Biotech to be harder hit

A new report shows the life sciences industry will be more seriously impacted than other sectors of research and development, by cuts proposed in a new Bill on the new Research and Development Tax Incentive (RDTI).

AusBiotech today released a report – R&D Tax Incentive: Additionality and spillovers for the life sciences industry – illustrating for the first time the disproportionately negative effects that the biotech sector is now facing.

The RDTI is the most critical policy available to life sciences companies and the vast majority of SMEs and companies in life sciences will be disadvantaged in their claims if the proposed changes go ahead. This in turn will impact on the capacity of the sector to deliver new treatments and technologies and patients may miss out on early access, if their country does not play a role in developing life science innovations, or conduct clinical trials.

In response to a Senate Inquiry’s (February 2019) recommendation to fully understand the impacts before proceeding with any proposed RDTI changes, AusBiotech commissioned new research to examine, analyse and understand the additional benefits that the RDTI brings to Australian life sciences. This research is fundamental to informing decision making. The industry was astonished that government tabled a new RDTI Bill without notice last week, and without first undertaking further consultation.

The available dataset in the original Centre for International Economics (CIE) report – on which the previous recommendations for making changes to the RDTI were based – lacked the granularity needed to capture the particular sensitivities of life science research and product development.

The new data captured in today’s report is markedly different from those captured in the CIE Report, clearly illustrating the significant impact on the biotech sector in comparison to the broader innovation happening within Australia.

Ms Lorraine Chiroiu, CEO, AusBiotech, says, “For the first time biotech has hard evidence that the benefits that the industry’s R&D environment brings is different, and this distinction needs to be acknowledged and mitigated before any proposed changes to the RDTI go ahead. The sector brings significant social and economic contributions to Australia, and the impacts of the proposed changes will be felt across the ecosystem – from bench, to business, to bedside.”

Key findings in the report include:

  • 63 per cent of respondents advise that the RDTI materially influenced the decision to undertake R&D.
  • 61 per cent of respondents advise that the proposed changes would not only affect their expenditure on research and development (R&D) but would also threaten the sustainability of their businesses.
  • 57 per cent advise that changes would impact on the amount of R&D their companies undertake in the future.
  • 29 per cent (average) anticipated a reduction in R&D.
  • Clinical trials are critically important to survey respondents, and particularly to businesses who provide third-party services for clinical trials. However, the broader ecosystem shows that the volume of clinical trials is dependent upon the health of companies relying on broader RDTI contributions.
  • As well as the additional R&D that occurs due to the RDTI, significant spillovers are also generated in relation to employment, training and skills development, together with growth of the sector and advances in health and innovation.

Eight issues have also been highlighted that need to be better understood before proceeding with any changes to the RDTI, and two further measures are recommended to maintain the sustainability of the high growth and job-producing potential of the Australian life sciences sector in the medium term.

R&D in the biotech sector is unique, both in its development challenges and in its output products. It is IP-based, heavily regulated and R&D-intensive and a highly globally-mobile industry. The biotech industry drives both economic growth and patient wellbeing, raising the quality of life for all Australians. Whereas engineering and mining R&D have the potential to increase productivity or stimulate demand for employment, life sciences research transcends these benefits. Whereas most industries capture benefits in increased activity and income, biotechnology also offers expanded public welfare outcomes.

Download the report here.

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