How the pharmaceutical industry is paving the way to build Australia's R&D capacity.  By Paul Ly, Research and Development Manager, GMP Pharmaceuticals

Recent months have seen increased discussion on the growth of Australian research and development (R&D), with research agencies, universities and the government agreeing there is a need for greater investment in the sector. The pharmaceutical industry is one of the biggest contributors to research and development in the country and is currently a burgeoning market. This puts it in a prime position to build Australia’s R&D capacity.

According to the latest government figures, R&D expenditure in Australia is 1.8% of GDP, which is below the OECD average of 2.67%. Government spending specifically has been declining over the years, with an average of 0.61% of GDP since 2010-11, and only 0.17% in 2020-21. It is worth noting that Australia is currently ranked 91st on the global Economic Complexity Index, while countries in the top 10, such as Japan, Germany and the United States, all spend more than 3% of their GDP on R&D, and are considered world leaders in research.

Ahead of the 2022 election, Labor pledged to work towards spending “closer to 3% of GDP” on R&D, but is yet to deliver a plan to achieve this goal. In February, Australian researchers urged the Government to do more to deliver on this promise, with pre-Budget submissions pushing for greater investment in R&D from the Australian Academy of Science (AAS), Science and Technology Australia (STA), Research Australia (RA), Universities Australia (UA), Cooperative Research Australia (CRA), the Australian Technology Network (ATN), and the Australian Academy of Technology and Engineering (ATSE).

Research and development forms an integral part of the pharmaceutical industry, which has experienced exponential growth in recent years, fuelled by a heightened awareness of health and wellness among consumers. In fact, the latest figures from Austrade show that life sciences research in Australia is ranked eighth globally overall.

One of the key drivers of this is the export opportunity provided by pharmaceuticals. Health and life sciences have become some of our largest export sectors, worth $5.6bn in 2021. A significant portion of this is attributed to the Asia market, with its ageing population leading to greater demand for medicines. Free trade agreements with China, Japan and Korea are boosting Australia’s pharmaceutical industry, and existing relationships with Asian universities are providing opportunities for R&D collaborations.

Another reason the pharmaceutical industry is poised for R&D growth is through grants and incentives.

While businesses across all sectors are eligible for the government’s R&D Tax Incentive, which offers tax offsets for eligible R&D expenditure, there are more specific incentives for pharmaceutical organisations to leverage. For instance, The Patent Box encourages R&D to be undertaken in Australia through a $206m scheme to reduce taxes on income from Australian medical and biotech patents. Additionally, medical products have been designated as a priority area in the $2.5bn Modern Manufacturing Strategy.

The demand and opportunity in pharmaceuticals, alongside local grants and incentives, are encouraging more industry players to grow R&D in Australia. As the largest health supplement contract manufacturer in the Asia-Pacific region, GMP boasts local teams and research and development laboratories in Australia and New Zealand. At these labs, researchers are able to support health products in all stages of the R&D process including formulations, specifications, testing methods and stability testing reports.

Growing investment in R&D by biopharmaceutical companies not only results in more advanced health products, it also benefits our economy. Increasing R&D investment to meet the target of 3% of GDP will drive economic growth, making Australia more competitive on a global scale. It will also contribute to helping Australia become a knowledge-based economy, alongside other OECD countries.

Founded in 1994, GMP Pharmaceuticals has been a market leader in health supplement manufacturing for over 25 years. GMP is a TGA, Medsafe, FDA and GMP-licensed complementary healthcare manufacturer with facilities in Australia and New Zealand and offices in China.