Australian Medtech: An Opal in the Rough?

For instance in January, Nashua, N.H.-based Resonetics LLC partnered with Australian Scientific Instruments Pty. Ltd. based in Canberra, Australia, to bring its RESOlution laser-ablation product line to the continent down under. And in February, Flagstaff, Ariz.-based W. L. Gore & Associates Inc. announced plans to expand the treatment range available in Australia and New Zealand for its Gore Excluder AAA (abdominal aortic aneurysm) endoprosthesis used to treat abdominal aortic aneurysms. In late February, the Ministry of Health of Australian state New South Wales (NSW) launched the second round of Medical Devices Fund, a grant program designed to encourage and support investment in the development of medical devices in the state. Applicants for the grant money should present an innovative device technology—new to the market or the world—developed locally and supported by intellectual property.

According to the newest industry report from the Medical Technology Association of Australia (MTAA), 62 percent of all medtech companies in Australia were founded between 1990-2012. Only 10 percent were founded before 1970. The industry experienced sustained growth in the 1950s and 1960s, but it was only after 1970 that rapid expansion started. Today, there are more than 500 medtech companies in Australia—54 percent grew from startups, about a third were established as a subsidiary of a multinational company, and the rest are spinoffs from larger companies, universities or mergers. Most major global orthopedic players have a presence Down Under. DePuySynthes’s Australia office, Synthes Australia, was established in 1972 and has its head office in Sydney, NSW. Zimmer Holdings Inc. has offices in all six states; Smith & Nephew plc in five. Medtronic Inc. and Stryker Corp. South Pacific also make their Australian home in NSW.

Not surprisingly, considering its investment and encouragement of medical innovation, the vast majority (55 percent) of medtech companies in Australia are located in NSW, one of six total Australia states. One of last year’s recipients of the NSW Medical Devices Fund grant was Saluda Medical Pty. Ltd., a NSW company that makes technology for closed loop control of neuromodulation therapies. The company won funds for its closed loop spinal cord stimulation device for chronic pain. Saluda falls into the small percentage of companies that started as spinoffs, in this case from NICTA in February 2013. NICTA is Australia’s Information and Communications Technology Research Centre of Excellence, and the pain management technology Saluda now owns is based on four years of research funded by NICTA and developed in collaboration with the Pain Management Research Institute at the Royal North Shore Hospital. The implantable device works by attaching to the spine and sending electrical pulses in order to block the pain.

“NSW has traditionally been the home of a large percentage of pharmaceutical companies, which in terms inspired the establishment of spinoff medtech companies and helped attract Australian headquarters of multinational companies,” Susi Tegan, chief executive of the MTAA, told ODT. “NSW is also the most populous Australian state with good health, research and tertiary education infrastructure.”

Indeed, implantable devices represent the third largest category of medical devices made or supplied in Australia (9 percent). At 7 percent, orthopedic devices as a whole are the fifth largest segment of locally supplied medical devices in Australia. Prostheses (of all kinds, not just orthopedic) make up the second largest imported and exported medical device category in Australia. Research and development efforts are increasing: Musculoskeletal and physical medicine is the second largest category for medtech clinical investigations at 18 percent, with cardiovascular and stroke research taking the number one spot at 29 percent.

Tegan told ODT that population growth, an aging population and the rise in disease burden has increased the demand for medical devices in Australia.

Perhaps because orthopedic devices have been seeing increasing demand, Michael Armitage, chief executive of private health insurance interest group Private Healthcare Australia, said that prostheses in Australia were too expensive.

“In 2011-12 the total benefits paid by health funds for prostheses was $1.5 billion [$1.4 billion U.S.], amounting to around 14 percent of all benefits paid,” he said. “Reform of prostheses pricing on this basis would save the [Australian] government around $246 million [$224 million U.S.] per year instantly from the contributions it makes to premiums through the Private Health Insurance Rebate, with savings reaching around $421 million [$383 million U.S.] per year by 2020.”

The MTAA, which represents the interests of Australian medical device companies, fought back.

“Government oversight of prostheses reimbursement has frozen pricing to 2005 levels with no increases on single items, which is in stark contrast to the yearly premium increases of private health insurance funds,” Tegen said. “Government oversight has ensured that health funds are required to provide their members with the most clinically appropriate implantable technology recommended by their surgeons, not the lowest priced implant selected by an insurance company.”