New global policy threatens to divert early-phase clinical trials away from Australia

As the nation’s biotech sector battles Treasurer Jim Chalmers’ contentious changes to the Research and Development Tax Incentive (RDTI), a new U.S. policy threatens to divert early phase clinical trials away from Australia.

Clinical trials contribute an estimated $1.6 billion annually to the Australian economy. According to an MTPConnect report, industry-sponsored studies account for almost one-third of all clinical trials conducted nationally. The report shows Phase 1 trials have experienced the strongest growth since 2015, expanding at 9.5% per annum, while Phase 2 trials increased by 5% annually. By contrast, Phase 3 trials have remained stagnant and Phase 4 trials have declined by 6% each year.

Now, Australia’s dominance in early-stage research is directly in the sights of the Trump Administration.

The U.S. Food and Drug Administration’s (FDA) 2027 budget proposes revising the regulatory framework to establish an expedited Investigational New Drug (IND) pathway for Phase 1 clinical trials where preclinical data already exists. The policy is explicitly designed to reduce regulatory friction and make the United States a more attractive destination for early drug development.

“This new pathway, which would serve as alternative to the existing Traditional IND pathway, aims to reduce duplicative and time-consuming requirements while maintaining safety and ethical standards,” the budget papers noted. “This policy would be particularly important for smaller biotechnology firms that face greater barriers to entry under the current paradigm, which has fuelled the increase in early stage preclinical and Phase 1 activity in Australia and China.”

The objective is to accelerate drug development and attract biotechnology investment back to the United States, and support the Trump Administration’s broader strategy to onshore pharmaceutical innovation and manufacturing.

For Australia, the threat extends beyond early-stage studies.

Longer-term trends suggest the country’s position in later-phase research has already been weakening. An Australian analysis found the proportion of Phase 3 and 4 trials conducted locally collapsed from 50% in 2006 to just 26% in 2020.

“Multinational pharmaceutical and medical device companies are increasingly considering the ethical and economic implications of running late-stage trials in countries where they do not plan a commercial launch,” wrote the authors in the MTPConnect report.

In a recent Health Industry Hub podcast, Adam Roach, Senior Vice President of Asia Pacific at BeOne Medicines, explored the tension Australia currently faces – a country widely recognised for scientific capability and world-class researchers, yet struggling to position itself competitively on the regional clinical trials stage.

Phase 3 trials deliver far more than economic investment. They provide Australian patients and clinicians with early access to innovative therapies while generating local evidence that can strengthen health technology assessments (HTA) and reduce uncertainty during reimbursement decisions.

For patients, the implications are personal. Under the World Medical Association’s Declaration of Helsinki, patients who benefit from a clinical trial therapy have the right to continue treatment until it becomes commercially available. Yet Australia’s average delay of 712 days between regulatory approval and PBS reimbursement creates an uncomfortable ethical contradiction.

While Compassionate Use and Product Familiarisation Programs (PFP) can help bridge the gap, they remain financially unsustainable for pharmaceutical companies and administratively burdensome for clinicians.

The broader access picture is equally concerning. Only one in four (27%) new medicines launched globally are reimbursed in Australia. Delays in implementing the HTA Review recommendations have already raised concerns about the government’s ability to keep pace with global innovation.

At a time when Australia can least afford to lose ground, policymakers and industry stakeholders may be watching both ends of the clinical trials pipeline come under pressure simultaneously, with early-stage investment being actively courted offshore and late-stage research already slipping away.

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