Australia is struggling as a nation to care for the sick, to protect the healthy and to preserve the economy amidst the COVID-19 pandemic.
But our government can make one decision that achieves all three: to buy more Australian medical products.
With borders closed and shipping slowed, we know we can’t rely on foreign supply chains for essential items in a global crisis.
The government has recognised the importance of establishing strong sovereign healthcare manufacturing capabilities to ensure a steady source of everything from personal protective equipment to ventilators, urging manufacturers willing to pivot to meet the growing healthcare demand.
Our industry has rallied.
With the support of the Australian government, the Victorian government and the Advanced Manufacturing Growth Centre, my company, Planet Innovation, is using its facility at Box Hill to help deliver 2,000 ventilators to the federal Department of Health through the NOTUS Emergency Invasive Ventilator Program.
The COVID-19 pandemic has shown that Australian manufacturers, which are already adept at producing regulated medical products, can fill gaps in supply chains.
We have the capabilities to anchor Australia as a key manufacturing partner as multinationals restructure their global supply chain strategies to include dual or multiple sources.
But the sector is sub-scale, due largely to limited domestic demand.
Governments have always had enormous power to drive orders and growth in local industries. Leveraging this power is even more critical as Australia looks beyond COVID-19.
Similar to the approach to defence procurement, governments must use their procurement powers to buy locally made goods —and preferably do so in a co-ordinated fashion — if Australia’s medical products manufacturing sector is to provide economic sovereignty and much-needed jobs.
The federal Minister for Industry, Karen Andrews, has acknowledged that government procurement is an important lever for building manufacturing capability.
But we are still waiting to see details from the federal government’s manufacturing taskforce on how the sector may emerge from the pandemic.
Governments can boost local manufacturing by providing orders.
For example, where the product is considered essential, such as antibiotics or critical diagnostic tests, governments could mandate that a local supply chain is established for a minimum of 50% of supplied goods.
If there’s an order for goods, the manufacturing sector can make it. This will generate jobs and build the sector.
It is critical that a degree of purchasing freedom is maintained to avoid setting up monopolies for companies or creating a structure that makes companies lazy. We still need competition.
Providing incentives for local manufacturers does not necessarily eliminate international competition.
If local suppliers are prioritised here in Australia, a large international medical device manufacturer may determine the only way it can access the Australian market is to establish an assembly and test facility here.
Their product may have been designed in the US or Europe, and received regulatory approval there, but the international company could set up a division here, start manufacturing medical products here, and employ people. Australian companies may also consider making foreign-designed medical products under licence.
Additionally, coordinating the purchase of locally made medical goods between states would help create economies of scale.
Determining that a product should be made in a particular place may conflict with free market ideology. But, if we persist in having ‘cheapest products’ as the primary goal of procurement activities, local manufacturing of essential goods won’t happen.
We will continue to expose ourselves to supply risks during times of crisis and miss an opportunity to leverage local industry.
The COVID-19 pandemic has been a wake-up call to global medical product companies. They require more resilient supply chains, with dual or multi-source supply lines to ensure continuity of production. Companies that supply critical products will have to prove that they can supply products if one geographical line of supply is shut down.
We need to start producing and buying Australian medical products – again.
Yes, again. Australia faced daunting conditions in 1916, when WWI cut the international supply chain of critical medicines. In response, CSL was created to supply urgently needed medical supplies. CSL went on to become one of Australia’s greatest companies, employing more than 25,000 people.
Buying more Australian-made medical products is in the interest of people’s health and the economy.
It is a decision that we can make today to build an industry for tomorrow.
Stuart Elliott is the co-founder and co-CEO of Australian healthtech innovation and commercialisation company Planet Innovation.
