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A Fair Environment Australia Advances By Kim Ribbink Australia’s small, yet geographically diverse mainly coastal populations, a high standard of living, a government-funded health system, and regulated channels add to the country’s appeal as a pharmaceutical market on the rise. With its stable socio-political environment, strong intellectual property laws, and established links to the Asia-Pacific region, Australia enjoys some significant global and regional advantages. Despite its relatively small population, a Pharmaceuticals Industry Strategy Group report shows Australia has a healthy number of pharmaceutical companies, including more than 40 originator companies (predominantly subsidiaries of multinational companies), around 10 generic companies, 470 small-scale core biotechnology companies, and more than 20 world-class medical research institutes. The supply of pharmaceuticals to the Australian market is dominated by global companies, with the six largest accounting for 50.5% of the market and the top 20 being responsible for 85.8%, says Ash Kuchel, president Asia Pacific, Publicis Healthcare Communications Group. In addition, the percentage of GDP spent on health is relatively high, says Terry Hisey, vice chairman and U.S. life sciences leader, Deloitte. Australia enjoys a high standard of living, helped by the fact that it is one of the most prosperous economies in the world. The country also benefits from a heavily subsidized patient pool with the help of the Pharmaceutical Benefits Scheme (PBS) and Medicare benefits. “Medicines are more affordable for more people, with or without personal medical insurance, which makes effective treatment of disease accessible to all,” Mr. Kuchel says. Australia has several key strategic advantages as a destination for R&D investment, says Brendan Shaw, Ph.D., chief executive of Medicines Australia. “Australia has a very strong track record in R&D,” Dr. Shaw says. “The pioneering research for groundbreaking products such as Gardasil, Relenza, and Leukine was conducted in Australia. They are the result of collaborative research between the Australian medicines industry and local medical research infrastructure. Most importantly, we boast some of the best scientists and research infrastructures in the world.” Gardasil is a vaccine for use in the prevention of certain types of human papillomavirus (HPV); Relenza is used to treat influenza; and Leukine is a biologic response modifier used to accelerate the recovery of white blood cells following chemotherapy, following induction chemotherapy in acute myelogenous leukemia, after bone marrow transplantation, and before and/or after peripheral blood stem cell transplantation. Australia’s reputation for biomedical research is internationally renowned, says Nick Ward, principal consultant at Pharma to Market. “Australia has a strong biomedical research base in both medical research institutes and the leading research-based universities,” Mr. Ward says. Additionally, there are significant financial incentives for companies to establish permanent R&D facilities in Australia, Mr. Hisey says. “Companies are able to lower R&D costs by up to 10%, and they may earn anywhere from 40% to 45% R&D tax credits based on annual sales,” he says. Mr. Ward notes that the Australian government offers a tax deduction of up to 175% for eligible companies whose level of R&D expenditure on Australian or foreign-owned R&D increases above a three-year average. “The government also recently introduced legislation overhauling the country’s patent system to be in line with other OECD countries,” he says. “The research-use exemption allows scientists to conduct research on patented inventions without infringing such patents. However, the traditional gap in regulatory and intellectual property standards between other countries in the region and Australia is closing, making it harder for Australia to remain cost-competitive.” Other benefits are the country’s relatively strong intellectual property rights protection and enforcement, Mr. Hisey says. In terms of areas of research, the focus tends to be on diseases that represent a significant area of need across the board. “Like many markets, Australia focuses on oncology, cardiovascular, central nervous system conditions, etc.,” Mr. Hisey says. “Beyond that, there is a focus on a couple of specific cancer areas that have a high incidence rate in Australia, such as skin cancer. Given the nature of the country, Australian researchers also concentrate on venom research and tropical indigenous diseases. “In particular, there is a focus on disease conditions and the specific impact these would have on parts of the population, such as the Aboriginal population,” Mr. Hisey continues. “Cancer is one of the largest contributors to Australia’s disease burden, so there is high interest in helping to advance the treatment of that condition. Also, since Australia has an aging population, there is an emphasis on researching age-related therapies.” A Clinical Connection Between 2007 and 2010, the number of new clinical trials conducted in Australia decreased by 34%, Mr. Ward says. “As a result, the Clinical Trials Action Group was established via the government’s Pharmaceuticals Industry Strategy Group,” he says. “In its March 2011 report, 11 recommendations were made to increase Australia’s attractiveness as a location for clinical trial activity, including strategies to improve the timeliness and harmonization of the clinical trials approval process and to improve patient recruitment. “The government has recently invested in the Australian New Zealand Clinical Trial Registry, which will make it easier for patients to identify clinical trials being conducted in these countries and will improve patient recruitment,” Mr. Ward continues. With its ethnically diverse population, Australia satisfies any demographic needs for a clinical study, Dr. Shaw says. While several countries in the region, such as India and China, are among the world’s fastest-growing locations for international clinical trial activity, Australia continues to be an excellent location to conduct clinical trials, he says. “We have a single ethical review process for multicenter clinical trials across our three most important states in terms of clinical trial activity — New South Wales, Victoria, and Queensland — which account for 80% of Australia’s trials,” Dr. Shaw says. “In addition, our treatment and regulatory standards meet U.S. and European requirements, and we have a regulatory clinical trial notification scheme that allows for one of the fastest regulatory approval times globally.” Dr. Shaw adds, however, that efforts are still ongoing to extend harmonization of multicenter clinical trials across the remaining jurisdictions in Australia, which account for about 20% of clinical trials. “The Australian Government has announced its intention to harmonize and streamline the process for study start-up, and has made a commitment to implement a fully harmonized ethical approval process, and we are keen to ensure it delivers on that commitment,” he says. According to a Medicines Australia report, Australia has been facing competition from emerging clinical trial markets in Asia and South America, especially for the highest-cost Phase III clinical trials that involve large numbers of participants. Early-stage clinical trials, which require far fewer participants and where success largely depends on the experience and accomplishments of individual researchers, are particularly suited to Australia, Dr. Shaw says. Mr. Ward concurs, saying Australia’s relatively small population means that it is often harder to identify and recruit patients for clinical trials, particularly Phase II and III, although it remains a popular choice for Phase I trials due to the fast approval process, the high quality of clinical practice, high volunteer rate, and the fact that Phase I trials don’t require large numbers of subjects. Reimbursement and Regulatory Trends Most prescription medicines in Australia are made available to patients under PBS, which acts both as an insurer and as a sole purchaser negotiating prices for medicines with suppliers, Mr. Kuchel says. “Reimbursement via PBS is critical for pharma companies if they are to successfully market their products,” says Graham Edwards, managing director of Ogilvy Healthworld in Sydney. “While there is a private market, it is relatively small and it is difficult to sustain a significant enough revenue line to justify launching into the private market alone.” Under the PBS scheme, Australian patients get highly subsidized access to prescription pharmaceuticals. Moreover, the government-enforced Community Service Obligation (CSO) stipulates that all PBS subsidized medicines will be available to any pharmacy in Australia within 24 hours of order, thereby ensuring that remote access areas are adequately catered for and allowing manufacturers to distribute their medicines cost-effectively, Mr. Kuchel says. Mr. Edwards says while the previous federal government largely rubber-stamped the recommendations sent to them by the Pharmaceutical Benefits Advisory Committee (PBAC), this is no longer the case. “An increasing number of drugs recommended by the PBAC for reimbursement on the PBS are being turned back,” he says. “This has seen access to a number of drugs widely in use in overseas countries denied to the Australian public. It remains to be seen whether this approach by the current federal government toward drug reimbursement is a longer-term strategy for reining in what many see as the spiraling cost of pharmaceuticals to the healthcare system.” Regulatory Challenges When it comes to regulatory challenges, companies trying to get products marketed in Australia have struggled with lengthy evaluation and approval times by the Therapeutic Goods Administration (TGA) and a long time to have their products listed on the PBS. Mr. Ward says, however, starting in January 2011 the Australian Government’s Department of Health and Ageing (DOHA) introduced business process reforms and a regulatory framework to decrease the evaluation time of applications submitted to TGA and allow sponsors to submit applications to the PBAC for PBS listing in parallel to regulatory applications submitted to the TGA. “We are now starting to see a decrease in the time frame from submission of the regulatory application to PBS listing as a result of this measure, which means faster market access,” he says. “Last year, the prime ministers of Australia and New Zealand resurrected plans to regulate therapeutic products across both countries via the Australian and New Zealand Therapeutic Products Agency (ANZTPA), absorbing New Zealand’s Medsafe and the TGA.” Mr. Ward notes that a three-stage, five-year plan is under way and will result in substantial administrative and financial burdens for industry initially as they make changes to comply with the new regulations; however, in the long term the reduction in regulatory burden is welcomed by industry. It’s not only the marketing of products that is heavily regulated. The pharmacy sector is also highly regulated through legislation and agreements that determine the ownership structure of the sector, the number of pharmacies that can operate, the conditions under which they operate, and the prices they can charge for most of the products they supply, Mr. Kuchel says. One thing that differentiates the Australian market is the Divisions of General Practice, which provides services and support to general practice at the local level to achieve better health outcomes for the community, Mr. Edwards says. “The Divisions’ infrastructure also provides a valuable mechanism for informing and educating GPs and practice staff about changes to programs, services, and new initiatives for continuous quality improvement,” he says, adding that the divisions can be a valuable source of influence and access for pharma companies. Marketing and Promotion In terms of product promotion, all advertising to consumer groups is controlled by The Therapeutic Goods Authority Advertising Codes as well as the self-regulatory codes imposed by Medicines Australia, which represents the pharmaceutical industry, Mr. Edwards notes. “There is no branded advertising of prescription pharmaceuticals to the general public as allowed in the United States and New Zealand, although unbranded direct-to-consumer advertising is allowed in the form of disease-education programs,” he says. Mr. Kuchel notes that manufacturers of OTCs are allowed to communicate with consumers generally directly or through the pharmacy channel. He adds that disease awareness campaigns are often used by pharma companies to raise awareness of a category or a disease, and potential patients are encouraged to see their doctors or healthcare professionals. “Reimbursement via the Pharmaceutical Benefits Scheme is critical for pharma companies if they are to successfully market their products. ” Graham Edwards / Ogilvy Healthworld “The pioneering research for groundbreaking products like Gardasil, Relenza, and Leukine was conducted in Australia. ” Dr. Brendan Shaw / Medicines Australia “The combination of strong intellectual property rights protection, financial incentives, and access to talent means Australia merits a place on everybody’s decision matrix regarding locations for R&D efforts.” Terry Hisey / Deloitte “Australia has a strong biomedical research base in both medical research institutes and the leading research-based universities. ” Nick Ward / Pharma to Market Current Clinical Trial Activity in Australia In early 2010, the pharmaceuticals industry conducted a benchmarking survey of industry-sponsored clinical research in Australia. It collected data based on 2009 activity where 18 of 54 companies responded. Some headline information revealed by the survey is as follows: » A total of 1,265 clinical trials were being conducted by the respondent companies in 2009. » The total number of patients enrolled in these trials was 18,600. » Of these 1,265 clinical trials, 366 were commenced in 2009. » 899 trials were ongoing before 2009. » Most of the new trials were Phase III (118). » The smallest category of new trials was Phase IV (28). » The respondent companies spent a combined total of more than $214 million on clinical trials in 2009. » In cases where trials were cancelled or sites were closed before commencement of patient recruitment, 63% were due to governance delays and 37% were due to Human Research Ethics Committee (HREC ) delays. Source: Clinically Competitive: Boosting the Business of Clinical Trials in Australia, Australian Government. For more information, visit innovation.gov.au. An Industry Perspective on Australia’s Reimbursement Program The recent government policy of deferring funding of some medicines approved by the independent Pharmaceutical Benefits Advisory Committee (PBAC) for inclusion on the PBS reimbursement program has attracted its fair share of criticism. Takeda-Nycomed is, however, taking a cautiously optimistic view. The Australian PBS is generally recognized by other reimbursement authorities throughout the world as a leader in reimbursed medicines policy. Its sustainability has therefore become a mandated policy platform of successive federal governments since its inception in 1948. As a result, PBS sustainability not only becomes a primary objective for the research-based pharmaceutical industry, but also for patients dependent upon access to new, improved, and cost-effective medicines. According to James Jones, CEO of Nycomed: a Takeda Company Australia, the days of the large blockbusters that weigh heavily on the sustainability of the PBS are probably in the past. Industry is now confronted with the reality of patent expirations that will lead to a growing generics market. This, in turn, will mean that the viability and sustainability of the PBS is guaranteed as prices fall across that sector. “This clears the way to affordability of truly innovative new medicines, but with a difference,” he says. “They will be targeted to individual patients or groups of patients with a built-in, long-term guarantee to governments that they are working effectively and are reducing unnecessary treatment costs in quantified, real, and measurable terms.” While delays in reimbursement can be frustrating for the industry and patients alike, the PBS is changing. In fact, since a Senate inquiry outcome late last year, drugs are being introduced more quickly today and more patients are benefiting as a result. “There has been some inspired work within the executive of the Pharmaceutical Benefits Branch of the Australian Department of Health and Ageing and the PBAC secretariat, who are presently engaging with industry in a genuine partnership approach to prioritize the introduction of medicines with a clear clinical need,” Mr. Jones says. “This focus on medicines serving unmet medical need gives Takeda-Nycomed growing confidence that our pipeline of innovative molecules has a significant future in Australia. Our company already has a significant investment in clinical trial work here. “We are committed to working in close partnership with policymakers and specifically with the Pharmaceutical Benefits Branch to create the best possible opportunity to provide Australians with affordable access to our pipeline products in diabetes, cardiovascular, and chronic disease states,” he concludes. “Alliances with educational institutions, government-funded research, and collaborations with overseas bodies provide significant opportunities for R&D in Australia.” Ash Kuchel / PHCG Experts Graham Edwards. Managing Director, Ogilvy Healthworld Sydney, a part Ogilvy CommonHealth Worldwide, the health behavior experts of Ogilvy & Mather (ogilvy.com), representing one of the largest assemblies of creative talent in the world of healthcare communications with 66 offices across 36 countries. For more information, visit ogilvychww.com. Terry Hisey. Vice Chairman and U.S. Life Sciences Leader, Deloitte, part of a global network of member firms in more than 150 countries that provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. For more information, visit, deloitte.com. Ash Kuchel. President Asia Pacific, Publicis Healthcare Communications Group, a healthcare communications network and a division of Publicis Groupe S.A. For more information, visit publicishealthcare.com. Brendan Shaw, Ph.D. Chief Executive, Medicines Australia, which represents the discovery-driven pharmaceutical industry in Australia. For more information, visit medicinesaustralia.com.au. Nick WarD. Principal Consultant, Pharma to Market, an Australia-based consulting company providing global regulatory support services and outsourcing solutions to the pharmaceutical industry. For more information, visit pharmatomarket.com.