Productivity Commission interim reports spur health sector calls for crucial mindset shift

Medicines Australia, Research Australia, and the Australian Medical Association (AMA) are among the organisations pressing the federal government to take bold action on prevention and innovation in healthcare, following their submissions to the Productivity Commission’s interim reports on the five-pillar productivity inquiries.

Australia ranks 27th out of 36 OECD nations in its proportion of health spending allocated to prevention. The Commission’s interim report points to fragmented policies, short-term thinking, and entrenched siloes as barriers to long-term investment. It highlights that even a modest 10% reduction in preventable hospitalisations could save the nation $600 million every year.

Medicines Australia highlighted that prevention pays dividends, yet Australia’s budgetary rules and administrative structures stand in the way of proper evaluation and adoption of preventive measures.

The Commonwealth’s net investment in innovative medicines through the PBS has declined over the past decade, falling from 14% to 12% of the total health budget. This trend, Medicines Australia argued, reflects a broader failure to prioritise preventive health. The delays in patient access are also stark: Australians wait an average of 1,375 days for subsidised access to vaccines after TGA approval, with innovative medicines taking 466 days.

While the government is weighing up recommendations from the HTA Review, the Productivity Commission has called for a National Prevention Investment Framework that would allow the government to weigh second-round and long-term fiscal effects of prevention programs. These include cost savings across government programs, higher workforce participation, increased tax revenue, and productivity gains from a healthier population.

Medicines Australia endorsed this approach, but pointed to a key barrier in the PBAC guidelines which excludes productivity impacts from the base-case analysis of innovative medicines. This, they argued, sidelines an outcome that patients value. By contrast, countries like the UK, Netherlands, and Norway incorporate disease severity modifiers into their HTA processes, applying higher cost-effectiveness thresholds where warranted.

Research Australia also urged the government to view health and medical research as a driver of productivity and national strength in its submission.

“Lifting Australia’s productivity isn’t just an economic challenge – it’s a health and medical research opportunity. When we invest in discovery, health services research and commercialisation, we cut waste, lift workforce participation, and create new industries,” said Nadia Levin, CEO & Managing Director of Research Australia.

“Every preventable hospital admission we avoid, every faster diagnosis we enable, and every home-grown medical product we export is productivity in action. Elevating health and medical research and innovation makes that possible.”

Research Australia’s submission calls for a measurable pathway to lift preventive health spending to at least 5% of total health expenditure by 2030, alongside the implementation of Prevention Responsive Budgeting. It also recommends redirecting underspent MRFF funds into research translation and innovation, and creating a rational pathway to sustainably fund the full cost of research, including infrastructure.

“Economies that back research outperform. A national commitment to 3% of GDP for R&D will anchor the next decade of Australian productivity, with health and medical research leading the way,” said Levin.
“For every dollar invested in Australian health and medical research and innovation yields close to $4 to the Australian economy. Investment in our sector is not just budget neutral; it allows further reinvestment back into the broader health sector.”

The Australian Medical Association (AMA), meanwhile, warned that the health system is already straining under the weight of preventable hospitalisations and chronic disease. AMA President Dr Danielle McMullen said the government must fundamentally shift its thinking.

“Governments continue to view healthcare as a cost to be managed, rather than an investment to be made in Australia’s future – and this mentality is hurting our economy,” Dr McMullen stated. “While life expectancy remains high, Australians are also spending more years in poor health – limiting their ability to participate in the workforce and in the community.”

With more than 780,000 Australian workers now aged 65 and over – almost double the number a decade ago – the AMA argued that keeping people healthier for longer is critical to sustaining the workforce.

The AMA strongly backed the Productivity Commission’s call for a National Prevention Investment Framework, alongside a significant lift in preventive health funding from the current 2.3% of health expenditure to 5% by 2030.

“Governments must look beyond three or four-year election cycles and commit to long-term preventive health funding,” Dr McMullen said.

The Productivity Commission’s final reports will be delivered to government in December 2025.

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