Health overview
Australia spends a large share of its national income (approximately A$78.4 billion per year) on healthcare by international standards.
Public expenditure in most recent years accounts for just over 68% per annum of total healthcare spending.
Annual spending channelled through private health insurance amounts to A$8.1 billion of which approx A$2.5 billion is funded by health insurance rebates from the federal government. Health and community services employed just over 10% of the country’s total workforce. An ageing population and rising public expectations will stretch the health service in coming years, as is the case in many industrialised countries.
Australia’s health indicators compare favourably with those of other industrialised countries. Life expectancy is among the highest in the world, at approximately 80.1 years. The average infant mortality rate is at 4.8 deaths per 1000 live births.
The current Liberal-National government has introduced various measures in recent years to encourage the growth of private healthcare, but support for the public health system is strong. According to the industry association, Medicines Australia, the pharmaceutical industry comprises around 120 companies (both foreign and locally owned) directly employing around 14,000 people, and provides medicines for both the local and export markets, generating export earnings of around A$2.3 billion a year. The country is, however, a net importer of pharmaceutical products.
Australia established a national healthcare funding system, known as Medicare, in 1984. Contributions are made through taxes and a levy based on taxable income. Medicare provides free hospital care, and subsidises expenditure on out-of-hospital care, such as doctors’ consultation fees.
Medicines provided within public hospitals are paid for by Medicare, whereas the Pharmaceutical Benefits Scheme (PBS) subsidises the cost of medicines prescribed outside hospitals. The cost of the PBS has risen sharply in recent years, as new medicines have become available and the population has aged. As a result, the current government has sought to increase the cost of subsidised medicines.
Medicare patients are not charged for treatment in public hospitals, which is funded jointly by the federal, state and territory governments and administered by the states or territories.
Doctors’ fees payable by private hospital patients are partly paid by Medicare, but all other charges payable by such patients must be met by the patients themselves or by their private insurers.
The government has tried to boost private healthcare, most notably by introducing a 30% rebate on private health insurance in 1999. Since mid-2000, insurance premiums for new subscribers have been linked to the age at which they joined, in order to encourage younger people to take out private cover.
These measures helped to push the proportion of the population covered up to 43% in mid-2000, from 30.6% a year before, according to the Australian Health Insurance Association. An additional Medicare surcharge is levied on those on higher incomes without private insurance.
In 2005 the Liberal-National federal government lowered tax on private health insurance premiums for older people, from the previous rebate level of 30% that applied regardless of age, to 35% for those aged 65-69 and 40% for those aged 70.
Market size
- In 2004-05, revenue for this industry was 2.5% increase to $958 million. The industry was estimated to have contributed $372 million to the Gross Domestic Product of Australia, an increase of 7.5%.
- During the year, the industry composed of approximately 1971 establishments. These firms employed over 5500 people, and paid approximately $203 million in wages and salaries. The majority of firms operating within the industry employ less than 20 people.
Demand determinants
The external drivers of the industry are:
- Ageing population
- Government's role in the sector
- Regulatory framework
- Currency fluctuations
Products and service segmentation
|
Product/Services |
Share |
|
Traditional consumable items |
75.0% |
|
Technologically advanced products |
15.0% |
|
Aids and appliances |
10.0% |
In manufacturing products in this industry, firms must adhere to government regulation surrounding the development and manufacture of medical and surgical machinery and equipment. There tends to be a high level of technology and design aspects required in the development of products.
Increasing quality and performance accreditation required by government and customer markets is a barrier to entry for firms entering this industry. Without proper quality and performance accreditation, businesses can be restricted in the types of customers that they sell too.
The price at which technologies are supplied reflects the cost of research and development, manufacturing, marketing and distribution costs, as well the costs of meeting regulatory hurdles such as marketing approval. Supplier prices can also contain premiums conferred by patents.
Laboratory apparatus and furniture includes laboratory and hospital furniture. Examples of products are hospital beds, operating room tables, laboratory balances and scales, furnaces, ovens, centrifuges, cabinets, cases, benches, tables, and stools.
Surgical and medical instruments comprise medical, surgical, ophthalmic, and veterinary instruments and apparatus (except electrotherapeutic, electromedical and irradiation apparatus). Examples of products manufactured in this particular segment include syringes, hypodermic needles, anaesthesia apparatus, blood transfusion equipment, catheters, surgical clamps, and medical thermometers.
Surgical appliance and supplies include orthopaedic devices, prosthetic appliances, surgical dressings, crutches, surgical sutures, and personal industrial safety devices manufactured by firms operating in this particular industry.
Lastly, dental equipment and supplies are manufactured and supplied to dental laboratories and offices of dentists. Manufactured products in this segment include dental chairs, dental instrument delivery systems, dental hand instruments, and dental impression material.
Key players
There are 41 private healthcare funds in Australia, of which the largest is Medibank Private, with almost 3m members and 29% of the private health-insurance market. A non-profit company, Medibank Private operated as the commercial arm of the Health Insurance Commission, which administers Medicare, until 1998. It is wholly owned by the federal government.
In October 2003 the largest private hospital operator, Mayne Group, sold its holding of hospitals, although the company remains Australia’s leading provider of private healthcare services, including pharmaceuticals, radiology and pathology services. The largest locally owned biopharmaceutical group is CSL. Formerly known as Commonwealth Serum Laboratories, the company was privatised in 1994. CSL is the world’s third-largest maker of blood products, and has further consolidated its position in this segment of the market following the acquisition in December 2003 of the blood products arm of Aventis (France).
- Leadership in international health standards development, particularly in the areas of health messaging and electronic health record structures.
- Australia consistently ranks in the best performing group of countries for healthy life expectancy and health expenditure per person.
- A world leader in the introduction and uptake of healthcare information technology in areas such as – telehealth, and hospital management systems.
- The Australian Government has taken an active leadership role in the development of this rapidly expanding sector. In 2005 the National E-Health Transition Authority (NEHTA), a not-for-profit company was formally established by the Australian, State and Territory governments to develop better ways of electronically collecting and securely exchanging health information. In 2005-06, NEHTA focused on 12 areas to build national unity in approach.
Health services
Over the five years to 2004-05 this segment experienced average growth in revenue of 3.9 percent per annum. Specialist services are gaining increased market share, fuelled by the trend towards the delivery of a range of services through centres or clinics. There has been strong growth towards alternative health services such as acupuncture, homoeopathy and naturopathy.
According to BRW (May 11-17, 2006), as part of the Federal Budget for 2006-07, the health care sector is to receive a significant boost in spending which is expected to increase the number of doctors and nurses entering the industry. A reported $30.6 million is to be allocated over the next four years to assist with the training of clinical nurses. This translates into a rise in funding per student from $688 to $1000 for nurses undertaking higher education. A further $93.2 million will be spent by the Federal Government in an attempt to create an additional 1000 places for nurses undertaking higher education. Other funding initiatives include $94.9 million to create 200 extra medical school places.
Clinical trials
Australia has internationally recognised capabilities in niche areas of the preclinical phase (for example ICN Firefly) and emerging strengths in the clinical trials phase of biomedicine. These capabilities are supported by Australia’s robust and regulated health system, highly regulated facilities, a cost competitive structure as compared to the United States and Europe and skilled workforce in Good Clinical Practice (GCP). CMAX, QPharm, Neurosciences Victoria and Cancer Trials Australia are some of the internationally recognised facilities currently conducting clinical trials in Australia.
With 24 firms involved in Phase I trials in Australia, there is an increasing capability in early phase clinical trials, supported by current regulations and schemes in place.
Phase I and II trials (including early innovative drug trials) are taking place across the therapeutic fields, with some company capabilities confirmed by US Food and Drug Administration (FDA) accreditation. There are also paediatric trials being undertaken by the Royal Children’s Hospital and the Murdoch Children’s Research Institute as part of innovative drug trials.
An interesting example of clinical trials taking place in Australia is the Vision CRC’s ocular treatments using antibacterial coatings on contact lenses. These new coatings were the product of biodiscovery.
AstraZeneca Australia – www.astrazeneca.com.au
Australian Trade Commission – www.austrade.gov.au
Australian Department of Health and Ageing – www.health.gov.au
Medical Industry Association of Australia – www.miaa.org.au
Australian Health Insurance Association – www.ahia.org.au
CHIK Services - www.chik.com.au
CSL – www.csl.com.au
Health Insurance Commission – www.hic.gov.au
Mayne Group – www.maynegroup.com
Medibank Private – www.medibank.com.au
Medicines Australia – www.medicinesaustralia.com.au
NSW State Government - www.business.nsw.gov.au
Regulation of clinical trials in Australia – www.tga.gov.au/docs/html/regct.htm
Email: health@austrade.gov.au