1

Australia
Pharma report
February 2013

Brought to you by
Brought to you by
 Ack nowledgements

Special thanks to
Focus Reports would like to thank the
Hon. Mark Butler, Prof. Warwick Anderson,
Dr. Suzanne Hill, Dr. Brendan Shaw,
Dr. Anna Lavelle, and Dr. Martin Cross for
their contributions, and to all the
companies supporting the production of
this report.
 5

CONTENTS
4 AKNOWLEDGEMENTS

8 A DOUBLE-EDGED SWORD NAMED PBS

11 PREVENTING BEATS CURING

12 AND THE KEY TO SUCCESS IS…

13 MULTI-ETHNICAL; CROSS-SECTORAL; GEORGE CLINICAL

13 PILOTING AUSTRALIA INTO THE ASIAN CENTURY

14 IT’S ALL ABOUT PHARMACY BABY!

15 THE DISAPPEARING DISCONNECT

18 DON’T FORGET ABOUT ALZHEIMER’S

INTERVIEWS
22 
INTERVIEW WITH:
Brendan Shaw, Chief Executive - Medicines Australia
24 
INTERVIEW WITH:
Anna Lavelle, Chief Executive Officer, AusBiotech
26 
INTERVIEW WITH:
Dr. Suzanne Hill Chair,Pharmaceutical Benefits Advisory Committee
28 
INTERVIEW WITH:
Chris Hourigan Managing Director Janssen Australia and New Zealand
30 
INTERVIEW WITH:
Mark Fladrich, Managing Director, AstraZeneca Australia and New Zealand
32 
INTERVIEW WITH:
Prof. Vlado Perkovic Executive Director The George Institute Australia

This report was prepared by Focus Reports

Project Director: Mariuca Georgescu Project Coordinator: Martijn Jimmink
Journalist: Herbert Mosmuller Report Publisher: Diana Viola and Crystelle Coury

Copyright
All rights reserved. No part of this publication maybe reproduced in any form or by any means, whether electronic, mechanical or otherwise including
photocopying, recording or any information storage or retrieval system without prior written consent of Focus Reports.
While every attempt is made to ensure the accuracy of the information contained in this report, neither Focus Reports nor the authors accept any
liabilities for errors and omissions. Opinions expressed in this report are not necessarily those of the authors.
 RESEARCH AND DEVELOPMENT:
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• Servier is a Foundation, with the sole aim of reinvesting all profit from worldwide operations into R&D, in
particular with a focus on new first-in-class chemical entities at the high-end of pharmaceutical innovation
• The company was founded by Dr Jacques Servier in 1954 has since grown to become the second largest
French based pharmaceutical company in the world with 20,000 employees and a presence in over
140 countries
• Servier employs over 200 staff in Australia including 30 in R&D. It is one of the top 10 Servier affiliates
in the world. Two and a half percent of Servier’s global turnover comes from Australia

Improving health outcomes in Australia through discovery and alliances

• Research collaboration between Servier and Australian partners including Monash Institute of Pharmaceutical
Sciences (MIPS) and the Florey Institute aims to find new innovative treatments to improve the health of
patients in the national health priority areas of Australia
• We have a commitment to improving Aboriginal health outcomes through support for projects that aim to
improve the management of diabetes and renal disease among indigenous groups in rural and remote Australia
• Servier has partnered with Lifeline to fund a 3 year research project which will, for the first time, investigate
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Research in partnership with

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www.servier.com.au
 7
Special SponSored Section

australia report

AUSTRALIA: A young female client of the Adult Mental Health Rehabilitation Unit
at Sunshine Hospital, Victoria, Australia, Courtesy of Janssen-Cilag

Where Value Beats Cost

I
n some ways the Australian medicines industry is going
This sponsored supplement
through the same restructuring and challenges as the in- was produced by Focus Reports.
dustry is globally: the country is dealing with patent
Project Director: Mariuca Georgescu
cliffs, companies are cutting back staff, an ageing popu-
Journalist: Herbert Mosmuller
lation forces the government to rethink healthcare expendi- Coordinator: Martijn Jimmink
tures, and big originator companies are reforming. And just Report Publisher: Diana Viola and
like internationally, that is forcing the industry to rethink Crystelle Coury
traditional ways of doing things. Only, the Australian phar-
For exclusive interviews and more info, please
maceutical industry has been rethinking its role in such an log onto
innovative way that it is slowly floating from down under to or write to contact@focusreports.net
the center of attention of the global industry.

FeBrUarY 2013 FOCUS REPORTS S2

 8 Australia pharma report January 2013
australia report
During a visit to Australia in Febru-
ary 2012 Sir Andrew Witty, then still in
his tenure as CEO of GlaxoSmithKline,
quoted the Australian industry as an ex-
ample of how the global industry should
modernize itself and win back society’s
belief in its readiness to change, “wheth-
er that is through employment, contri-
bution to savings, or delivery of remark-
able medicines.”
And indeed the Australian pharma-
ceutical industry is undergoing several
remarkable developments. Its pharma-
ceutical manufacturing industry, not
too long ago having been seemingly
doomed to disappear as rationalization
reigned, is reinventing itself as a high
value added manufacturing hub. With
USD4.19 billion it is now Australia’s
biggest exporting industry, before the
car and wine industry, the country’s
traditional export strongholds.
AstraZeneca, for instance, recently
decided to invest USD80 million in its
existing Australian production capa-
bilities to provide the Chinese market
with its asthma treatment medicine.
“For many lower value added manu-
facturing processes decisions are made
every day to move manufacturing to
India as an alternative to producing in
Europe or Australia,” AstraZeneca’s
managing director Mark Fladrich said.
“The opportunity for AstraZeneca
here is that technology that is used to
support our medicines is complicated,”
he continued.
Furthermore, the notion of a discon-
nect between the country’s research
capabilities and big pharma’s research
investments, oft-heard when Focus Re-
ports first visited Australia in 2008,
is quickly turning obsolete. While big
pharma mainly tended to focus on le-
veraging Australia’s clinical research ca-
pabilities in the past, today the world’s
innovative companies are roaming
Australia’s research institutes and its
Melbourne-based biotech industry to
S3 FOCUS REPORTS FeBrUarY 2013
From left: Mark Fladrich, Managing Director,
AstraZeneca; Dr. Brendan Shaw, Chief
Executive, Medicines Australia
find ammunition for their pipelines. In
2012, the combined worth of Austra-
lia’s publicly listed biomedical compa-
nies was actually higher on a per capita
basis than is the case for such companies
in the US, according to Mark Mether-
ell, health correspondent of the Sydney
Morning Herald.
“The pharmaceutical industry is
high-skilled, high-wage, high-tech, ex-
port- and innovation- oriented, low car-
bon footprint industry,” said Dr. Bren-
dan Shaw, Chief Executive of Medicines
Australia, the association representing
the discovery-driven pharmaceutical
industry in Australia. “On top of that
Australia has a fantastic base of medical
research, public infrastructure, hospi-
tals, universities that national and inter-
national companies can plug into.”
These promising developments led
Medicines Australia to unfold a high-
ly ambitious agenda. The vision is to
double the manufacturing output from
AUD7 billion (USD7.34 billion) in 2012
AstraZeneca manufacturing plant in North
Ryde, Australia
Special SponSored Section
to AUD14 billion (USD14.68 billion)
over the next decade and to establish a
number of highly specialised bio-man-
ufacturing plants, to double exports
from AUD4 billion (USD4.19 billion)
to AUD8 billion (USD8.39 billion); and
to double R&D investment from AUD1
billion (USD1.05 billion) to AUD2 bil-
lion (USD2.1 billion), to create many
more high-skilled jobs and increase the
number of Australians accessing clinical
trials to 30,000.
Some doubt, however, whether the
nation is sufficiently aware of the value
of this highly innovative industry to gen-
erate the support needed to realize these
plans. Making the importance of the in-
dustry clear can be especially challeng-
ing against the backdrop of a massive
natural resource-driven economic boom
that made Australian per capita GNP
overtake the US’ in 2011 (USD49.130
for Australia and USD48.620 for the
US) according to World Bank data. This
led the International Monetary Fund
in April 2012 to predict that Australia
would be the best performing major ad-
vanced economy in the world over the
next two years.
“We need to keep our policy makers
understanding that booms in minerals
and coals come and go; we need to bal-
ance that with industries built on brains,
and the Australian medicines industry
has shown that it can fulfill a balancing
role,” said professor Warwick Ander-
son, CEO of the National Health and
Medical Research Council (NHMRC),
Australia’s medical research-funding or-
gan that is responsible for handing out
AUD0.8 billion in subsidies in 2012.
Paradoxically, today’s biggest chal-
lenge to Australia’s pharmaceutical
industry indirectly comes from the na-
tion’s rapidly ageing population. The
Australian government is looking to
contain soaring health expenditures
through reform of its pharmaceutical
reimbursement system.
 9

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10 Australia pharma report January 2013
Special SponSored Section

australia report

creasing percentage of submissions are

A DOUBLE-EDGED SWORD
NAMED PBS
In the case of Australia, the reforms of
this reimbursement system, the Phar-
maceutical Benefits Scheme (PBS), have
been about control of the supply chain
to combine a rise in generics share with
a drop in its prices in order to create
headspace for reimbursement of new
innovative medicines. Whether the PBS
reforms are reaching their goals is up for
serious debate. Many industry players
are asking whether the government can
afford to use the efficiencies that it has
gained from generics to increase spend-
ing on new products.
From left: Professor Warwick Anderson,
CEO, NHMRC; Robert Hendriks, Managing
Director, Genzyme
One of the industry representatives
that questions the reforms is Robert
Hendriks, managing director of Gen-
zyme. “Statistics of PBS approvals of
innovative medicines show that a de-
approved. The central question today is:
should the focus be on cost containment
to the extent we see today, or should the
focus shift more towards assessing real
health outcomes?”
Genzyme encounters a specific reim-
bursement challenge with its rare disease
portfolio, for which it has to apply to
obtain reimbursement on the life-saving
drug program. The life-saving drug pro-
gram gives a set of criteria, one of which
is showing substantial life-saving ben-
efit. This is extremely difficult for prod-
ucts that treat rare diseases: “we treat
few patients, which makes it difficult
to set up clinical trials, certainly when

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S5 FOCUS REPORTS FeBrUarY 2013

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they are life-saving,” said Hendriks. “Is
it ethical to have a double blind ran-
domized placebo-controlled trial? You
might consider that at the beginning of
the development of your drug, but if you
are further down the path and clinicians
are convinced that your drug works,
how are you going to set up a trial that
would allow patients to shorten their
life-span?”
Such hard-to-meet standards across
Australia’s reimbursement programs
could even put future investments of
research-driven pharmaceutical compa-
nies at risk, thinks Hendriks. “I sincere-
ly hope that government understands
the harm it does to Australia’s image
as an attractive investment destination
in the eyes of the global pharmaceutical
industry,” Hendriks said.
Already, job losses of Medicines Aus-
From left: Albert Spanos, General Manager,
Celgene Australia; Dr. Suzanne Hill, Chair,
Pharmaceutical Benefits Advisory Committee
tralia-members in 2012 number around
300 on a total of 14.000 employees,
with five major companies affected:
Sanofi, Pfizer, MSD Australia, Eli Lilly
and GlaxoSmithKline. The redundan-
cies are considered to be related in part
to medicines coming off patent and in
part to price cuts that resulted from the
latest PBS reform.
“Whilst the stated aims of PBS re-
forms related to efficient generics pricing
and transparency to ensure cost-effec-
tive pricing are well on the way to being
realised, the structural reforms related
to serving the future needs of patients
with the introduction of new innovative
medicines still leave much room for im-
provement,” said Albert Spanos, general
manager of Celgene Australia, “both
from a pricing and timing perspective,
which is definitely having a material im-
pact on industry investment in Austra-
lia, illustrated by the loss of 300 indus-
try jobs in 2012.”
In a response to industry criticism,
Dr. Suzanne Hill, chair of the Pharma-
ceutical Benefits Advisory Committee
(PBAC), the statutory committee that
advises the Ministry of Health and
Ageing as to what drugs will be listed

Preventing Beats Curing
The ageing of Australia’s population
and the increasing burden of chronic
disease jeopardize the sustainability
of the country’s healthcare system
at the current levels of expenditure.
Government is thus looking at new
ways to cut cost. “We see our govern-
ment encouraging people to look after
themselves, advising them to eat
more healthy, reduce smoking and Radek Sali, CEO of
frequently exercise thus implement- Swisse
ing preventative programs,” said Mal
Eutick, CEO of Phebra, an Australian company involved in
the development, manufacturing, marketing and distribu-
tion of highly specialized and innovative medicines for the
hospital market. “Ultimately, the government could penal-
ize people who do not look after themselves.”
Furthermore, we see people becoming more interested
in complementary medicines including vitamin and mineral
products and the NHMRC providing a significant amount
for rigorous scientific research in complementary medi-
cines,” Eutick continued.
But taking a greater role in maintaining health is a big
challenge for many. “Who has time for a balanced diet,
complete with organic fruits and vegetables?” asked
Radek Sali, CEO of vitamin company and Australian suc-
cess story Swisse.
Multivitamins help with the prevention of everything
from cognitive decline through to PMS and heart disease
according to Sali, and he therefore pleads for stronger
commitments of both the vitamin industry and govern-
ment to clinical research in order to bolster awareness of
the crucial role of vitamins in preventing disease. “It is a
responsibility for the natural health sector in general to
increase the evidence base.”
Swisse has over twenty trials published, unique for a
natural health company. Sali plans to spend one percent
of total revenue on clinical trials, which comes down to a
minimum of $20 million over the next five years according
to the company’s revenue projections.
One of the hurdles that the vitamin industry faces is a
modest commitment of government. Of the $800 million
the government spent on medical research and clinical
trials in 2011, $600,000 went to natural health, while the
industry represents 14 percent of the total health market,
according to Swisse’s data.
“I do feel that we need more government support in
clinical trials,” said Sali. “We have only started this jour-
ney and are still creating a structure with the right people
to drive outcomes in this area, but there are positive
signs coming from the government.”

FeBrUarY 2013 FOCUS REPORTS S6

 12
australia report
From left: Veronique Toully, Managing Director, UCB Australia; Andy Jackson, Managing
Director, IMS Australia; Jason Smith, Country Head & Managing Director, Novartis; George
Varkanis, Vice President Asia Pacific, Celgene
on the PBS, explained how the reforms
are changing the demands to the indus-
try. “It is going to be demanding of the
industry, because they will have to put
a lot of effort into clinical trials that
actually show that their products are
really better, and that difference in ef-
ficacy or effectiveness can be translated
Connecting
with patients
I would like to change the
perception of rheumatoid
arthritis and increase public
awareness. It is associated
with the elderly, but it is a
disease that can happen to
anyone at any age. I’m grateful
for the therapies that are
available now to help sufferers
live their lives as best they can.
Alison
Inspired by patients. Driven by science.
© 2011 - 2013 UCB Australia Pty Ltd. All rights reserved. UCB Australia Pty Ltd (ABN 48 005 799 208).
Tel: +61 (3) 9828 1800. Fax: +61 (3) 9828 1860. Level 1, 1155 Malvern Rd. Malvern VIC 3144, Australia.
S7 FOCUS REPORTS FeBrUarY 2013
01_702_V2.1.indd 1
Australia pharma report January 2013
into a difference in price,” Dr. Hill
said, adding that “The usual drug de-
velopment by industry is incremental in
its gains and development, and that is
going to be a real challenge.”
Looking at the growth of expendi-
ture through the PBS, about one percent
in an economy growing 3.2 percent in
PC1301-CIM-03
10/01/13 5:23 PM
Special SponSored Section
2011, the reforms already seem to have
the intended effect. Nonetheless, the end
is not in sight. “I suspect that the gov-
ernment is going to look for a lot more
savings before it allows more expendi-
ture,” said Dr. Hill.
AND thE KEy tO SUccESS iS…
In this environment—“one of the most
demanding in the world when it comes
to data, cost-effectiveness proof, etc.”,
according Veronique Toully, managing
director of UCB Australia and former
vice-president in charge of pricing &
reimbursement—a player’s competitive-
ness is determined by several factors.
“The companies that have had loss of
exclusivity issues, a concentrated port-
folio, and do not have a strong pipeline
are really struggling,” said Andy Jack-
son, general manager IMS Australia and
New Zealand. “Those three dynamics
together all hitting in one go plus a rela-
tively unfavorable economic environ-
ment provide serious challenges.”
“Still, there are companies that are
growing very well in this market, main-
ly companies with a specialist portfolio
or from generics,” according to Jackson.
One example of a company that is doing
well in the changing environment is No-
vartis. Recently appointed country head
and managing director Jason Smith is
confident that he will be able to lead the
company to the top of the commercial
rankings on the back of Novartis’ re-
search success and its pipeline.
Except for Toyota, no other company
worldwide invests more money in R&D
than Novartis. “This commitment to re-
search allows us to focus more and more
on unmet medical needs in the therapeu-
tic areas in which we have experience
and ensures the longevity of our robust
pipeline,“ said Smith. “That means that
as we bring newer products to market,
they should be more likely to meet the
bar for approval and reimbursement in
a country like Australia.”
On top of that, Novartis is develop-
 13
Special SponSored Section

australia report

ing products with companion diagnostics which are used in

Multi-Ethnical; Cross-Sectoral; George Clinical the clinical development process. According to Smith, this
helps to personalise treatment, to identify those who respond
One of the frontrunners in connecting public and well and those who do not respond well to treatment, which
private is George Clinical (part of the George Institute then means discovering better patient outcomes at the start.
for Global Health), which is successfully working with
multiple stakeholders. “We run a PiLOtiNG AUStRALiA iNtO thE ASiAN cENtURy
number of trials that address pub- While one could argue that PBS reforms are limiting access
lic health priorities while provid- to the newest innovations to the Australian pensioner after
ing commercial opportunities for a hardworking, taxpaying life, PBS reforms are also forcing
companies funded by industry and the industry to do something totally new rather than tweak
at the same time by the NHMRC,”
existing products.
said Marisa Petersen, George
“Registration and reimbursement processes in Australia
Clinical’s managing director. “Be-
should be approached as a trigger for creativity, to come up
cause of the mutual benefit and
with ways to successfully commercialize your drug,” said
goals, it is possible to do hugely
important research in a very ef- George Varkanis, vice-president Asia Pacific for Celgene. Aus-
fective way.” tralia was purposely meant to be a pioneer market for Celgene
“A key priority for George in Asia Pacific, a role that it has fulfi lled with verve. Australia
Clinical is redesigning the clinical was among the fi rst in Celgene’s global portfolio to success-
trials process and influencing fully launch key brands Revlimid and Vidaza.
regulatory process in this area,”
added Prof. Vlado Perkovic, execu-
tive director of the Institute. “The
current process is creaking under
its own weight. We need more From top: Marisa
Petersen, Managing
modern, cheaper, and effective Director George
clinical trials that can identify Clinical; Vlado
treatments that work.” Perkovic, Executive
With half the world’s popula- Director, The George
Institute
tion living in Asia and a growing
expertise in clinical trials as
well as an expanding middle class to market new
medicines, that is where George Clinical focuses its
activity. Recently George Clinical opened its office in
Beijing, its third in Asia after Hong Kong and India.
“The growth of chronic disease and ‘western’ diseas-
es is greatest in Asia, so this population needs to be
part of trial plans,” explained Petersen.

The George Institute for Global Health at

Peking University Health Science Center

FeBrUarY 2013 FOCUS REPORTS S8

14 Australia pharma report January 2013
Special SponSored Section

australia report

It’s All About Pharmacy Baby!

Due to the dynamics of the government reforms, medicine while it is on patent. When I became
the Australian pharmacy has taken on a pivotal president we dreamed that we would be working
role as a platform for growth. As margins start with AstraZeneca, Pfizer, Eli Lilly, etc.; now it is
to deplete the supply chain, both generics and reality in Australia.
innovator companies are looking at smarter ways
of getting to the pharmacies. This has led Pfizer What would you earmark as the biggest chal-
lenge in establishing stronger relations with the
to breach the traditional Community Service
big pharma companies?
Obligation-model of bypassing the wholesaler
It is hard for the Guild to deal with an industry
and going directly to pharmacy in collaboration
sector where CEOs change frequently. Also, in
with DHL in a landmark move. Kos Sclavos,
many Asian countries pharmacists play a mar-
Three visions on how to deal with the stake- National President,
ginal role, and we sometimes see players com-
holder that have been taking center stage in the Pharmacy Guild
ing in who at first are not aware of the different
shifting dynamics of Australia’s pharma industry. role of pharmacies here in Australia.
Kos Sclavos, National President, Pharmacy Guild Of course the Guild explains that this is not the case
We have seen a big change over the past three or four and the pharmacies have an indispensable place in the
years in the interaction between pharmacy and manufac- supply chain of medicines. In Australia, patients with
turers. Big pharma have engaged heavily with the Guild. chronic diseases often see the pharmacist five times over
Four years ago, 99 percent of our relationships were with a six month period while seeing their doctor only once.
generics manufacturers, as in most countries, but every- The link with the individual family doctor is disappearing,
one is realizing that pharmacies can play an important role which makes the pharmacists’ role more crucial.
and pharmaceutical companies have to maximize usage of continues…

In a success story similar to that of

Celgene, the Australia-affiliate of Bel-
gian chemical company-gone-biotech
UCB was the first in the Asia-Pacific re-
gion to launch the company’s three new
brands—Cimzia, Neupro, and Vimpat.
“Australia is thus a pilot country in the
region,” said Toully.
“Australia is much closer to Europe-
an markets than to Asia-Pacific markets
in terms of launching timelines and the
overall way in which the industry oper-
ates,” she continues. “At the same time,
because we have this strong geographic
link and also because the doctors here
have very strong connections with Chi-
nese, Japanese, and Korean doctors we
are a close partner of UCB affiliates in
Asia-Pacific and we can actually share a
lot with them and support their launch-
es,” she said.

thE DiSAPPEARiNG DiScONNEct

With South East Asia’s seemingly nev-
er-ending boom expected to drive the
numbers of the Asian middle class from
around 500 million to 3.2 billion by
2030, figuring out how to optimally

S9 FOCUS REPORTS FeBrUarY 2013

 15

AUSTRALIA’S
No.1 *
MULTIVITAMIN

Mark Webber
Formula 1 Winner

Official Vitamin of the Formula 1™Australian Grand Prix

*Aztec sales data - MAT 04/11/12 (Grocery and pharmacy combined).

Always read the label. Use only as directed.

16
australia report
It’s All About Pharmacy Baby! continued
THE WHOlESAlER/BANNER GROUP
Stephen Roche, CEO and Managing Director, Australian
Pharmaceutical Industries (API)
last April we saw the biggest round of price cuts, how has
this impacted the API business?
“There is no doubt that pharmacy in this country has un-
dergone more change in the last 2.5 years than probably in
its recorded history before that, and with the current reform
process this is likely to continue for the foreseeable future.
We, along with the rest of the constituents in the supply
chain, are working to maintain both our presence and our
profitability for our shareholders, as well as providing the
best in market service & experience for our customers.”
looking at the distribution sector in the region, we see a
very competitive situation, with a balancing act between
a big three (API, Sigma, Symbion) aggressively targeting
each other’s clients. How do you position API in the com-
petitive landscape in the region to be the partner of choice
Jimenia,
MPS I disease
S11 FOCUS REPORTS FeBrUarY 2013
Special SponSored Section
Australia pharma report January 2013
for the world’s leading pharma companies in Australia?
“Among wholesalers, margins are so thin that everyone has
effectively the same product and the same pricing. The gov-
ernment’s Community Service Obligation (CSO) demands a
level of efficiency and fundamental investment. I am of the
view that there is absolutely no point of differentiation in
the supply chain. The CSO prescribes
maximum price and minimum delivery,
so in essence you are actually provid-
ing a similar service that cannot be dif-
ferentiated. This makes it fundamen-
tally a relationship business, both with
our customers and the leading pharma
companies.”
Pfizer’s decision to engage in a clos-
er integrative relationship with phar-
Stephen Roche, macists was the signal that everyone
CEO, Australian needed to re-evaluate their model. The
Pharmaceutical scenario for API is to continue to adapt
Industries (API)
and change over the next three to five
At Genzyme Australia,
we have a rare
commitment to
discover and deliver
transformative
therapies, providing
hope to patients with
rare and special unmet
medical needs.
Special SponSored Section

17
australia report

years as big pharma– depending on their own molecular
portfolio and their generic relationship—will change and
adapt to whatever their new markets are. There is no doubt
that, once the key molecules go post-patent, branded phar-
ma companies face a very different go-to market strategy.”
API believes that it offers a very economic & viable ser-
vice to pharmacy. Our view is that pharmacies actually want
a single source of supply for their product, which provides
real efficiencies to them which they need in this economic
environment. API will continue to add value and the go-to-
market strategy for brand pharma or generic suppliers as
required.”
THE GENERICS PlAyER
Azhar Mohammed, Managing Director, Dr. Reddy’s
How does a relatively new entry differentiate itself in a
highly competitive Australian generics industry?
It is about engaging pharmacy on a sustainable basis by
providing value in these challenging times. In the older days
the pharmacy would go with a manufacturer’s full portfolio
without rigorous review of the individual product prices.
With the current price pressure the
pharmacist is willing to take a detailed
look at individual price offerings and
switch to where he can maximize his
value. To Dr. Reddy’s that means con-
sistent engagement with the pharma-
cists across a range of products and
services to improve their profitability in
these rather challenging times.
Azhar Mohammed,
Managing Director, How do you see the relationship be-
Dr. Reddy’s tween manufacturer and pharmacy
change?
There is no denying that there has been an aggressive cut
on generics pricing, and this has put pressure on the profit-
ability of the pharmacies. It is in the interest of all—phar-
maceutical companies, consumers and the governments
that pharmacies operate in a sustainable environment. In
order to meet this objective I am very clear that only com-
panies that are vertically integrated and able to execute
global economics of scale can sustainably partner with
pharmacies; all others need to review their cost structures.

capture the massive opportunities

that come with it is one of the hot- Australia’s leading clinical research
test topics on Australia’s national organisation for the conduct of
agenda. early phase clinical trials
While bringing ample oppor-
tunities, the explosion of Asia’s
markets & middle classes also
causes less favorable develop-
ments, such as an inevitable de-
Dr. Martin Cross,
Chairman, Generic scent of Australia down the global
Medicines industry ladder of most sizable pharma-
Association (GMiA) ceutical markets. “Australia still
stands up very well against other
mature markets across the dynamics that IMS looks
at, but the issue is that it does not stand up as well
as it used to in terms of growth potential and market
issues,” said Andy Jackson, general manager of IMS
Australia. “The investment divide is already there: the
pharmaceutical industry opts for
China, India—the Pharmerging
markets. The Australian market
has grown 6-7 percent on a com-
pound annual growth basis in re-
cent years, while the forecast has
dropped to 2-3 percent for the
For more information
next five years.” phone +613 9076 8928
But, “Australia has a very strong www.nucleusnetwork.com.au
R&D capability and is an amazing Chris Hourigan, Service Driven. Quality Focused. Globally Orientated.
country for start-ups,” according Managing Director,
to Dr. Martin Cross, chairman of Janssen-Cilag

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australia report
the Generic Medicines industry Associa-
tion (GMiA). “It is a knowledge-based
country, and under-recognized as a mat-
ter of fact, and that is to the detriment
of many companies that could come here
and get really good leads.”
Don’t Forget About Alzheimer’s
One of the world’s leading laborato-
ries to optimally leverage Australia’s
research capabilities is Servier,
France’s second-largest pharmaceuti-
cal company, for whom Australia is its
seventh-biggest affiliate.
In 2012, Servier announced two
significant collaborative partnerships
for drug discovery and research. The
company commenced collaboration
with the Monash Institute of Pharma-
ceutical Sciences (MIPS) on G Protein-
Coupled Receptors (GPCRs), while
also starting collaboration with the
Florey Institute of Neuroscience and
Mental Health on the Insulin-Regulat-
ing Amino Peptidase program (IRAP).
G Protein-coupled receptors (GPCR; as
depicted) are the focus of the MIPS-
Servier drug discovery partnership
“The Florey Institute is among the
world’s top six brain research centres
and the largest and most success-
ful neuroscience and mental health
institute in Australia,” said Servier
Australia CEO Patrick Tete, who has
been leading the Australia-operations
for over eight years. “IRAP is a novel
target which has been under preclini-
cal validation as a target in Alzheim-
er’s Disease. In addition to being a
S13 FOCUS REPORTS FeBrUarY 2013
Australia pharma report January 2013
However, this notion of a disconnect
seems to be disappearing. Pharmaceu-
tical companies have been concluding
many agreements with biotech industry
and research institutes for their R&D,
demonstrating a set of new relationships
cognitive enhancer, it is believed that
IRAP inhibitors may also provide a
mechanism for disease modification in
Alzheimer’s Disease.”
Servier’s investments in Al-
zheimer’s are all the more remark-
able against a backdrop of a steady
stream of headlines announcing drug
companies abandoning research into
treatments for dementia. With poor
economic conditions in the US and
Europe, many drug companies are
cutting back on their research arm,
and disproportionately so on research
related to the central nervous system
given the high-risk character of such
investments.
According to Tete, Servier’s foun-
dation structure allows it to pursue
strategies that listed companies
cannot. “We do not have to meet
shareholders expectations; therefore
we can focus on long-term strategies.
Servier can focus on the longer term,
and also on domains such as cardio-
vascular and mental health at a time
when the Pharma industry is basically
turning its back on research for new
anti-hypertensives, heart failure drugs
or antidepressants.”
Servier’s investments in Alzheim-
er’s come at a time when Australia’s
first minister of mental health &
ageing, the hon Mark Butler, warns
that dementia is set to become
Australia’s largest source of disability
by 2016. “We need to get everyone in
the health sector rowing in the same
direction: we need the entire pharma-
ceutical industry behind it, we need
traditional biomedical researchers be-
Special SponSored Section
that requires sophisticated partnering.
“Indeed Australia is considered a high-
potential R&D opportunity particularly
in the biotech sector, and the secret is
out. Many of the world’s top pharma-
ceutical companies have caught on to
From left: The Hon Mark Butler MP,
Australia’s first Minister of Mental Health
& Ageing; Patrick Tete, CEO, Servier
hind it, we need the age care sector,
GPs and so on collaborating on the
matter,” Butler told Focus Reports.
”To do that we need to recognise that
the healthcare sector currently oper-
ates in silos—the hospital system,
GP system, pharmaceutical indus-
try—and breaking down those silos is
a key challenge.”
An example of such broader stake-
holder cooperation to alleviate the
burden of mental health is Lifeline,
a leading provider of crisis support,
mental health and suicide prevention
services. The organization recently
found its first corporate contributor in
Servier for its Foundation for Suicide
Prevention. Through the Foundation
Servier funds a three-year research
project that investigates improved
pathways for people with complex
needs, many of whom have mental
illnesses or are suicidal, and who are
in contact with Lifeline crisis sup-
port services. Through this research,
Lifeline will find better ways to assist
these individuals with accessing
continuing professional care—and will
create better partnerships between
crisis services and clinical services.

Special SponSored Section
the fact that Australia offers a
lot of pipeline potential,” said
Chris Hourigan, managing
director of Janssen-Cilag.
“The quality and the abil-
ity to do work that other
countries cannot do are key,”
explained Jason Smith the
choice of his company Novar-
Craig Rogers, CEO,
tis to invest close to USD40 Nucleus Network
million in R&D in Australia
annually. While part of the money is in-
vested in over 100 clinical trials, Novar-
tis’ research commitment to Australia is
no longer limited to the clinical side.
The Swiss drug maker recently an-
nounced collaboration with the Brain
& Mind Research Institute, one of Aus-
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tralia’s leading neuroscience
centres. Through this cooper-
ation, Novartis is supporting
the first multi-country analy-
sis of MRI work in its kind
in the Southern Hemisphere
within the company. Australia
is the third country within the
group after the US and Swit-
zerland to have this capability.
While discovery-focused re-
search is becoming increasingly popular,
the last few years have been tough for the
clinical research sector. “The last three or
four years have been tough, the financial
crisis has had an impact on the work com-
ing through both from small biotechs into
Australia and the overall availability of
Dr. Reddy’s provides high quality,
innovative medicines at affordable prices.
Dr. Reddy’s is listed in the top 10 generics companies in the US and is also
a leading generics company in the UK and Europe. We are committed to
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Partnering with pharmacies for
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19
australia report
money to overseas biotechs,” said Craig
Rogers, CEO of Nucleus Network, one
of Australia’s leading early-phase clinical
research businesses. “Also from the big
pharma perspective the high Australian
dollar has made us less competitive.”
Still, a lot of big pharma and biotech
companies like Australia because studies
can be done before filing IND, to get pa-
tient data before going to the FDA. “Also,
all phase I studies can be addressed by the
local ethics committee,” Rogers said. “So
as long as there is a competent ethics com-
mittee with the right scientific subcom-
mittee, they can do the full evaluation to
avoid going through a central regulatory
process.”
Consistent value through
competitive pricing
Available from all major
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Products are supplied to
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22 Brendan Shaw, Chief Executive - Medicines Australia
INTERVIEW WITH:
Brendan Shaw, Chief Executive -
Medicines Australia
Focus Reports: When we met you in 2008 your
vision for the future of the pharmaceutical
industry in Australia was ‘for existing manu-
facturers to reinvest in new plants and bring
more work here, to utilize the strong Austra-
lian skill base and competitive advantages,
and to grow more indigenous Australian com-
panies.’ Do the achievements of the industry
over the past five years match your vision of
2008?
BRENDAN SHAW: In the past 12 to 18 months
we have seen several positive developments.
AstraZeneca had decided to close its plant
in Sydney, but reversed this decision and
decided not only to keep it open, but to
actually expand it. GSK decided to invest in
its Melbourne plant rather than invest in a
new plant in India. The global CEO of GSK,
Andrew Witty, said during his visit to Aus-
tralia earlier this year that the reason for
GSK to invest in Australia was the belief
that factors such as quality, research, and
“Just In Time” manufacturing are more
important today than cheap labor.
On top of the investments of AstraZeneca
and GSK we see CSL, an Australian success
story is investing A$ 235 million in its biotech
manufacturing facility in Melbourne.
Furthermore a number of Australian
start-up biotech companies are reaching the
commercial stage. One of them is Pharmaxis,
which recently had its first drug recom-
mended for the Pharmaceutical Benefits
Scheme. Others are Mesoblast and Star-
pharma.
Brendan Shaw, CHIEF EXECUTIVE, MEDICINES AUSTRALIA
FR: To what extent do you still see the narrow
manufacturing base and manufacturing ratio-
nalization as a threat for the future of Austra-
lia’s pharma manufacturers?
BRENDAN SHAW: They still pose challenges.
Another challenge is the high exchange rate
of the Australian dollar, although the good
news is that to date the pharmaceutical
manufacturing plants have managed to
stay competitive in spite of the high
exchange rate. This most probably has to do
with the high-value, high-technology
nature of the pharmaceutical products that
Australia exports, as for these products the
factor cost of production is less impactful.
The high exchange rate is causing some
restructuring in the Australian manufactur-
ing industry and leads some industries to
decline, and the government is looking at
other industries that can take on a leading
role. The pharmaceutical industry is high-
skilled, high-wage, high-tech, export- and
innovation- oriented, low carbon footprint
industry. On top of that Australia has a fan-
tastic base of medical research, public infra-
structure, hospitals, universities that national
and international companies can plug into.
Another interesting opportunity stems
from one of the things that we have not done
well in Australia historically, which is to link
universities with industry. There are comple-
mentary interests here: the pharmaceutical
industry globally is looking for more oppor-
tunities to find pipeline products at biotech
companies and universities, while the Aus-
tralian government wants to integrate the

Australian research sector with business. We
need to get on each other’s radar screens
though.
FR: How successful have you been in reaching
this over the past years?
BRENDAN SHAW: AstraZeneca, GSK, CSL, and
Leo Pharma have ventured into biotech.
Some of the indigenous companies such as
Pharmaxis are on the verge of becoming
commercial pharmaceutical companies. The
challenge for Australia is to continue the
momentum and capitalize on it.
So Medicines Australia is keen to see the
government take the next step in building a
strategy around this. We have seen several
good initiatives over the years, such as the
R&D Tax Credit, which makes R&D about ten
percent cheaper and significantly boosts the
attractiveness of Australia as an R&D desti-
nation.
FR: To what extent can your member compa-
nies accept further price reductions in order
to keep the PBS sustainable?
BRENDAN SHAW: In 2010 Medicines Australia
signed a Memorandum of Understanding
(MoU) with the government on how the
PBS should be run in terms of pricing policy,
the first agreement of its kind between the
industry and the government. The MoU
runs until 2014 and contains a range of ini-
tiatives such as price cuts in the F2 multiple
brand market, process improvements in
listing new medicines, and guarantees of
government on which policy changes they
will not implement before the MoU ends.
The MoU provides the industry with a level
of policy predictability. It is not perfect, but
the agreement has given the industry a
four-year window in which it can more or
less know what will happen.
April 2012 indeed saw a major round of
23
PBS price cuts. Dozens of medicines were cut
in price by up to 75 percent, and more such
price cuts will follow as agreed in the MoU.
The reason that Medicines Australia could
negotiate this agreement is that our members
account for a significant percentage of the off-
patent market; originator companies histor-
ically have significant business in the off-pat-
ent market in Australia. So the price cuts have
affected our members quite badly, but it is
part of the philosophy of the industry: while
a medicine is on-patent a rigorous health
technology assessment system regulates the
price, but once the medicine goes off-patent,
the price is set through market competition.
Our philosophy has been to indeed let free
competition reign and have the tax-payer
benefit.
FR: What is your vision for the Australian
pharmaceutical industry in the next five
years?
BRENDAN SHAW: When talking about the
future of medicines and pharmaceuticals,
Australia is the undiscovered country. Over
the past years the industry has produced a
range of remarkable successes, and I would
urge pharmaceutical executives around the
world to have a good, hard look at Australia.
Often Australia would be towards the bot-
tom of the pile of a range of Asia-Pacific
investment proposals in a company. Com-
panies would focus all their attention on
China or India. But when looking for oppor-
tunities in hi-tech, high-value manufactur-
ing, Australia is positioning itself more and
more as a viable choice in the region. GSK
is a good example with their choice for Aus-
tralia over India as the location for their
manufacturing facilities. The more the com-
panies are awake to the opportunities, the
better the companies and Australia will be
served.
24 Interview with: Anna Lavelle, Chief Executive Officer, AusBiotech
INTERVIEW WITH:
Anna Lavelle, Chief Executive Officer
– AusBiotech
Focus Reports: What have been the focus areas
for the association in improving the wellbeing
of the life science biotech industry and what
have been the key milestones/achievements
since 2008?
ANNA LAVELLE: In addition to the financial cri-
sis the government decided to decrease its
2008 budget in which they axed programmes
designed for innovative companies-in par-
ticular life science companies in the biotech
area. These two events coinciding has been a
double jeopardy for the life science biotech
industry. Inevitably the industry received a
big hit with the result that numerous com-
panies have not survived.
Due to successful C-level decision making
by the leading pharmaceutical companies the
industry has managed to march on despite
money scarcity and the sober environment.
Notable has been that they have not lost their
desire to continue their search to access cap-
ital subsequently refocusing and restructur-
ing their companies extremely well.
Looking back from 2008 until now, the
small cap biotech life science companies have
outperformed all the ordinaries in the Nas-
daq Composite index and the ISEX 300. In
other words, the small cap biotech life science
companies have proven to be highly invest-
able-many sophisticated investors have made
money. This can’t be said about many other
industries.
FR: What has been the key success factor for
the biotech industry being able to consistently
outperform the size of the economy?
ANNA LAVELLE: Australian biotechnology and
Anna Lavelle, CHIEF EXECUTIVE OFFICER, AUSBIOTECH
life science companies are capital efficient.
Australians are used to doing a lot with very
little. Moreover, companies tend to be flat
with little hierarchy and are reasonably
priced-good value for money.
Due to high level of technology, manage-
ment and driven scientists, Australia is well
positioned on a global level.
Incentives that attract investors to Aus-
tralia are our regulatory framework, a good
health system and skilled clinicians who have
created an attractive environment to conduct
clinical trials. In addition to this, Australia
punches above its weight if we set off popula-
tion versus number of top researchers. This
country seems to be fertile ground for medi-
cal research having a highly reputable medical
research community.
FR: Could you shed a light on what AusBiotech
has been doing recently to pave the way for the
Australian biotech industry to further build
its success?
ANNA LAVELLE: In 2007 listed companies
have raised almost a billion Australian Dol-
lars in secondary capital.
During the financial crisis we realized that
our best contribution would be helping our
member companies to access capital. Having
said this, at a 2009 conference we organized
the first in a series of of investment plat-
forms. We showcased 40 private companies
- 20 late stage and 20 early stage - to invited
international investors. Around 100 inves-
tors, including bankers, stock brokers and
other investors participated to that particular
conference. We have built on this and today

we have an international series of investment
meetings taking Australian companies over-
sees and putting them in front of potential
investors who may not be aware of Australian
technology. This has proven to be extremely
successful, generating significant new invest-
ments and interest in our technology.
From a public policy perspective, we have
been involved in negotiations regarding
changes in the federal tax laws, which were
implemented 12 months ago. Since these
changes started to apply companies
announced that they are getting significant
money reimbursed due to R&D tax incentives.
Companies with less than $20 million turno-
ver get 45 cents cash back for every dollar
they invest in R&D and companies with turn-
over above $20 million get a 40% offset. This
is a 45% discount on their expenditure that
companies get back as a cheque in cash from
the tax office or a 40% tax credit. This guar-
antees that investors receive a 40 - 45 % uplift
straight away and it encourages R&D.
FR: How confident are you today about the gov-
ernment’s commitment to foster the right
environment for the biotechnology sector?
ANNA LAVELLE: I believe that the federal as
well as the state government wants to see
innovation. Speaking to the public the gov-
ernment often mentions its desire for a
smart country and their support for inno-
vation.
AusBiotech conducts a survey among
CEOs every year in order to track what their
ideas are about the environment. Last year
we found the CEOs optimistic, speaking
about hiring additional staff, capital raisings,
growth and other positive aspects. They were
less positive about the business environment
meaning: tax, the regulatory framework, red
tape and processes.
25
What is your vision for the Australian biotech-
nology industry?
ANNA LAVELLE: We need more success stories
such as Pharmaxis, a company that is
involved in the research, development and
commercialisation of new therapies for
undertreated respiratory diseases and has
grown to become among Australia’s largest
life sciences companies.
The environment will always be heteroge-
neous because it depends on what the product
is. Does it have a domestic or international
focus and are there partnerships involved? It
is a bespoke area where it is hard to make
standard rules or expectations. We have seen
that companies search creative ways in order
to finance their operation, looking for inno-
vative financing and partner arrangements
or start-up a commercial operation that
finances the program rather than having to
go out raising money through investors.
I strongly believe that to enable innova-
tion, pressure is required. If there is no pres-
sure there is no drive nor trigger to innovate.
Over the last few years, scarce capital has
pushed people to find creative solutions to
finance their companies.
Pharmaxis has been a great example as a
first indigenous company that has made its
way from discovery right through commer-
cialization process. I’d like to see more com-
panies PBS-listed and getting their products
out to the community.
While five years ago people merely focused
on phase III developments, today we see
increasing interest from pharmaceutical com-
panies in phase I and pre-clinical studies.
Moreover, pharmaceutical companies have
been concluding agreements with the biotech
industry to their R&D, not taking up the
responsibility of developing themselves. This
demonstrates a set of new relationships that
requires sophisticated partnering.
26 Interview with: Dr. Suzanne Hill Chair
Pharmaceutical Benefits Advisory Committee
Interview with:
Dr. Suzanne Hill, Chair – Pharmaceutical
Benefits Advisory Committee
Focus Reports: What is your response to PBS
reform criticisms at the apparent conflict
between the government’s desire to reward
innovation, while sharply reducing the rev-
enues that would otherwise be used to fund
such innovation?
Dr. Suzanne Hill: The question is: what
are you paying for, and how much control
do you have over the pharmaceutical sec-
tor? When I left in 2005, Australia was
paying lower prices for innovative prod-
ucts than its OECD comparators, but rel-
atively high prices for generics. If you
want to encourage new products, then
generics prices may have to drop to allow
head room for investment.
The PBS reforms introduced in 2007
have been about control of the supply chain
to encourage a drop in generics prices, and
that created financial space. The challenge
then is whether the government will be
able to afford to use the efficiencies that it
has gained from generics to actually spend
it on new products. The PBAC is required
under the National Health Act to assess
comparative effectiveness, safety and cost.
We are also required not to recommend a
product that is more expensive than some-
thing we already have, unless we are con-
vinced that it is better. It is going to be
demanding of the industry, because they
will have to put a lot of effort into clinical
trials that actually show that their prod-
ucts are really better, and that difference
Dr. Suzanne Hill Chair Pharmaceutical Benefits Advisory Committee
in efficacy or effectiveness can be trans-
lated into a difference in price. The usual
drug development by industry is incremen-
tal in its gains and development, and that
is going to be a real challenge. I suspect
that the government is going to look for a
lot more savings before it allows more
expenditure.
Any system needs to be clear about what
its overall gains are, and what the aims for
healthcare are. If we know that we have
three or four different generic molecules
and that by allowing competition in the
market we can actually allow improved
health outcomes at a lower price, then it is
irresponsible not to go that way. We need
to ask ourselves whether our system is
allowing competition appropriately, or
whether we have perverse incentives in the
system that distort competition and may
mean that we do not get best value for
money.
At the moment, because Australia has
been unpacking its control on generics
pricing over the last three years, a lot of
things are still in transition, and I believe
that there are probably some perverse
incentives in the system that are inflating
prices inappropriately or are holding up
newer versus older generics in the market.
Those will gradually be resolved and things
will even out. In the end, from the health
perspective, we are about health outcomes.

FR: Some of our interviewees have mentioned
that, although there are mechanisms in place
to speed up the approval of new products, the
approval time is still quite long and the pre-
dictability of getting products listed on the
PBS is decreasing. Would you agree and how
is the PBAC working to improve this?
DR. SUZANNE HILL: There are three parts to
the process. First of all the PBAC has to
approve. If the PBAC does not approve, the
product will not be listed; if PBAC
approves, the product might be listed.
That is what companies are complaining
about: that it has gone from a definite
approval if the PBAC said yes, which
meant they only had one hurdle, to a
‘maybe’ after the PBAC approved. Nothing
has actually changed other than that the
government is exercising its prerogative
under the National Health Act, which has
always been there and has been exercised
in the past, so it is about remembering his-
tory a little bit.
There are three parts to it though - there is
the PBAC recommendation, there is the pricing
negotiation, and then there is approval on the
political level. These three parts have always
been there. If a company is feeling that things
have come less predictable, it could be because
the pricing discussions that they are having are
much tougher, which in the environment after
the global financial crisis is to be expected as
well as , in an environment in which the pricing
system with the supply chain control is chang-
ing. That would be the first hurdle.
Then if the government is fiscally responsi-
ble and is worried about its budget, it naturally
sets higher demands. Companies are seeing the
downstream effects of that as uncertainty, and
are seeing basically what other countries are
seeing as well in the global financial crisis. It is
just the reality of the changing environment
that we are working in.
27
“We need to ask ourselves whether
our system is allowing competition
appropriately, or whether we have
perverse incentives in the system
that distort competition and may
mean that we do not get best value
for money.”
You have been in charge of the organization
now for 1 year. What is your vision for the PBS
and the PBAC for the remainder of your ten-
ure?
DR. SUZANNE HILL: The appointment is for
four years. The PBAC has to make sure that
its advice is relevant and as accurate as pos-
sible. The committee is doing that pretty
well and we have to continue to do that. We
have to be responsive to both community
expectations for access because that is our
role in the national medicines policy, as
well as to industry expectations for access
for business purposes. We have to sit on
the fence at times and make sure that both
views actually get transferred into that
advice.
We have to remain independent because
the strength is having an independent advi-
sory committee that people can turn to for a
balanced view, without being prejudiced by
either side of the spectrum.
Remaining independent is key, as well as
being clear and transparent. We need to
maintain what my predecessor Lloyd Sansom
has managed to do so well over the last dec-
ade and develop it to suit the needs of the
various stakeholders.
28 Interview with: Chris Hourigan Managing Director
Janssen Australia and New Zealand
INTERVIEW WITH:
Chris Hourigan, Managing Director –
Janssen Australia and New Zealand
Focus Reports: To what extent has Janssen Aus-
tralia been able to meet increased demands for
more acceptable and additional evidence that
supports reimbursement as criteria for listing
on the Pharmaceutical Benefits Scheme grow
increasingly stringent?
CHRIS HOURIGAN: The fact that we are the fast-
est growing pharmaceutical MNC in Austra-
lia is a great testimony of our success. We
have also been relatively successful over time
with achieving PBS reimbursement.
Nonetheless, we would like to see more
attention for real world data. Clinical trials are
of course crucial but they do not always give
the right picture; actually there have been
examples where a clinical trial will give one
effect, while in the real world we see a different
effect.
Janssen has a long-acting injectable for
treating schizophrenia, a product that offers
one single injection per month, after which the
patients can get on with their lives. The other
options available to the patients are either
fortnightly injections or an oral tablet that
must be taken at least once per day, 365 days
per year.
The oral treatment option may be associ-
ated with a greater adherence risk compared
to the injection. In a clinical study chances are
that the person will take his tablets every day,
while in the real world the oral medication does
not hold on.
The bottom line is that we need to do more
about data generation, but we would like to see
a change in the guidelines to facilitate real
world data collection.
Chris Hourigan, MANAGING DIRECTOR JANSSEN AUSTRALIA AND NEW ZEALAND
FR: With Minister of Mental Health & Ageing
Mark Butler we discussed how pressing mental
health issues are in Australia. Janssen tradi-
tionally has a strong mental health portfolio -
how important is the presence of Janssen in for
the Australian population?
CHRIS HOURIGAN: Globally a lot of companies
are pulling out of mental health. Nonethe-
less, mental illnesses are still top of the table
of the global burden of diseases. Neurosci-
ence is one of the last areas where research-
ers worldwide are working hard to reach the
same levels of understanding as in cardio-
vascular or oncology when it comes to under-
standing the science behind the disease.
Although we realize that there are big chal-
lenges in identifying innovative discoveries in
neuroscience, we have a long-term commit-
ment that is also based on the fact that our
founder Paul Janssen is one of history’s great-
est CNS researchers. That legacy gets carried
on in the company.
FR: How would you explain the disconnect
between Australia’s research capabilities and
the attention it gets in executive rooms of the
global pharmaceutical industry?
CHRIS HOURIGAN: Janssen does not see the dis-
connect as much as others in the industry.
We actually see Australia and New Zealand
as a real opportunity from a business per-
spective but also from an innovation and
R&D perspective.
We fly in the key therapeutic areas leads
from the US and Europe to Australia on an
annual basis and review the research that is
happening in this country. Australia and New

Zealand are high-potential R&D opportuni-
ties, particularly in the biotech sector, and the
secret is out: many of the world’s top pharma-
ceutical companies have caught on to the fact
that Australia offers a lot of pipeline potential.
In the last two years we have signed seven
local R&D deals. One of them is with Uni-
Quest, the University of Queensland’s main
research commercialisation company. This is
a strategic research collaboration agreement
to develop a promising treatment for a devas-
tating immunological disease that affects mil-
lions of people around the world. Dr. Paul Stof-
fels, our worldw ide Chair man w ith
responsibility for research and development
actually came to Australia to visit the program.
Gone are the days where everything was
done in silos. We have several programs and
agreements for open innovation with external
stakeholders under which we share IP and try
and find solutions. Everyone acknowledges
that the burden of disease cannot be lessened
by one company or individual but it has to be
about people working together. Johnson &
Johnson is committed to that.
The model is no longer just about pharma-
ceutical interventions; governments are after
finding a total, life-improving solution for a
therapeutic area that cannot be offered by the
individual components. Johnson & Johnson’s
three key divisions are able to offer something
to wrap around all of that and give that kind
of outcome.
FR: You recently started your tenure. If we come
back four years from now for the next edition
of our report, where will you have taken Jans-
sen in Australia?
CHRIS HOURIGAN: I wish to continue to develop
our people like Janssen Australia has done
before. Historically, Janssen Australia is a
key driver of talent development for the
group in Asia-Pacific. We are very proud of
29
“ Although we realize that there are big
challenges in identifying innovative
discoveries in neuroscience, we have a
long-term commitment that is also
based on the fact that our founder Paul
Janssen is one of history’s greatest CNS
researchers. That legacy gets carried on
in the company.”
our record in exporting talent. This does not
only involve talent that we have identified
here but also bringing people in from other
parts of the Asia-Pacific region and give them
a chance to experience our way of working.
Being a good employer is of great impor-
tance, and Janssen has already won the
Hewitt 2012 Employer of the Year Award. I
truly believe that people are the key differ-
entiating factor in our industry, perhaps of
even greater importance than the products
we deliver.
Secondly a lot needs to be done in the Aus-
tralian context about how we work as an indus-
try group and partner with the government on
continuing to evolve the system, improve
access and the timeliness of access. I am hope-
ful that in four years’ time we will have worked
through some of the challenges and that the
Australian system has continued to evolve. We
should aim to be a global benchmark for indus-
try-government cooperation. Hopefully the
government has a similar view; it is what we
need to do if we want to create a viable indus-
try in this country.
Thirdly we strive to be the world leader in
every single therapeutic area for Janssen. We
are number two or three in many different
markets in terms of our market share, and we
aim to be number one in four years’ time!
30 Interview with: Mark Fladrich, Managing Director,
AstraZeneca Australia and New Zealand
INTERVIEW WITH:
Mark Fladrich, Managing Director –
AstraZeneca Australia and New Zealand
Focus Reports: You returned to Australia a year
ago after spending eight years in Europe.
What have been the key changes in the Aus-
tralian market between the moment you left
and your return?
MARK FLADRICH: Looking at the overall mar-
ket, the biggest changes have been the var-
ious reforms to the Pharmaceutical Bene-
fits Scheme (PBS). PBS reform started back
in 2004 and culminated with the signing
of the Memorandum of Understanding
(MoU) between Medicines Australia repre-
senting the Industry and the government.
Through these reforms, significant sav-
ings have been delivered by the industry to
government who have clearly stated that PBS
spending must grow only at a controllable
rate. The MoU has actually delivered A$2.5
billion in savings, which is significantly
above the government’s own estimates,
which in return was supposed to deliver a
stable and predictable reimbursement pro-
cess with room for new medicines to enter
the Australian Market.PBS reform intro-
duced the process of price disclosure which
was designed to deliver savings resulting
from generic entry of off-patent medicines
because the country’s generics prices were
relatively high. Price disclosure was designed
to bring prices down and reduce the cost bur-
den on the PBS.
The government has chosen various
mechanisms beyond PBS reform designed to
slow PBS growth further such as deferrals
and cost-effectiveness reviews. The bar for
achieving reimbursement of medicines is
Mark Fladrich, MANAGING DIRECTOR, ASTRAZENECA AUSTRALIA AND NEW ZEALAND
arguably at an all time high, resulting in a
reduction of new medicines of the PBS for all
medicines.
Industry’s greatest disappointment is
that the predictability and stability that we
require has not been delivered and the PBS
itself has become increasingly politicised in
the quest for savings and a balanced federal
budget, which in my view does not achieve
the best health outcomes for the Australian
public.
FR: Is the regulatory environment a threat to
the industry?
MARK FLADRICH: The PBS price cuts are hav-
ing an impact on the innovative industry,
and AstraZeneca is no exception. Not only
do we deliver savings to government, but
we’re a leading export Industry to Asia. Yet
the government’s lack of a plan for the sec-
tor threatens our collective success, jobs
and our reputation as an outstanding coun-
try for access to medicines.
The unpredictability of the reinbursement
process is a real hinderance. However, Astra-
Zeneca has been one of the few companies in
the past 12 months to have successfully
achieved a PBS listing, for our drug Brilinta,
probably the most important asset that
AstraZeneca has globally. Brilinta is a good
example of providing the kind of evidence
that is needed to secure good pricing and
market access. We have a very good clinical
study which showed a CV mortality benefit,
which was key to achieving reimbursement.
But, let’s face it, not all medicines deliver

that kind of innovation. That is the dilemma
that the industry is facing: the benchmark
for innovation continues to increase and
obviously the cost of research and develop-
ment is not decreasing. This balance between
bringing incremental innovation versus
breakthrough innovation is our biggest chal-
lenge as an industry and at AstraZeneca.
The challenge is generating acceptable evi-
dence that will support reimbursement, at
least in markets where governments effec-
tively pay for medicine.. AstraZeneca recog-
nized several years ago that we need to pro-
vide extra evidence for payers, beyond what
we need to provide to get a product regis-
tered. AstraZeneca is building this into our
phase III program. Of course, given that it
takes quite a long time to flow through, we
will only see this deliver over time - , although
Brilinta is an early example of this being put
into action. We recognize that payers need
additional evidence, and if we ignore their
needs we will not get good pricing and access.
FR: And looking at the organisation that you
now lead, what have been the key changes?
MARK FLADRICH: AstraZeneca has effectively
doubled its size since 2003 in terms of sales
on the back of our outstanding portfolio of
medicines. . With a market share of ten per-
cent, we are one of the highest performing
subsidiaries for AstraZeneca globally. This
ten percent ranks Australia in the top half
of the top ten countries within the com-
pany, ahead of Germany, the UK, and Spain
in terms of contribution to global revenue,
which helps us to punch above our weight
globally.
How would you outline the present and
future role of Australia within AstraZeneca?
We believe in the next five years we will
stay in the top five global markets for Astra-
Zeneca globally, we also we have a privileged
31
position owing to our center of excellence for
manufacturing based on blow fill seal tech-
nology. This technology is about injecting
sterile solutions blown into plastic type vials
that are then presented as sterile products
either for injection or inhalation.
It is high-end manufacturing which needs
to be done in a sterile environment and for
which highly trained operators are needed.
For twenty years AstraZeneca has built the
capability and productivity of the facility,
and today we are the sole supplier to the Chi-
nese market for our asthma treatment med-
icine. The Chinese market for this medicine
is projected to grow from 50 million units to
250 million units in the next decade, thus
presenting tremendous opportunities for
AstraZeneca Australia.
FR: Why has the choice been made to continue
production from Australia rather than to
invest in facilities in cheaper competitors such
as India?
MARK FLADRICH: For lower value-added man-
ufacturing processes decisions are made
every day to move manufacturing to India
as an alternative to producing in Europe or
Australia. The opportunity for AstraZeneca
here is that technology that is used to sup-
port our medicines is complicated. To start
up as a green field operation with all the
required validation and then get all the
machinery functioning and produce prod-
ucts that need to be sterile was not a viable
alternative to the great manufacturing
environment that Australia offered. Astra-
Zeneca chose to build on the capability and
the very high level of productivity of the
Australian site.
32 Interview with: Prof. Vlado Perkovic Executive Director
The George Institute Australia
INTERVIEW WITH:
Prof. Vlado Perkovic, Executive Director
– The George Institute Australia
Focus Reports: You have recently been
appointed at the head of the Institute. What
are the changes that you are looking to imple-
ment in an already highly successful organi-
zation?
PROF. VLADO PERKOVIC: The Institute has been
incredibly successful since its foundation
in 1999, and there are a range of world lead-
ing experts doing great research.
Looking ahead, a key priority is redesign-
ing the clinical trials process and influencing
regulatory process in this area. The current
process is creaking under its own weight. We
need more modern, cheaper, and effective
clinical trials that can identify treatments
that work.
In the delivery of healthcare we need to
concentrate on understanding how to
increase global access to products and treat-
ments that work. Most people around the
world do not have access to the simple proven
effective treatments that we take for granted
like Aspirin and agents that lower cholesterol
or blood pressure. The Institute’s priority is
to find solutions to this.
We are also focusing our work on the
broader determinants of health. Healthcare
is a much broader issue than treating an ill-
ness in hospital, and improving health is
more than the pills a person is taking; it is
also about their diet and the kind of exercise
that they do.
An example is the Institute’s work around
salt reduction as a way to prevent chronic dis-
ease like heart disease and stroke, and reduce
the global burden of disease.
Prof. Vlado Perkovic, EXECUTIVE DIRECTOR THE GEORGE INSTITUTE AUSTRALIA
FR: What are the biggest flaws in the way clin-
ical trials are conducted today?
PROF. VLADO PERKOVIC: We have a long his-
tory of delivering high-quality, rigorously
conducted and high impact trials at much
lower cost than those conducted through
pharmaceutical companies or other CROs.
It is about intelligent design, intelligent
consideration of the factors that are crucial
in clinical trials (in terms of determining
their reliability and ensuring that partici-
pants are protected). It is also about getting
rid of a lot of the additional activities that
are routine in clinical trials, but that do not
actually provide additional value.
We do this by bringing science to the
operations side of clinical trials. We evaluate
what the impact of site monitoring and other
expensive activities are, and generally we
find that they add little value and that there
are more modern, technology-based methods
of doing the same sort of thing, yielding sim-
ilar or better results at lower cost.
FR: How do you see cooperation between gov-
ernment-funded clinical research vs. privately
funded clinical research in Australia?
PROF. VLADO PERKOVIC: There is a tension
between the public sector and private com-
panies, but I am not sure it is an unhealthy
tension. Sometimes this sort of tension
allows change to occur and allows both
sides to evolve.
One of the reasons the Institute has been
so successful is that we have been able to
work with multiple stakeholders. We run tri-
als that are funded by industry and at the

same time funded by the NHMRC.
These trials have addressed the needs of both
sides of the spectrum: they address public health
priorities of the NHMRC while providing a com-
mercial opportunity for a company that seeks
the benefits of the trial. Because of the mutual
benefit and goals, it is possible to do hugely
important research in a very effective way.
FR: Would you outline in more detail what coop-
eration looks like for the George Institute?
PROF. VLADO PERKOVIC: The CHEST trial was a
collaboration between the manufacturer of
the fluid and the George Institute, as well as
the NHMRC and a range of other funding bod-
ies. The company had a requirement to clearly
understand what the effects of their product,
which was also a addressing a public health
issue and they also wanted to do it in a rigor-
ous way that maximized the reliability of the
study and allowed them to be hands-off in the
way the trial was conducted.
The company entered in an agreement with
the Institute under which they provided fund-
ing for the study but the study was run,
designed, reported on by an independent aca-
demic group.
The results were published in the New Eng-
land Journal of Medicine and have had a huge
impact, providing important data for the scien-
tific community, for the health community, and
for the company.
The results of a trial are not always what was
hoped, but no commercial organization wants
to do something that is harmful.
FR: What role do you believe Australia can play
in clinical research in the Asian Century?
PROF. VLADO PERKOVIC: Although Australia is
perceived as a place where it is difficult to
recruit large numbers of patients because our
population is not so big, there are key exam-
ples where people have arranged themselves
33
“We have a long history of delivering
high-quality, rigorously conducted and
high impact trials at much lower cost
than those conducted through
pharmaceutical companies or other
CROs.”
in a way as to outperform other parts of the
world.
One of those is in intensive care trials, where
we have a very strong and well established net-
work of intensive care researchers who in the
past decade have recruited over 20.000 people
in Australia and New Zealand alone, far more
than anywhere else in the world.
It is possible to set up modern or effective
systems that are not based on the traditional
hospital recruitment system and that allow vol-
umes that are comparable to for example China
or other countries.
On top of this there are other groups, for
instance the Monash Group in Melbourne, who
have set up innovative primary care based net-
works. They are currently recruiting 10-15.000
people to a trial using a novel, highly effective
and innovative model of recruitment. These
intelligent re-designs of the clinical process are
a real opportunity not only for Australia, but
for the broader clinical trials community glob-
ally.
Furthermore I see the opportunity for Aus-
tralia not as a bulk producer of clinical trials or
a heavy recruiter to clinical trials, although it
still is possible, but more as a value-added part-
ner for the broader region. We are in the same
time zone which makes communication and
partnership much stronger. We understand the
culture of the countries around us, and can work
very well as a facilitator of clinical research in
the region.
34

Company index
AstraZeneca............. 8, 14, 22 ,23, 30, 31 Medicines Australia............. 8, 22, 23, 30

Ausbiotech.....................................24, 25 Ministry of Health & Ageing............... 11

Australian Pharmaceutical National Health and Medical Research

Industries..............................................16 Council....................................................8

Celgene............................... 11, 12, 13, 14 Novartis...................................... 9, 12, 19

Dr. Reddy’s......................................17, 19
Nucleus Network ...........................17, 19

Genzyme........................................ 10, 16
Pharmaceutical Benefits Advisory
Committee............................... 11, 26, 27
Generic Medicines Industry
Association......................................17, 18
Pharmacy Guild...................................14

George Clinical.....................................13
Phebra................................................... 11
George
Institute.....................................13, 32, 33 Servier............................................... 6, 18

IMS............................................ 10, 12, 17 Swisse.................................................. 11

Janssen................................17, 19, 28, 29 UCB.................................................12, 14

 35

PAST REPORTS
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