Medical products are a major growth sector, important to Australia’s economy, wellbeing and security. In November 2020, the sector supported 41,000 jobs. Medical technologies and pharmaceuticals were Australia’s 8th largest export measured by value in 2019.
Commercial activity in Australia’s medical product sector has steadily grown. The number of human health companies has increased by around 1% per annum to 1,278 with a net increase of 50 companies since 2016. The sector has a small number of large companies, with the bulk of the sector made up of smaller players. Many of these small companies have either a single product or single research project, often in pre-commercial stages.
Snapshot of the medical products sector
- Economically significant: $5.5 billion contribution to economy—equalling 0.3% of total GDP and 41,000 jobs. 
- Growing globally: In 2018, global spending on health reach US$8.3 trillion, or about 10% of global GDP. By 2050, the United Nations estimates 37% of the world’s older population (65+) will reside in Eastern and South-East Asia.
- Untapped potential: Australian businesses already spend big on research and development. The R&D spend in 2019 totalled $1.6 billion.
- Strong market capitalisation: The ASX-listed Australian life science industry is valued at AU$100 billion and includes around 100 companies.
- Small but growing: In 2020-21, Australian veterinary pharmaceutical manufacturing is expected to record $852 million in revenue with 5.4% annualised growth since 2016 and employ approximately 1,300 people.
- Small but growing companion animal market: In 2019, factory gate sales of veterinary medicines for companion animals was $550.6 million and for the production sector it was $509.7 million.
The market capitalisation of publicly listed companies was $179 billion in 2019. CSL, Resmed and Cochlear made up almost 90% of market capitalisation and contributed 87% of the increase in market capitalisation from 2018 to 2019. Veterinary pharmaceutical manufacturing reflects similar trends to the broader medical products sector, with strong revenue growth but growing consolidation.
This industry structure is indicative of the main challenge faced by medical manufacturers in Australia―to achieve true scale, products need to be globally competitive. Companies that are able to make this step can grow. Encouraging more of these larger globally competitive businesses will increase Australian medical product manufacturing. CSL has grown to be Australia’s largest company, and is a one of the largest biotechnology companies in the world. Other medical companies in the ASX200 have a global presence based on providing a competitive value proposition to international customers.
While Australia has a growing medical products manufacturing sector, bringing a commercial product to market that meets global demand is essential for medical product manufacturers to scale. This is a challenge for the industry, particularly for small and medium enterprises. Some small businesses stay small because they find it difficult to navigate the commercialisation pathway.
There are 3 primary barriers that limit commercialisation:
- difficulties in translating research into competitive products
- obstacles in integrating into local and international supply chains
- challenges in establishing the conditions that enable collaboration.
For small companies with a good idea, the translation pathway in Australia can be difficult and expensive. Medical products are highly regulated, have long development timelines and require access to specialist skills and facilities for design, testing and manufacture.
Faced with these challenges, many Australian manufacturers licence or divest their innovative products for manufacturing overseas, rather than translating them into commercial products here. If commercialisation occurs overseas, the likelihood of reshoring large-scale manufacturing of these products is very low.
Australia is a small market with a small population. Selling medical products in international markets allows Australian businesses to increase their customer base, find a competitive edge and scale. Manufacturers need to access local and international supply chains to get competitive products into global markets. The complexity of international regulatory systems, lack of connections in overseas markets and challenges in joining multinational distribution networks can be barriers for small businesses. When firms are unable to expand into new markets, it is very difficult for them to truly scale.
Collaboration helps medical product manufactures successfully scale their design, production and distribution capabilities. Medical products precincts provide medical product manufacturers with an abundance of collaboration opportunities. In general, successful medical precincts bring together an ‘anchor tenant’ (a large successful medical company), with existing infrastructure such as hospitals, research organisations and manufacturing facilities. These conditions support firms to share testing, manufacturing and distribution facilities, which helps them to control costs and generate new ideas for commercial products. Firms can be unwilling to invest in these precincts if they are not able to capture all the value created through their investments. Producing these conditions also requires multiple entities investing in parallel, which can be difficult to sequence.
Successful collaborations allow firms to draw on complementary skills and expertise, as well as creating efficiencies that sustain production and distribution of novel medical products. To scale medical product manufacturing in Australia, we need to establish the conditions required to make collaboration effective and easy for vibrant manufacturing ecosystems to develop.
The need for collaboration across the medical products sector was brought into sharp focus during the COVID-19 pandemic. Barriers were broken down as local medical product manufacturers swung into action to combat the pandemic and quickly get medical products from the research lab to market.
This road map seeks to address these commercialisation challenges by highlighting opportunities for Australian businesses to build scale and capability. The Government wants to support industry to make strategic co-investments in projects that overcome these challenges and that:
- increase domestic translation of research
- strengthen integration with local and global supply chains
- enhance competition and collaboration across the sector.
In addition to these industry-specific challenges, there are other barriers to scale, outlined in Road map in context.
Supporting the supply chain
Too often, new medical product ideas are shipped offshore to businesses with greater capacity to commercialise and manufacture them. Industry and government need to work together to keep more manufacturing in Australia and capture more economic value locally. Domestic manufacturing can play a role in ensuring availability of medical products during crises such as the COVID-19 pandemic.
Scaled-up industry is fundamental to developing a resilient and responsive medical manufacturing ecosystem, supported by crisis-ready facilities and a skilled workforce. It is unrealistic to expect these items could be entirely derived from domestic sources. Australia will likely need to import some precursors and finished medical products.
A range of work across government and industry is assessing and addressing supply chain vulnerabilities. This road map does not presuppose the outcome of this supply chain work.
Leveraging existing strengths
There is enormous potential to keep growing:
- global demand for medical products is rising, particularly in Australia’s northern neighbours
- Australia already has leading medical research, respected regulatory frameworks, and a reputation for high-quality, clean and safe manufacturing
- Australian global companies like CSL, ResMed and Cochlear demonstrate the potential for large-scale success
- the COVID-19 pandemic demonstrated the ability of local medical product manufacturers to rapidly pivot and scale.
This road map focuses on the high-value opportunities for Australian businesses to manufacture medical products. There are opportunities where Australia is more likely to be competitive, and therefore more likely to achieve scale.
There is significant potential to grow the medical products sector further by leveraging Australia’s:
- highly skilled workforce
- proximity to emerging markets
- reputation for high-quality products
- world-leading science, research and innovation capabilities.
To realise this potential, the Government will work closely with industry to support our local manufacturers to grow and scale-up, access export markets and become more competitive.
3 Australian Bureau of Statistics, Labour Force, Australia, Detailed, Quarterly, Table EQ06, November 2020 (cat.no. 6291.0.5.003) and Australian Bureau of Statistics, 2016 Census of Population and Housing (table Builder extract). ↵
4 MTPConnect, Medical Technology, Biotechnology & Pharmaceutical Sector Competitiveness Plan, 2020. ↵
5 MTPConnect, Medical Technology, Biotechnology & Pharmaceutical Sector Competitiveness Plan, p.11, 2020. ↵
6 Australian Bureau of Statistics, Australian Industry 2018–19 (cat. no. 8155.0); Australian Bureau of Statistics, Australian System of National Accounts, 2019–20,Table 5, Current Prices (cat. no. 5204.0). ↵
7 Australian Bureau of Statistics, Labour Force, Australia, Detailed, Quarterly, Table EQ06, November 2020 (cat.no. 6291.0.5.003) and Australian Bureau of Statistics, 2016 Census of Population and Housing (table Builder extract). ↵
8 World Health Organisation, Global spending on health 2020: weathering the storm, 2020, p.ix, accessed 13 January 2021. ↵
10 MTP Connect, Medical Technology, Biotechnology & Pharmaceutical Sector Competitiveness Plan, 2020. ↵
11 AusBiotech, Australia: a thriving life science hub with global reach, 2021, accessed 25 January 2021. ↵
12 IBISWorld report, Veterinary Pharmaceutical Manufacturing in Australia, August 2020. ↵
13 Unpublished Animal Medicines Australia data. ↵
15 IBISWorld report, Veterinary Pharmaceutical Manufacturing in Australia, August 2020. ↵