Earlier this year the Australian Government launched the Medical Science Co-Investment Plan, an initiative to facilitate increased investment and growth in the medical sector.

The Medical Science Co-Investment Plan is the first of seven such proposed plans, each of which will focus on one of the government’s priority areas as set out in the National Reconstruction Fund Corporation (Priority Areas) Declaration 2023.^[1] The plans are intended to serve as policy documents to set out where the government sees opportunities for investment and ways in which government and industry can work together to support growth in these sectors.

What is the Medical Science Co-Investment Plan aiming to achieve?

One of the main tenets of Medical Science Co-Investment Plan (the Co-Investment Plan) is that while Australia is a world leader in medical research, it falls behind when it comes to translating research into commercial output. This is said to be largely as a result of Australia’s lack of manufacturing capability.^[2]

To address these issues, the Co-Investment Plan highlights opportunities for investment in four key sub-sectors: digital health, medical devices, complex therapeutics and sustainability. These sub-sectors are selected as areas in which Australia has the potential to be competitive on the global scale, as compared to, for example high-volume, low-value, small-molecule medicines which in many cases will not be “an economically viable option for enterprises operating in Australia”.^[3]

What does the Co-Investment Plan propose?

To bolster manufacturing and competitiveness in the four sub-sectors, the Co-Investment Plan identifies six areas for government and industry to focus on. These are, in summary:

1. providing a larger skilled local workforce, including through improved education and regional planning systems;
2. improving domestic procurement processes, including through the harmonisation of health procurement practices across the states and territories;
3. increasing collaboration and coordination between research, industry and government;
4. diversifying the supply chain, including by increasing the import and export of specialised components needed to manufacture medical products;
5. translating research into commercial outputs, including through the Government’s Industry Growth Program, discussed further below; and
6. streamlining the regulatory approval process, including as part of the Government’s Health Technology Assessment (HTA) Policy and Methods Review – the report and recommendations for which were published on 10 September 2024. (You can read more about the background to the HTA in our article here.)

The Co-Investment Plan is designed to complement a number of recently-launched related initiatives, including the National Reconstruction Fund Corporation and the Industry Growth Program.^[4]

What is the National Reconstruction Fund Corporation?

In March 2023, the Australian Government passed a bill to establish a National Reconstruction Fund to provide finance in a number of “priority areas” of the Australian economy, including medical science.^[5]

The National Reconstruction Fund Corporation (NRFC) was subsequently established in September 2023, to provide finance to the priority areas in the form of debt and equity (but not grants).^[6]

Under the National Reconstruction Fund Corporation (Investment Mandate) Direction 2023, the NRFC will allocate investments to target $1.5 billion in funding in medical manufacturing in the medium to long term.^[7]

Applications for the NRFC opened following the issuing of the NRFC’s Investment Mandate on 30 November 2023.

Funding is available to businesses with proposals that are “solely or mainly Australian-based” and which can demonstrate an expected positive return on investment^[8] or repayment of debt, as well as a contribution to one or more policy outcomes as set out in the NRFC Act, such as commercialising Australian innovation and technology.^[9]

Proposals can be submitted via the National Reconstruction Fund website. Applicants are asked to explain how the proposal advances medical science, the purpose to which the requested finance will be put and how the applicant intends to generate returns.

What is the Industry Growth Program?

The Industry Growth Program (the IGP) was opened in November 2023 to support innovative start-ups and SMEs undertaking “early-stage commercialisation” or “commercialisation and growth” projects within the NRFC’s priority areas.^[10]

Early-stage projects are intended to broadly include levels 3 to 6 of the globally-accepted Technology Readiness Level (TRL) Index, while commercialisation and growth projects are intended to include TRL4 to TRL9.^[11]

Overview of TRL, adapted from scale as available here.

The IGP offers an advisory service, as well grants of:

• $50,000 to $250,000 to support early-stage commercialisation projects;
• $1000 to $5 million for commercialisation and growth projects.

Applications can be submitted via the business.gov.au website. Amongst other requirements, applicants must have a combined annual turnover of less than $20 million and have a product, process or service that meets certain criteria for newness, uniqueness and/or involving significant enhancements.

Key points

Smaller businesses and start-ups operating in the medtech and digital health spaces intending to seek finance via the NRFC and the IGP should consider highlighting how their proposals address the six focus areas outlined in the Co-Investment Plan.

While the Co-Investment Plan will run alongside existing initiatives such as the National Reconstruction Fund, the Co-Investment Plan expressly states that it does not “outline or direct” NRFC investment – the NRFC Board is to make investment decisions independently in line with its legislative framework. Nonetheless, the Co-Investment Plan serves as a useful indication of the key drivers which may underpin such decisions, highlighting the sub-sectors considered by the government to have the most scope for revenue generation in Australia.

_{[1] National Reconstruction Fund Corporation (Priority Areas) Declaration 2023, s 5(4).}

_{[2] Medical Science Co-Investment Plan, p 7.}

_{[3] Medical Science Co-Investment Plan, p 14.}

_{[4] Medical Science Co-Investment Plan, p 2.}

_{[5] Medical Science Co-Investment Plan, p 29.}

_{[6] National Reconstruction Fund Corporation Act 2023, s 63.}

_{[7] National Reconstruction Fund Corporation (Investment Mandate) Direction 2023, s 15.}

_{[8] The NRFC’s target portfolio rate of return is 2-3% above the 5-year Australian Government Bond rate over the medium to long term: National Reconstruction Fund Corporation (Investment Mandate) Direction 2023, s 8.}

_{[9] National Reconstruction Fund Corporation Act 2023, s 17(3A)(f).}

_{[10] Industry Growth Program – Information Guide (2023), p 6.}

_{[11] Ibid.}