New report reinforces the evidence for exceptional returns from health research

Oct 18 2010

“The urge to cut back spending on Australian Health and Medical Research in times of economic austerity could short-change the future,” says Rebecca James, CEO Research Australia.

A Lateral Economic’s Report “The Economic Value of Australia’s Investment in Health and Medical Research,” provides an up to date analysis of the pay-back of the significant investment by the Australian Government and business community in HMR in Australia.

“The report demonstrates that the investment in research has resulted in new disease treatments that not only contribute to Australian gross domestic product but also support high skill, high paid jobs”

The Lateral Economics report indicates that if health and medical research spending were to at least keep pace with historical spending on health over the decade and a half to 2021-22 then revenues of $73.7 billion could be generated, while health benefits could approach $150 billion (based on Access Economics’ estimate of $2.17 in health benefits for every health and medical research dollar spent.)

“The results support past analysis that there are exceptional returns from research in the form of reduced mortality and morbidity in the population than would otherwise be the case as shown by Australian discoveries in such areas as cancer prevention, and vaccines.

“Investing in health and medical research is not only productive of income and wealth. It also promotes the health and wellbeing of the population — making such investments doubly beneficial and leading to higher-than-average rates of return. Every dollar invested in medical research provides in excess of $2 in health benefits received”

Health and medical research must maintain its share of increases in health expenditure as otherwise, the risk is that this vital field of activity loses out in both cyclical downturns and at times when decisions are made to significantly increase resources devoted to health.

An extra $125 million would be available for medical research if the Government had maintained its historical share of the recently announced $7.4 billion in new health spending.

Lateral Economics CEO Nicholas Gruen noted that economic reform is all about building the political constituency to bear short term costs in order to build a more productive economy in the long term. “This message has been front and centre when it comes to removing past interventions like tariffs, state monopolies, and agricultural price supports. But economic reformers have been much more equivocal about building economic institutions even where they accept the in principle case for doing so. Yet that’s what must be done in R&D. Supporting R&D is costly and therefore inevitably subjected to the usual short term political pressures.”

One solution would be for policy makers to commit to long term targets to increase research, as they successfully committed to long term targets to increase compulsory superannuation contributions. Lateral Economics propose that the Australian Government enter into discussions with other funders of research to explore what would be necessary to adopt and meet a target of doubling health and medical research expenditure (in real terms) over, say, a decade.

Without an expansion in health and medical research Australia will falter in meeting the challenges of an ageing population, growing incidence of chronic disease and cancer, international competition and workforce scarcity. The report highlights the need for policy continuity at a time when it is unclear as to whether the Government is to maintain existing levels of medical research funding by the National Health and Medical Research Council.

Report can be downloaded from the website at www.researchaustralia.org