Australia’s biomedical research base is outstanding by any measure – creativity, originality, publications in the world’s best journals, even Nobel Prizes – and there is every reason to suppose that it will become better yet.

Major investments by Federal and State governments, particularly in Queensland and Victoria, during this decade are already paying handsome dividends through the attraction and retention of internationally acclaimed researchers, the establishment of vibrant and iconic new research institutes, and the building of knowledge-intensive industries.

So, how is it that health costs are climbing, Indigenous Australians are dying 17 years younger than the rest of the population and biotechnology companies are stagnating? What do we have to do to see serious social and commercial returns from our investment in health and medical research?

In my view, we need to ramp up our investment in translational R&D, using our outstanding research base as the engine to generate more effective health care services and a stronger life sciences industry.

Let’s start with the social issues. It is often said that every dollar invested in medical research saves $5 in health costs. But, despite our considerable investments in health and medical research, Australia’s health bill has risen from 5.4 per cent of GDP in 1971 to 9 per cent in 2006. In the US, which has by far the largest medical research budget on the planet, the corresponding increase has been from 7 per cent to 15 per cent.

What is driving this increase? In large measure, it is chronic disease. According to the Australian Institute of Health and Welfare, 77 per cent of Australians have at least one chronic disease condition. Worse, 10 per cent of children under 14, and 80 per cent of adults over 65, have three or more such conditions. In total, these conditions account for 80 per cent of the loss of productive life due to disease and injury and 70 per cent of all health care costs due to disease. Productivity losses amount to three times as much again.

These are problems that should be susceptible to our research. By and large, chronic diseases are preventable, and even those that cannot be prevented can be treated much more economically and effectively if detected early.

What do we need to do? First, let’s tackle our major challenge: the risk factors driving our unacceptably high levels of chronic disease.

By and large, Australian adults are overweight, consume too much alcohol but not enough fruit and vegetables, and do not get enough exercise. More than 20 per cent still smoke. In lower socioeconomic groups, remote communities and among Indigenous Australians the prevalence of these risk factors is higher and so are the levels of chronic disease.

It is known that the elimination of these risk factors can lead to a decade or more of increased life expectancy. What is not known is how to devise and implement programs at the community, workplace or health-services level that will enable Australians to make the transition to healthier lifestyles.

The answers to these questions do not lie in conventional biomedical research. Rather, we need to build on our biomedical research base, and integrate it with research in the social sciences. We need to expand our investment at the interface of the medical and social sciences.

Second, let’s take the opportunity provided by our biomedical research base to lead the way in the prediction and early detection of chronic disease.

The $1000 genome is fast approaching reality, and will enable genetic predisposition to disease to be predicted at birth. At the same time, the identification of biomarkers in blood will enable the rapid, early and inexpensive detection of chronic disorders, and the advent of pharmacogenomics will ensure that patients receive drugs individually tailored to the underlying causes of their disease.

Again, these advances will not be the province of biomedical research alone, but of collaborative efforts at the interface of information technology, genomics, biochemistry and nanotechnology. Investment at these interfaces, and their intersection with clinical science, will be the key to translating research excellence into practical health outcomes.

How about the commercial side? The global pharmaceutical industry is worth more than US$500 billion a year, with faster growth and higher rates of return than most other knowledge-intensive industries. The growth rate of the biotechnology industry is higher again, and more than half of all new drugs reaching the market are now products of biotechnology.

Recognising this trend, the international pharmaceutical industry is presently outsourcing more than 40 per cent of its R&D, compared with four per cent in the early 1990s. Indeed, Queensland clinical-trial companies are anticipating that revenues from international pharmaceutical companies will reach $60 million by 2010, and the overall market value of the State’s biotechnology industry is projected to be $20 billion, with annual revenues of $4 billion, by 2025.

Is this plausible?

From a standing start a decade ago, Queensland’s biotechnology industry now has about two dozen drugs from local biotechnology companies in clinical trials. In 10 years the number of publicly listed biotechnology firms in Queensland has risen from two to 12, and revenues and employee numbers have jumped by a factor of six.

How can we maintain this momentum? Basically we need two things: more companies spinning out of our universities and biomedical research institutes, and more of those small emerging companies being converted into big ones.

Almost all of Australia’s biomedical research is conducted in public-sector research organisations, but we offer these organisations and their researchers little or no incentive to translate their research into commercial outcomes.

If we want our biomedical research community to go beyond excellent teaching and research, we need to provide an additional stream of funding that enables them to do so. And we need to provide incentives – such as relief from capital gains tax – that will encourage individuals, such as the Fellows of ATSE, to invest their capital and experience in facilitating the process.

Even then, a further step is required. Australian biotechnology companies are commonly listing at one-tenth of the market capitalisation of their US counterparts, and raise one-tenth as much money. They are being set up to fail.

One of the few factors that has historically helped them compete internationally – AusIndustry’s Commercial Ready – fell victim to the razor gang in the May Federal Budget. It will be vital that a successor scheme is rapidly identified, ideally by extending the R&D Tax Offset to enable tax loss companies to claim a rebate equivalent to their entitlements under the R&D Tax Concession, but without the current counterproductive restrictions on group turnover and R&D expenditure.

The bottom line? We need to maintain our very strong track record in fundamental research, but add real muscle to our ability to translate it into social and commercial outcomes. We need to invest more in research at the interfaces between biomedical, social and clinical sciences, and we need to invest in the processes that will convert the results of our biomedical research into companies, and companies into industries.

Professor Peter Andrews AO FTSE is an eminent Queensland scientist and bio-entrepreneur whose role as Queensland Chief Scientist involves advising government on policy and economic development issues associated with science, research and innovation. Author of more than 100 publications and inventor on two patents, he has led multifunctional scientific teams at research institutions in Victoria and Queensland. Professor Andrews has been at the forefront of initiatives to develop the Australian biotechnology industry and is an active participant in the commercialisation of Australian science and research. Since 1985, he has founded, co-founded or been a director of more than 10 scientific companies. He currently serves as a director of two Australian biotechnology companies.