Ecosystem for sovereign manufacturing still perceived to be unfavourable

MedTech News: More than 97% of the in vitro diagnostic (IVD) products used in Australia are imported, exposing Australia to supply shortages during periods of high demand and stress on global supply chains. The Australian Strategic Policy Institute estimates that 80% of global trade is carried via sea and that between 20% and 33% of that trade moves through the contested waters of the South China Sea.

MTPConnect has been engaged by the Department of Industry, Science and Resources (DISR) to develop a National Action Plan for establishing end-to-end sovereign manufacturing capability for diagnostic products in Australia. The project is mid-way to be being delivered in partnership with Pathology Technology Australia (PTA) and supported by HTANALYSTS.

In an interim report published last week, the preliminary findings from the stakeholder engagement process show a clear consensus that Australia is vulnerable to supply chain disruptions driven by geopolitical instability, which means it is critical to improve sovereign manufacturing capabilities, as well as the resilience of the supply chain.

Regulatory pathways must keep pace with digital innovations in diagnostics and medtech

However, despite the presence of some Australian companies developing, manufacturing and selling diagnostic tests locally and overseas, the current environment to develop sovereign manufacturing capability is still perceived to be unfavourable by a range of stakeholders.

The interim report identifies key barriers to the growth of Australia’s diagnostics product sector, covering the full R&D, manufacturing and commercialisation cycle. Some of these barriers include difficulty to navigate, fund and source patients for clinical trials, lost R&D tax incentives for companies that return ≥$20 million annually, high costs of importing/exporting products or raw materials, less economically viable to set up manufacturing locally, low reimbursement for services or products in Australia leaving little for manufacturers, and misalignment between health policy and procurement where the Australian
Government is not prioritising Australian-made IVDs.

MTPConnect CEO Stuart Dignam welcomed the mid project update from the Australian Diagnostics Action Plan Team (ADAPT) who have been on the road travelling for the last few months interviewing stakeholders including researchers, funders, pathologists, regulation and governing bodies, SMEs, manufacturers, global corporates, start-ups, and scale ups.

“The preliminary findings highlight the issues and challenges in front of us if we want to establish Australia as a regional centre of excellence for diagnostic technology manufacturing. This is just the start of our research and analysis and our final report will provide a National Action Plan to make that happen,” he said.

According to the stakeholders interviewed to date, Australian-manufactured IVD products have good market appeal in the Asia-Pacific region, as well as globally, due to perceptions of safety, quality and reliability and the halo of the ‘Brand Australia’. If the market conditions are right, it is therefore feasible to create economies of scale in exporting for manufacturers.

The Australian Government is moving to establish a $15 billion National Reconstruction Fund, with $1.5 billion earmarked for medical manufacturing. The National Reconstruction Fund, currently under development, aims to boost domestic manufacturing capabilities for medicines, vaccines and diagnostic tests.

The interim report has been developed from Phase I interviews conducted in three states and focuses mainly on manufacturing capabilities. Data from the remaining three states will be analysed in the final report.

Further research on the supply chain resilience topic will continue through Phase II and III and will inform the recommendations in the final report, due in April 2023.

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