will take their biotech research offshore. We need capital here for biotech research, but the removal [of PIIP] would condemn the pharmaceutical industry and the R&D sectors too. We need the pharmas to help with our biotechs," he said.

Evans claimed the proliferation of biotech start-ups and major pharma and was one of the key objectives in initiating the PIIP program. Additionally, he said, it allowed the government to keep retail prices low for many drugs, whilst still enabling pharma to maintain the shareholder profits they sought.

"If Australia cuts the PIIP scheme entirely, it will send a clear negative signal to the overseas boards of major pharma. The will see it as a 'cost, not opportunity' approach which would be a shame," he said.

"If the government just fiddles with the R&D scheme only, they won't see any overseas investment. The pharmaceutical industry is a global industry. It is looking for centres of research and of production. We have to decide if we want to be one of those centres," he added.

The fate of PIIP or its successor will be determined by mid-May, but the writing is not yet firmly on the wall. In fact the cynics might say the rumour of potential cuts could just be the government testing market reaction.

"All this stuff might just be a controlled leak to test the water prior to making a decision. It has happened before," noted Naughton.

PIIP 'irrelevant' to biotech

Naughton claimed PIIP was not relevant for most Australian biotechs in any event, and that it would be more useful to invest in the seeds of the biotech industry -- education.

"The health of our universities is much more important than the establishment of prescription sales in Australia," he said. "Our audience is overseas investors and head offices of the big pharma. There was no real connection between PIIP and local biotechs.

"We deal directly -- not with the local offices."