Australian drugmakers say the R&D tax incentive legislation reintroduced into Parliament last week will cut the costs of R&D in the country by 10%.

Access to the bill’s proposed A$1.6 billion worth of tax credits per financial year represents “a massive opportunity” for pharmaceutical and biotechnology industries in Australia, making them more globally competitive and providing both local and international companies with an additional incentive to invest in R&D in the country, said Brendan Shaw, chief executive of research-based industry group Medicines Australia.

“The competition for R&D investment from countries such as China, India and Singapore is extremely fierce; however, with the right policy settings we have a precious opportunity to grow our R&D industry and keep innovative R&D in Australia,” said Dr Shaw. “That would ensure we keep more of our top research scientists engaged in Australian R&D and attract greater investment to our universities and other research institutions,” he added.

The bill failed to be approved by the Senate before the federal election on August 21, and the minority Labor government is now aiming for it to have priority status in terms of debate, ahead of 41 other bills awaiting the new Parliament’s attention. The currently-proposed version of the bill would allow all Australian companies to have access to the 45% refundable credit instead of only those which are already in profit, as is presently the case under the existing R&D Tax Concession. Moreover, out of Australia’s more than two million businesses, only 8,000 are currently receiving any form of R&D tax benefits and the country’s top 100 companies currently account for 60% of the funds, noted Science and Innovation Minister Kim Carr, who said that adoption of the legislation would be “the single biggest instrument Australia has to support innovation.”

The government is also proposing amendments which would include clarifying the fact that experimental activities would be eligible for the credit, but the opposition Liberal/National Coalition continues to believe that these changes are inadequate and that there is no evidence that many more companies would become eligible. The government will need the support of two independent Members of Parliament – and possibly the one Green MP, Adam Bandt - to get it through the House of Representatives.

Observers also warn that the bill is unlikely to get through the Senate until next July, when nine newly-elected Green Senators will hold the balance of power, with Labor fielding 31 Senators and the Coalition 34. The other two other seats will be held by independent Senator Nick Xenophen and the Democratic Labour Party Senator John Madigan of Victoria.  

This expected long delay is also casting doubts on Senator Carr’s pledge to apply the R&D tax credits retrospectively from July 1, 2010.

- Late last month, it was reported that, in 2008-9, the Australian pharma industry’s annual R&D investment had exceeded A$1 billion for the first time. Investment for the year rose 10% to A$1.023 billion, according to the Australian Bureau of Statistics’ annual report on R&D spending, which also notes that the pharmaceutical industry’s investment was the country’s third largest, behind financial services and mining.

The figures “confirm Australia’s reputation as a global hub for R&D excellence and send a powerful signal to policymakers that R&D is worth supporting,” said Medicines Australia's Dr Shaw, and he urged the government to takes steps to improve Australia’s regulatory environment for clinical trials, in order to be able to keep and attract greater investment.