In an interview with BiotechDispatch following his address to the Parliamentary Friends of Medicines event in Canberra, Ken Frazier, President and CEO of US-based Merck, one of the world’s largest biopharmaceutical companies and biggest investors in R&D, predicted human biology would be the next great driver of health innovation.

According to Frazier, there is an opportunity for Australia to “get on the wave of the biology revolution”. Yet he also said “attitudes” need to change, particularly when it comes to moving beyond “rhetorical” support for innovation.

“There’s no reason, given the quality of the science in this country, why Australia should not be a dominant power when it comes to the application of biology to human medicine.”

However, he said investment by industry was key and that the ability of pharmaceutical companies like Merck to discover and commercialise the product of original Australian medical R&D will be contingent on Government recognising innovation through policies that back a positive operating environment.

Merck invests around US$7 billion every year in R&D.

Frazier said that, based on his meetings in Canberra yesterday, the language of Australian policy-makers is consistent with what you would expect from a Government supportive of innovation, but that, “we seem have very different conceptions of what is happening on the ground.”

Frazier referenced a range of issues, including Australia’s 5-year data exclusivity period, which he said needs to be extended to 12, the policies underpinning market access arrangements, and his concern that Australia could become an “international outlier” by allowing pharmacy level substitution of biosimilars.

AusBiotech recently wrote to Health Minister Sussan Ley expressing concern over proposed pharmacy-level substitution of biosimilars.

“All countries are grappling with the shortage of funds to be allocated to healthcare, but what’s different are their approaches to it.” He said that some are still recognising the interdependence between support for basic medical R&D and a vibrant pharmaceutical sector.

“I do think there has been a tradition in this country of going after the multinationals, because it’s easier in the short-term than going after other areas in the health system, but there are implications in that,” he told BiotechDispatch.

“But it’s not really just about the impact on multinationals. Ultimately, it’s about the wider impact on the economy.”

He repeated his reference from earlier in the day to the HPV vaccine, Gardasil, saying that its discovery and development highlighted the current challenge facing Australia.

“The basic science was here to make the discovery, but not the capital and capability to turn it into the global product it is today – CSL ultimately had to partner with Merck for that.”

Frazier then questioned the ongoing ability of companies like Merck to identify the next Gardasil when its operating environment is now preventing the “downstream investments” required to create a “strong industry infrastructure” in Australia.

“You have a strong scientific infrastructure in Australia, but you don’t have a strong industry infrastructure.”

Frazier said there is “clearly a lot at stake in these conversations”, referring to ongoing discussions on reform to the PBS between the Government and pharmaceutical industry.

“I think the challenge is for Government to take the long view,” he said, highlighting Merck’s decision to exclude R&D from its own significant program of cost-cutting in recent years.

“I know that if I cut R&D, I can give my investors a short-term benefit – my earnings will look great for the next five years. But I also know that 25 years from now the money I didn’t commit to R&D today will have a negative impact on the company.

“The same goes for countries. What does Australia want to be in 25 years? Does it want to be a biological powerhouse? Or, does it want to be an also-ran?”

On working with Governments to focus on the long-term, Frazier said that today’s financial challenge is often seen as “the most important thing in the world”.

“What’s actually important is what you’re going to do in the medium to longer term, and how we’re going to create a situation where the next generation of patients gets the benefit of these medical breakthroughs.”

According to Frazier, people arguing for a short-term focus on cost are actually arguing to deny patients in the future.

“The reason people have new drugs today is that capital flowed for investment twenty years ago. It’s why you have a Keytruda today. If people had taken that cost cutting attitude twenty years ago, there wouldn’t be a Keytruda today.”

Frazier told BiotechDispatch that the impact of the recently announced multi-billion PBS savings package will be real, feeding into Australia’s ability to attract investment.

“We have to articulate that,” he said.

“The first and foremost responsibility of industry leaders is to fight for innovation. We have to do a better job, including in Australia, of setting out the long-term consequences of these short-term actions.”

This article originally appeared in BiotechDispatch and was reproduced here with permission.

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