Wednesday, March 10, 2010

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Cancer, ischaemic heart diseases and cerebrovascular incidents--in that order--remain responsible for most deaths in the country. On a positive note, improved treatment, early diagnosis and reduced smoking rates have caused a 14% fall in cancer deaths between 1986 and 2004.

Cardiovascular disease accounts for 36% of all deaths in Australia and is the most expensive therapeutic area, costing US$5.5bn per year. Heart disease is the leading cause of death in women in Australia, claiming the lives of 30 women every day, totalling 11,000 a year.

Despite this, a Newspoll survey in June 2008 showed that more women believed that breast cancer is the leading cause of death amongst women. This survey also showed that Australian women had a poor understanding of factors that increase the risk of heart disease. A report from the Australian Institute of Health and Welfare, which tracks the number of deaths from cardiovascular disease in Australia, has shown a sharp decline over the last four decades. The report estimates that in 2006 140,000 fewer lives were lost than at the peak in the 1960s.

Breast cancer claims 2,600 lives annually. A study published in the International Journal of Epidemiology estimated that in the six months following Kylie Minogue's diagnosis with breast cancer in April 2005, breast imaging rose by 33% in women aged between 25 and 34 and 25% in women aged between 35 and 44. The number of breast biopsies carried out rose by 46% in women aged between 25 and 34 and 37% in those aged between 35 and 44. However, there was not a corresponding spike in the diagnosis of cancer.

According to a report released jointly by Cancer Australia and the Australian Institute of Health and Welfare in October 2008, the rising incidence of skin cancer in the country will put increasing pressure on healthcare facilities and may lead to unsustainable medical costs. The report also warned of the rapid spread of cases of Australia's most diagnosed cancer, non-melanoma skin cancer (NMSC).

Australia has about 700 new cases and over 200 deaths as a result of cervical cancer each year. The Australian department of health and ageing initiated a national human papillomavirus (HPV) vaccination programme in July 2007 for females aged between 12 and 26 years. The free 'catch up' vaccination programme for women aged between 18 and 26 concluded at the end of June 2009, but free vaccines for 12 and 13 years old girls will be provided on an ongoing basis through schools. As a result of this programme 5.3 million doses of Merck & Co's HPV vaccine Gardasil have been distributed.

It is estimated that a third of all cancer patients in Australia live outside major metropolitan areas and the Cancer Council says that these patients are more likely to die due to later diagnosis and difficulties in accessing treatment. A study published in June 2008 found that the incidence of breast cancer in women aged over 50 decreased by 6.7%. Two years ago, a WHI study triggered a dramatic drop in HRT use. Prescriptions of HRT dropped by 40% between 2001 and 2003.

According to an Australian Institute of Health and Welfare report released on 27 May 2009, the rate of Australians receiving dialysis and kidney transplants for the treatment of end-stage kidney disease rose by 26% between 2000 and 2007. In 2006, chronic kidney disease was a factor in nearly one in 10 deaths and accounted for more than a million hospitalisations in 2006-2007. Chronic kidney disease is particularly common in indigenous people, who also have a high rate of diabetes. Aboriginal people are six times more likely to receive dialysis and kidney transplants than non-indigenous people and the death rate from chronic kidney disease for indigenous people is 11 times that of non-indigenous people.

Obesity is a particular problem in Australia. The annual cost of the condition was approximately AUD21bn (US$18.6bn) in ill health and disability, premature death and productivity losses during 2008. This in turn negatively impacts the overall economy to the detriment of the entire population. Moreover, childhood obesity is reaching worryingly high levels. Latest figures show that one in four children is overweight. In related news, the number of diabetes sufferers is also on the rise, with current estimates suggesting that as many as 1mn Australians (or over 5% of the population) are affected by the condition. Most suffer from type II diabetes, which is linked with excess weight.

In February 2008, the National Health Commission estimated that between 50 and 60% of the health system burden related to individuals' lifestyle choices, and that supporting more Australians to quit smoking, exercise and eat well would reduce health care costs and human suffering significantly. Similarly, population ageing also represents a major challenge to the Australian healthcare system, with some 6.3% Australians, mostly among the older age groups, battling a variety of musculoskeletal conditions, including arthritis and osteoporosis.

In fact, the ageing of the Australian population is also causing a substantial rise in cases of macular degeneration (MD). The condition is the leading cause of blindness in the country, affecting more than 800,000 people, although it is often undiagnosed. Presently, it is estimated that MD costs the federal government AUD2.6bn (US$2bn) a year, although this figure is expected to rise to AUD6.5bn (US$4.99bn) by 2025, with the government expected to foot most of the bill. Genentech's Lucentis (ranibizumab), a treatment for 'wet' macular degeneration, the more common of the two types of the disease, has recently been approved by the US FDA, but is only available in Australia under special authority, due to its annual cost of US$6,000.

A major impact of Australia's ageing population will be dementia, which is set to increase by 400% and affect over 1mn people, according to a report from Alzheimer's Australia. BMI's BoDD indicates a similar prognosis, with DALYs lost to Alzheimer's and other dementias forecast to increase by 65.0% from 2008-2030 and account for over 7% of the country's disease burden.

Asthma is also becoming a common chronic condition amongst Australians, and children in particular, with a 14-16% prevalence rate, according to the Australian Centre for Asthma Monitoring 2005 figures. However, in May 2007, it was revealed that the incidence of asthma declined slightly, from 11.6% in 2001 to 10.3% in 2004/05, according to the Australia Institute of Health and Welfare. The incidence of AIDS continues to decline, having peaked in the mid-1980s, as a result of effective antiretroviral (ARV) combination therapy for HIV/AIDS.

Communicable Diseases

The latest health data from the OECD are positive, including 92% immunisation coverage for diphtheria, tetanus and pertussis, and 94% for measles. Australia has less than 1 case of measles per million of the population. On the negative side, Australians recorded a relatively high adult obesity rate of 22% and rising, which is related to the growing number of diabetes cases in the country. More worryingly, childhood obesity rates have increased sharply, potentially having a severe impact on the country's future health. Diabetes rates are growing rapidly and have more than doubled between 1989 and 2005, with 700,000 Australians suffering from the condition. The rise can be attributed mainly to growing levels of obesity in the country. It is estimated that in 2006, over 3mn Australians were obese, with the potential for this figure to rise to over 7mn within 20 years. It is also currently estimated that one in four children in Australia are overweight.

Mental Health Issues

The Australian government continues to be criticised over its handling of mental health. This is in spite of the increase in the number of state psychiatrists from 560 to 753, and psychologists from 696 to 1,417 over the past decade, according to the Human Rights and Equal Opportunity Commission (HREOC) and Mental Health of Australia October 2005 report Not for Service. The administration is committing AUD69mn under the youth mental health programme initiative in the coming years, although the overall mental health budget is stagnating at 8% of total healthcare spending.

However, mental health issues are the fourth most common reason for seeing a GP in Australia, accounting for 20 million prescriptions each year, and almost 3 million hospital bed days. The Australian Institute of Health and Welfare (AIHW) biennial report for 2004-5 indicated that 15.1% of females and 10.8% of males experience very high levels of psychological distress. Mental health problems account for 13% of the total burden of disease.

Figures released by the Australian Bureau of Statistics in May 2009 showed that the number of Australians reporting long-term mental and behavioural problems has risen by 200,000 in the last three years. There was a 9% jump in incidences of mental health problems between 2004-2005 and 2007-2008, from 2.1 to 2.3mn. Over the same period the number of Australians on medications or supplements for mental well-being doubled from 19% to 37%. Of those on medication, antidepressants (72%) were the most common, followed by sleeping tablets (27%) and anti-anxiety medicines (23%). This survey also showed that around 213,000 Australian children under 15 had mental or behavioural problems in 2007-2008, down from 263,000 three years earlier.

Aboriginal health (particularly mental well-being) is another area of concern. Indigenous people are admitted to hospitals at rates higher than other ethnic groups. While no factor can be isolated as the key cause of the trend, major factors include isolation, poverty and poor access to and understanding of healthcare.

In June 2008, researchers from the Universities of Newcastle and Queensland found that almost one in 12 young women in the country used antidepressants. This makes the medicine category the most frequently taken in the 18 to 23 years range, more than oral contraceptives and adrenergic inhalants for the treatment of asthma. BMI's BoDD reveals that depression resulted in the loss of 205,127 DALYs in Australia during 2007. This equates to 33.8% of the total neuropsychiatric condition burden. The burden of depression will increase marginally through to 2020, and then fall slowly through to 2030. Given that males are less susceptible to depression that women, we calculate that three fifths of this burden can be attributed to females.

Healthcare Reforms

In June 2009, New South Wales director-general Debora Piccone told The Daily Telegraph that the Australian system of free universal healthcare is set to disappear in as little as five years and is heading towards a US-style end user-pays system, due to an ageing population and out-of-control costs. This has prompted a radical plan for a new federal-state partnership to take control of hospitals and patient care. The state hospital budget (currently AUD13.2bn) is estimated to reach almost AUD50bn by 2025. There is also a concern that there will not be enough senior doctors to train medical graduates, with numbers expected to double by 2012.

By December 2009, the outgoing premier of New South Wales (NSW) suggested that the healthcare system in Australia should be managed by a single body supervising regional health authorities. This move is aimed at reducing cost- and blame-shifting activities. The premier also showed willingness to implement the concept in one of NSW's area health services, which could change the nature of healthcare in Australia, although it appears to be seen if his successor will continue along this path.

In late 2007, the new government under Australia's Labour party indicated its commitment to an AUD2billion program of wide-ranging healthcare reforms over four years. Its top priorities include improvements to waiting lists, tackling childhood obesity and a monitoring mechanism to know if results have been achieved.

Prior to the election, a poll identified health and Medicare--Australia's publicly funded universal healthcare system--as the key issue for voters, with 83% of respondents rating it as 'very important.' Other significant issues included education (79%), the economy (67%), the environment (60%) and national security (60%). Accordingly, Leader of the Labour party Kevin Rudd made health the spearhead of his election campaign.

An important issue is delays to receiving care in hospitals. It is thought that as many as 25,000 people are currently waiting longer than clinically recommended for surgical procedures. This is a concern, as, health ministers have been ordered to design ways to admit fewer people to hospital and release patients only when they are ready to leave, in return for government incentive payments. The government warned that it would consider a commonwealth takeover of underperforming public hospitals if the states had not begun implementing changes by mid-2009. In March 2008, the government also announced an additional AUD500 million for the public health system and training places for an additional 50,000 health professionals.

Worryingly, a report from the government released in July 2009 claims that savings of over US$1bn could be made if problems such as hospital-borne infections, incorrect dispensing of medicines and drug side-effects and patient falls were halved. Meanwhile 30% of Australians who suffer a chronic condition complain of poor co-ordination of care, duplication of clinical tests or inconsistent medical advice. Nearly 10% of hospital stays were found to be preventable, while only two-thirds of emergency patients were seen within clinically appropriate times.

A monitoring mechanism--based on the US Government Accountability Office (GAO)--has been proposed by members of the Australia Medical Association (AMA). They believe that the system will be able to see whether agreed outcomes are being achieved, and show the public that their tax dollars are being wisely invested. For example, data on medical errors--currently thought to cost the country AUD1.5bn (US$1.3bn) a year (although some estimates say that it could be as high as AUD2million)--are not being collected properly.

In February 2008, the new government formed the National Health and Hospital Reform Commission, fulfilling one of its election promises. The body will carry out a root and branch examination of the long-term problems of the national healthcare system, with a view to reducing expenditure and designing a health system that is capable of dealing with the challenges of the 21st century. Key areas under scrutiny are the different levels of government involved in healthcare, the extent of preventative healthcare, the relationship between hospitals and nursing home care, and rural health services. The government has not said whether it will introduce laws to give the commission the power to implement changes. The 10-member Commission will develop three reports for the government by the middle of 2009.

In January 2008, the government also announced plans to invest an extra AUD9mn over three years for the provision of more outreach specialists to rural and remote communities. Later in the year, the government has injected US$5bn into public hospitals, with the aim of improving infrastructure and equipment. Australian doctors have welcomed the government's effort to improve public hospitals.


In January 2008, it was announced that Medicare will create individual healthcare identifiers for Australians from personal information held on its databases in an AUD51.6mn (US$30mn) contract with the National E-Health Transition Authority (NEHTA), to support a nationwide shared electronic health records system. Records belonging to 99% of the population are in Medicare's Consumer Directory Maintenance System. In 2006, the Council of Australian Governments allocated AUD45 million to NEHTA over three years to develop individual healthcare identifiers and a further AUD53million to develop identifiers for healthcare providers. The Queensland branch of the Australian Medical Association said that this would improve efficiency and ensure that correct information is passed between private practice and hospitals.

Telemedicine is becoming increasingly prevalent, as healthcare reaches some of the most isolated people on earth. The sparsely populated Australian state of New South Wales recently deployed a videoconferencing system that links small rural hospitals to larger facilities, initially concentrating on mental health. Each outpost will be provided with a high-definition screen and camera that are mounted on a custom built trolley. This allows two-way visual communication, which is essential when assessing a person's psychological state.

Healthcare Expenditure

BMI calculated that, in early 2007, Australia's spending on healthcare topped US$70bn, or 10% of GDP. In January 2008, it was reported that this spending had risen to over AUD80bn. This is significant because the country now joins Canada, Switzerland and the US as the only major developed nations that spend more than one-tenth of national wealth on health. By way of comparison, France, the UK, Germany and Japan do not spend that much. BMI expects Australia to continue to increase its spending on healthcare, although the government is looking into ways of cutting unnecessary costs.

Australians enjoy excellent health and frequently live to an old age. However, this level of care comes at a cost, principally raising out-of-pocket expenses. According to figures from the Australian Institute of Health and Welfare, citizens are spending AUD16.9bn (US$14.1bn) a year from their own wallets and purses on healthcare, despite the government-funded universal Medicare system that is meant to cushion them from health costs. On average, each Australian spent an extra AUD805 (US$671) annually. In 2004/05, Australians spent AUD4.7bn (US$3.9bn) on medicines, or AUD227 (US$189) per person. Dental bills, glasses, hearing aids and ambulance costs also add to out-of-pocket expenses. Dental treatment costs an average AUD159 (US$132), while spectacles, hearing aids and other appliances cost AUD144 (US$120).

The country now has the sixth-highest out-of-pocket health expenses in the developed world. While this extra expense is easily absorbed by the wealthy, the less well-off find it hard to source this money, leading to some sectors of society forgoing medical intervention. The situation is set to escalate further, as out-of-pocket expenses are growing at twice the rate of inflation.

On the other hand, the reforms of the PBS appear to be working, as the number of concessional scripts is increasing, but spending is capped. In 1994-95, the PBS underwrote approximately100mn prescriptions. Over a 10-year period, this figure had increased by over 40%, partially driven by the population increase, but mainly by greater dispensing to the elderly. Meanwhile, during the 2005-06 period, the total amount spent on pharmaceuticals funded by the PBS was AUD7.3bn (US$6.4bn). This reflects growth in real terms of 2.7% from the previous year, but marked a fall from the average annual growth of 9.1% for the 1995/96 to 2005/06 period. In the twelve months to June 2009, the number of PBS scripts rose to 181mn, up by 5.5% in relation to the previous period, reaching AUD7.7bn in value.

However, a survey by the University of Sydney and the AIHW showed that from 1998 to 2008 GPs in Australia have reduced their prescription rate from 93.6 prescriptions per 100 consultations to 83.3 per 100 consultations. There has been a 19.42% drop in the prescription of antibiotics for respiratory diseases. Volume of prescriptions on the PBS rose just 0.1% last year. The PBS cost taxpayers AUD$6.5bn last year. It has been suggested that this is in part due to the increasing number of products that are available OTC.

Prescribing Patterns

Results of a national survey published in January 2008 indicated that Australian general practitioners (GPs) write out significantly fewer prescriptions than they did a decade ago. Nevertheless, spending on pharmaceuticals continues to rise as more OTC medications are consumed and hospital doctors keep on administering expensive drugs.

The study was conducted by the AIHW and the University of Sydney. Research found that since 1998 the number of prescriptions written by GPs per 100 patient visits had fallen from 93.6 to 83.3, or just over 11%. The drop is widely attributed to a cultural shift in which prescription pharmaceuticals are not seen as an automatic remedy, usually in favour of 'green prescriptions', no intervention or self-medication. A green prescription is a card with exercise and lifestyle goals written on it, given by a GP to a patient. Furthermore, an increase in the number of fixed-dose combinations--such as UK company GSK's Accuhaler (fluticasone + salmeterol) for asthma--has contributed to the downturn.

For many years there have been efforts in Australia to reduce the prescribing of antibiotics, because overuse results in bacterial resistance and unnecessary healthcare expenditure. Cefaclor, doxycycline and erythromycin experienced the greatest decrease in scripts written. Nevertheless, antibiotics are still the second most prescribed therapeutic class and amoxicillin is the most popular drug, accounting for 4% of all prescriptions. Three of the top five medications were antibiotics, and two were plain and combination paracetamol.

In the wake of the Vioxx (rofecoxib) scandal, prescribing rates for anti-inflammatory and anti-rheumatic drugs acting on the musculoskeletal system were significantly lower in 2006-2007 than in all other years. Meanwhile, the decrease in vaccine numbers reflects the move towards combined vaccinations, particularly in the case of childhood immunisations. BMI expects this trend to continue as more combination vaccines such as Pediacel--which is manufactured by French firm Sanofi Pasteur and protects against diphtheria, tetanus, whooping cough, polio and Haemophilus influenzae infection--are developed and commercialised.

Prescriptions for drugs acting on the renin-angiotensin-aldosterone system displayed the greatest increase, as the incidence of high blood pressure rose. There were approximately 2.5mn more GP prescriptions for these agents in 2006-2007 compared to a decade earlier. Rates of statin use, particularly US-based Pfizer's blockbuster Lipitor (atorvastatin), were also up, as were prescriptions for anti-depressants, thyroid disorder therapeutics and anti-thrombotics.

Private Healthcare Insurance

In May 2008, it was warned that there may be a double-digit rise in the cost of private health insurance premiums. This is in response to government proposals to double the AUD100,000 income threshold at which a single person without private health cove is forced to pay the 1% Medicare levy surcharge. It is predicted that this will result in 400,000 people dropping out of private insurance funds. The threshold for couples will rise from AUD100,000 to AUD150,000.

In a positive development, Australia's private health funds may soon begin offering discounts to people who live a healthy lifestyle. Health insurers are proposing reduced premiums for members who give up smoking or lose weight. However, the federal government would have to change laws that prohibit insurers from offering discriminatory pricing. Some private health insurers are suggesting that these proposals be applied to the Medicare system as well.

According to official figures, an extra 150,000 people signed up for private health insurance in the course of 2005, with 17,000 taking up cover in the quarter ending June 2006 alone. One of the main reasons for the increase is the private insurance rebate, which has saved the average privately insured family over AUD1,000 (US$761) a year. The figures take the total number of Australians covered by private insurance to a record 10.2mn. The trend is likely to alleviate financial pressure on the public healthcare sector, which is responsible for 67% of the total.

However, in September 2008, Family First Senator Steve Fielding voted with the opposition to defeat the federal government's bill that planned changes to Australian government agency Medicare's levy surcharge thresholds. The bill aimed to raise the income levels at which the Medicare levy surcharge starts for taxpayers not having private health insurance from AUD50,000 (US$45,288) to AUD100,000 (US$90,575) for singles, and from AUD100,000 (US$90,575) to AUD150,000 (US$135,863) for couples.

Biotechnology and Research

The Australian biotech industry originated as a number of small companies, which fragmented management and scientific expertise. At that time, multinationals were largely responsible for pharmaceutical R&D. However, as large numbers of expatriate Australians working in the life sciences sector and in venture capital started to return home, the local industry gained significant expertise and foreign backing. By the end of 2006, Australia boasted around 430 biotech companies, over 120 of which were listed on the stock exchange. Most companies are focused on human therapeutics, agri-biotech and diagnostics. According to figures provided by the government of the state of Victoria, market capitalisation of the top 10 Australian biotechs rose from AUD7.5mn in 2001 to over AUD21mn in 2008.

The country's biotech sector has matured impressively in the last few years. Most Australian biotechnology firms are spin-offs from the research sector, with some 50% of new firms created in 2004 emerging from public research organisations. At present, Australia has more core public biotechnology companies than any other country in the Asia Pacific region, as a result of growth in government funding over the past several years and a steady flow of venture capital. Australia has one of the most dynamic biotechnology industries in the Asia Pacific region, generating almost US$1bn in sales per year.

Australia now ranks sixth in the world in innovative biotechnology, according to Anna Levelle, chief executive of AusBiotech, and Serg Duchini, national R&D tax services leader at Deloitte. The country's biotechnology industry association, AusBiotech, previously also asked for a system of matched grants, much like the axed Commercial Ready program, in which small grants were given for proof of concept projects and larger grants of AUD3-10mn for companies in existence now that are moving to clinic. AusBiotech, which boasts over 3,000 members that jointly export over AUD5bn worth of goods, estimated that this would cost AUD250mn.

Although the sector is relatively insignificant when compared to those from the US or Europe, it boasts a number of advantages, including highly skilled staff, world-class technologies, a reliable infrastructure and utilities, an abundance of competitively priced raw materials, increasing federal and state government support through funding and infrastructure assistance, a clear business cost advantage in running R&D facilities compared with other countries, and--crucially--one of the most effective and modern systems in the world for protecting IP in terms of patents and copyright enforcement.

Australia's government has set up an AUD83mn Innovation Investment Follow-on Fund (IIFF) and a R&D tax credit to help cash-poor biotechnology firms weather the financial crisis. The IIFF will be released to licensed venture capital firms to invest in small technology companies. Australia was the fifth country to introduce such a tax-refundable credit and because this follows a similar move by the Indonesian state, BMI believes that a regional trend may be emerging. BMI notes that the initial funding of AUD83mn (US$57mn) will not go far, as there are 1,113 biotech firms in Australia. Nevertheless, in 2008, the state of Victoria alone spent AUD555mn on biotech R&D, up by 14% on 2007.

AusBiotech accordingly wanted more assistance. First, it asked for a 50% refundable tax credit for companies with a turnover of less that AUD50mn (US$35mn), which would cost the state approximately AUD300mn (US$207mn) over the next two years. In May 2009, the government approved the 45% refundable tax credit for R&D, applicable for companies with a turnover of under AUD20. Second, it was asking for a system of matched grants, in which small amounts will be granted to proof-of-concept projects, as well as larger endowments of between AUD3-10mn (US$2-7mn) for companies in existence now that are moving medicines into clinical evaluation.

Australia reportedly represents the world's second-most cost-effective location for biomedical R&D and medical device manufacturing, and the third most cost-effective location for clinical trials. Overall, the guaranteed sales inherent in the PBS market, combined with a well-regulated operating environment, make Australia an attractive investment destination. Most of the local and foreign pharmaceutical firms operating in the country have some R&D interest. In the spirit of trans-Tasman relations, the New Zealand government confirmed its support for the Australia New Zealand Biotechnology Partnership Fund, with a contribution of NZD25mn (US$19mn).

The Australian industry is increasingly focusing on R&D. According to the figures released in February 2008 in the Innovation Dynamics' Australia New Zealand (ANZ) Drug Pipeline database, Australian biotechnology and pharmaceutical companies have over 450 drugs in clinical development, up by 8% in relation to the previous year. The most significant change was in the largest therapeutic field, oncology, which recorded a 29% y-o-y increase. Neurology and analgesia development compounds were 16% higher than in the previous twelve-month period. Around 180 compounds are in Phase I through III human clinical trials, with over half being in phases II and III. More and more companies are entering Phase III clinical trials, signifying a maturing environment.

Recent Developments in the Biotechnology Sector

* In September 2009, Australian biotechnology company HalcyGen Pharmaceuticals was set to become a big player in the Australian healthcare industry after forging a deal with Hospira Australia, the Australian subsidiary of Hospira. HalcyGen has entered a deal with Hospira to acquire all of the outstanding shares of its local business division Mayne Pharma International for US$15mn.

* In August 2009, Australian biotech company Immuron held talks with a major pharmaceutical company over the development of its flu drug. The company has already achieved positive results in flu antibodies in preclinical animal trials, and expects the drug to help boost the effectiveness of vaccinations and flu treatments, especially in the elderly and young populations. Immuron is aiming to sell the product over the counter.

* In June 2009, StemCells Incorporated, the US-based owner of Stem Cell Sciences in Melbourne, reported that it is planning to close its Australian operations. As a result, Mesoblast is the only local stem cell biotechnology firm after Bresagen and Embryonic Stemcells also left the sector in Australia.

Clinical Trials

According to a recent report, Australia is the best location in the world to conduct clinical trials, thanks to the low cost, the large number of recognised trial sites and the high proportion of trials concluded on schedule. The study ranked Australia against the US, UK, Germany, Japan, Singapore and India.

On average, Australian trials cost 30% less than in other developed markets such as the US or Europe, while regulatory delays are far shorter. A trial can begin within two to three months from the initiation of the approval process. As a result, Australia's clinical trials sector was forecast to grow 15% in 2006, driven by increased business from major firms.

However, Australia has come under fierce competition from the likes of India and China, which offer lower cost alternatives, although their IP protections are inadequate by comparison. Meanwhile, drug firms have also stood accused of manipulating clinical trials in order to gain commercial advantage. For example, two drugmakers postponed the publication of data showing their medicine was less effective than first thought because of concerns over the impact it would have on business. In another example, drug companies refused to fund research into the potential side effects for different patients, as this could limit their market.

The problem is that the firm conducting the clinical trial owns the information and will therefore seek to present it in the most favourable light. Pharmaceutical companies fund most trials in Australia with the government providing little financing in this area compared with other countries, which can lead to a conflict of interest. In a recent survey in The Medical Journal of Australia, approximately a quarter of specialists reported 'unsatisfactory dealings' with the pharmaceutical industry, including practices such as putting a positive spin on a drug candidate by selectively editing the clinical trial report.

Medicines Australia, which represents drugmakers in the country, has denied the allegations, claiming that pharmaceutical companies provide ample testing for toxicity. If anything, safety standards have become more stringent over the past few years, resulting in spiralling costs for drug development. One recent guideline requires clinical trials to be recorded on databases to promote greater transparency. Subsequently, in May 2007, Medicines Australia welcomed the 'important' announcement in the national budget of an AUD436mn (US$369mn) grant for medical research.

Recent Developments in the Clinical Trials Industry

* In December 2009, Australian biopharmaceutical company Clinuvel Pharmaceuticals reported promising results for afamelanotide in a multicentre randomised Phase III study in erythropoietic protoporphyria (EPP) patients. EPP is a genetic disorder which causes patients to be intolerant to visible and ultraviolet light, leading to the accumulation of protoporphyrin IX, created during the production of haemoglobin, in the skin. It also increases the risk of phototoxic reactions that cause pain and ulcers on the skin.

* In December 2009, US-based Amarillo Biosciences reported that it is finalising its clinical trial of oral interferon as prevention/treatment of influenza and other respiratory illnesses, which has been taking place in Perth (Australia). The study, which was conducted by staff within the Microbiology and Immunology Discipline (BBCS) at the University of Western Australia, received funding support from the regional Department of Health. Preliminary phase II results suggest that the product is well tolerated.

* In the same month, Australia's Innovation and Health Ministers announced that the Rudd government will present the country as a good place to conduct clinical trials. However, the ministers feel that competition from low-cost centres is likely to threaten the country's long term competitiveness in the clinical trials segment.

* In September 2009 Australian company Peplin announced a definitive merger agreement whereby multinational Leo Pharma would acquire all of its outstanding securities for US$287.5mn. Peplin's lead product candidate, PEP005 Gel, is currently in phase III clinical trials for actinic keratosis.

* In August 2009 biotech firm Biota announced positive phase III clinical trial results for an influenza candidate. The drug, which uses inhalation as the route of administration, is claimed to be as effective as 10 doses of Roche's Tamiflu (oseltamivir). Biota is to pursue clinical trials in Western Europe and North America.

Medical Devices

The Australian medical devices market is regulated by the Therapeutic Goods Act and its amendments, with the Office of Devices, Blood and Tissues (ODBT) as the specific TGA body charged with the area of medical devices. Three statutory committees--the Medical Devices Evaluation Committee (MDEC), the Therapeutic Goods Committee (TGC) and the National Co-ordinating Committee on Therapeutic Goods (NCCTG)--provide advice on matters of safety, quality and availability of medical devices, among other issues.

Medical devices are classified on the basis of different levels of risk for each class of device into five categories: Class I, IIa, IIb, III and Active Implantable Medical Devices (AIMD). All legally supplied medical devices must be included in the Australian Register of Therapeutic Goods (ARTG). Legislation stipulates steep fines for illegal importing and other activities. For example, misrepresentations of medical devices carries a maximum penalty of AUD6,600 for individuals and AUD33,000 for corporations.

In recent years, the medical devices industry has been recording annual growth of around 15%. The three leading companies represent 60% of the sector and have a market capitalisation valued in excess of AUD4.3bn. In total, Australia boasts over 650 medical device manufacturers, most of which are represented by the Medical Industry Association of Australia (MDIA).

Within the market, the industry sales are estimated in the region of AUD2bn per annum. Domestic companies manufacture around AUD720mn worth of output, with over AUD600mn of this figure destined for exports. Local demand is largely met by imports, which constitute around 90% of the market. The US is the leading supplier.

The potential for further growth of the Australian medical devices market is based on a wealthy and ageing population, public tendering for hospitals, developed domestic industry and market, strong research and commercial ties, among other factors. Some of the Australian-made devices presently sold in a number of countries around the world include the Cochlear bionic ear system, the Ventracor left ventricle assist device and Polartechnics cancer-detecting technology. According to TGA figures, in 2006, it received in excess of 5,000 applications for new device registrations. However, economic slow-down and the emergence of other regional medical devices industries pose threats to the growth in the coming years.

Table Examples Of Medical Devices Classifications

Class I Class IIa Class IIb Class III AIMD

Examination Gamma Blood warmers Heart Implantable
gloves cameras valves drug infusion

Gels Hearing Infusion ports Vascular Implantable
aids stents pulse

Beds Crowns External Implantable
defibrillators electrodes

Source: Therapeutic Goods Administration (TGA), February 2008Recent Developments in the Medical Devices Sector

* In December 2009, Australian diagnostics specialist HealthLinx, which launched the first early-state ovarian cancer test OvPlex in Australia in 2008, announced that its product would also become available in the UK in 2010. The company received the CE approval in June 2009 for the diagnostic tool, which is based on the measurement of five protein biomarkers found in blood. Company estimates indicate that the number of units that could be sold in the UK is as high as 750,000, given that the country records 7,000 new ovarian cancer cases annually.

* In February 2009, RSDecon, a unit of US companies Bracco Diagnostics and Counter Terrorism Solutions, has won approval from Australia's Therapeutic Goods Association (TGA) to market its RSDL chemical warfare decontamination lotion. RSDL neutralises chemical agents, such as T2 toxin, allowing them to be rinsed from the skin with water. The product will be marketed for the security forces and other first-responders in the event of a chemical warfare attack.

* In February 2008, Sonic Healthcare, a pathology and radiology provider announced that it was still on track to deliver 20-25% revenues growth for the full year despite taking an AUD40mn loss due to the rising dollar. Sonic Healthcare is also confident of annual EPS growth of at least 12%. Sonic's net profit for the six months to December 31 2007 rose 21% to AUD113mn while interim revenue rose 28% to AUD1.1bn. Half of Sonic's business comes from outside Australia; however it expects organic growth of their pathology business in Australia of 9%. In the last 2-3 years the company has doubled in size, with an additional AUD1bn added to its revenues.

* In February 2008, the state of South Australia created an AUD3.3mn programme for the development and production of high-tech medical devices. The programme will be led by the Flinders University and include partners from commercial and manufacturing spheres. The scheme received AUD0.565mn funding from the Premier's Science and Research Fund, with additional funding to be provided by partners, including the Commonwealth's Office for the Ageing.

Source Citation
"Industry trends and developments." Australia Pharmaceuticals & Healthcare Report Apr. 2010: 27+. General Business File ASAP. Web. 10 Mar. 2010.
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