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Community Affairs Legislation Committee - 04/08/2015 - Medical Research Future Fund Bill 2015 Medical Research Future Fund (Consequential Amendments) Bill 2015

CORMACK, Mr Mark, Deputy Secretary, Strategic Policy and Innovation Group, Department of Health

KELSO, Professor Anne, Chief Executive Officer, National Health and Medical Research Council

SPENCER, Dr Jenean, Assistant Secretary, Health and Medical Research Branch, Department of Health

[15:06]

Evidence from Professor Kelso and Dr Spencer was taken via teleconference—

CHAIR: Welcome. I understand that information on parliamentary privilege and the protection of witnesses and evidence has been provided to you. I remind witnesses that the Senate has resolved that an officer of a department of the Commonwealth or of a state shall not be asked to give opinions on matters of policy and shall be given reasonable opportunity to refer questions asked of the officer to superior officers or to a minister. This resolution prohibits only questions asking for opinions on matters of policy and does not preclude questions asking for explanations of policies or factual questions about when and how policies were adopted. Officers of the department are also reminded that any claim that it would be contrary to the public interest to answer a question must be made by a minister and should be accompanied by a statement setting out the basis for the claim.

The committee has received a submission from each of your organisations. I now invite you to make short opening statements, after which we will move to questions.

Mr Cormack : Health and medical research has an important role to play in identifying opportunities and strategies to increase the efficiency of health services and ensure sustainability of the overall health system. Better health starts with the creation of new knowledge, and innovative health and medical research is a key driver of better health care and health service delivery.

The Medical Research Future Fund is being established as a dedicated vehicle for investment in medical research. As a capital protected fund it will ensure that medical research funding is available on an ongoing basis. The fund will support the sustainability of the health system into the future. It will enable research that may lead to the discovery of new medicines and technologies used for prevention, treatment and cure. As an example, Gardasil, the first designed HPV vaccine to prevent cervical cancer, was the result of work done by researchers at the University of Queensland in collaboration with the Commonwealth Serum Laboratories, or CSL, Australia's largest biotechnology company. The rollout of Gardasil has resulted in improved health outcomes for females, with HPV related diseases expected to drop by 92 per cent over the next 30 years. HPV vaccines have now been approved in more than 120 countries and over 70 million doses have been distributed worldwide.

For many years the success of Australian health and medical research has resulted in healthier Australians and has led to innovations that have boosted national wealth. In addition, many Australian researchers have contributed to important health advances internationally. Australian researchers have led discoveries in genetics, in the development of vaccines against malaria and in innovative therapeutics like spray-on skins for burns victims.

A report by Access Economics estimated that every dollar invested in health research and development returns an average benefit of $2.17. Better prevention and treatments resulting from health and medical research will allow people to live longer and more productive lives. A healthier working population will contribute to increased economic activity and productivity as well as lead to reduced medical, hospital and pharmaceutical costs.

The amendments that have been made to the Medical Research Future Fund Bill 2015 clarify and enhance the decision making and accountability mechanisms to be used in the disbursement of funds from the MRFF and provide transparency by including requirements for an expert medical research advisory board, including setting out the advisory board's role, governance and reporting arrangements; an Australian medical research and innovation strategy; Australian medical research and innovation priorities; and decision making mechanisms for the disbursement of funds from the MRFF to be reliant upon the strategy and the priorities.

The amendments also clarify the role of the National Health and Medical Research Council in the disbursement of MRFF funds. The bill now details that the CEO of the NHMRC must be a member of the advisory board; that the requirements of the board to take into account the council's national strategy for medical research and public health research; and the council's role in managing the distribution of disbursements consistent with government decisions. These amendments make the role of the NHMRC explicit and acknowledge the NHMRC's knowledge, expertise and experience.

The MRFF represents new funding for the medical research sector, adding to the research funding allocated by the NHMRC through the Medical Research Endowment Account, the MREA. The MRFF and the MREA will operate alongside each other and in clear sight of each other. Complementarity, not duplication, for all government initiatives is vital, and we are working closely with other agencies to ensure that the MRFF alliance with other important, including the Innovation, Industry and Competitiveness Agenda and the work of the Commonwealth Science Council.

CHAIR: Thank you, Mr Cormack. Professor Kelso, would you like to make an opening statement?

Prof. Kelso : Yes. Thank you for allowing me to join you by phone. I am afraid my flight was delayed and then cancelled and there was no other way to get to you in time.

The NHMRC welcomes the MRFF as a major new source of funding for Australian health and medical research, and we see it as having the potential to have a very big impact on Australia's research productivity and its translation into better health and health care. We also welcome the opportunity to contribute to the development of the Medical Research and Innovation Strategy through my membership of the advisory board in my role as CEO of the NHMRC and also to ensure that the MRFF and the NHMRC strategies are aligned and complementary, as Mr Cormack has said. I will be able to draw on our wealth of experience and advice from our council and principal committees, and I hope that will be useful to the advisory board as well. The NHMRC also has a very long experience in identifying the best research and researchers across the full spectrum, from basic research to clinical population health and health services research and including early stage commercial research and targeted or priority research.

NHMRC support has contributed to the major achievements of health and medical research in Australia outlined by Mr Cormack. For all our funding schemes, we rely on independent expert review processes, using whatever expertise is needed for the purposes of the funding scheme and within a well-established integrity framework. So, if the minister directs any MRFF funds to NHMRC for disbursement, we will be pleased to adapt these processes and draw on whatever expertise is needed to make sound recommendations to government.

CHAIR: Thank you. I might just start off with one question, Mr Cormack, and it is around the five-year research strategy alongside the two-year research priorities. There is just a little bit of confusion as to how these two things will work together. Are you able to give some more information on that?

Mr Cormack : The Australian medical research innovation strategy is one of the first requirements of the advisory board alongside the determination of priorities. The strategy is for five years. It is the general framework in which the investment will take place. It will certainly be required to take into account advice from the NHMRC and its determination of priorities, under its own requirements, under the act. It will also be required to take into account other Commonwealth government science priorities. We have seen some of those put forward recently.

The role of the priority-setting process is, in many ways, to get down to the specifics. The strategy gives you the general framework within which the fund will operate for the five-year period, and the act requires publication of that strategy. The priorities will get down to individual priorities. It will be updated to the years. The two work together to ensure that there is a refreshing of priorities going on and a responsiveness to emerging issues. Indeed, just hearing some of the evidence from the previous witnesses, sometimes research work is required to operate in a short-term time frame and the ability to update those priorities within a five-year strategy, but to do the priorities every two years is an important feature of responsiveness and accountability in that both have to be published. The minister is required, also, to provide a statement every two years, in relation to the way the fund has responded to those priorities and strategies.

CHAIR: The MRFF action group raised an issue around how the research strategy and research priorities will be kept consistent when there is not always the opportunity to renew the priorities in the same year as the strategy. How do you respond to that concern?

Mr Cormack : The first strategy will need to be drawn together relatively quickly to enable the initial disbursements to take place, but there is a lot of good foundation work there to draw upon. We also have the considerable expertise with work undertaken by the NHMRC to guide us there. We would envisage a dynamic interaction between the two. I do not think there is a hard and fast distinction between them and we would envisage that as priorities emerge they are able to be refreshed and reflected, in the context of the strategy, and the overall strategy must be renewed every five years.

CHAIR: On another issue, you touched on the fact that this is a capital protected fund; I think they were your words. Could you describe what is different about this from any other bucket of money that the government spends?

Mr Cormack : I will confine my comments somewhat, here, in that from the health perspective the health minister has specific priorities, but the actual management and investment arrangements for the funds are the responsibilities of other ministers who will be called later.

In the main, we see a capital protected fund building up over the years and, through an investment strategy—which is outlined in the legislation—you will see a regular flow of funds from a fixed capital fund. They can be applied to the strategy and to the priorities and in the context of the health minister's responsibilities that translate them into an annual program of activities through the budget process.

Senator McLUCAS: Thank you very much, Mr Cormack, Professor Kelso and Dr Spencer. What consideration, in the design of the governance arrangements, was given to having the fund administered directly by an expanded NHMRC, so that the current NHMRC charter could have been expanded to deliver a second fund, with a different purpose to what the NHMRC does now?

Mr Cormack : You are really asking a question about a policy decision of government. The government has determined the approach that it is going to take here, and we have responded accordingly. It is not really up to me to comment on the policy deliberations here. We provide advice, and that advice is reflected in the crafting of the legislation and indeed the whole-of-government submission to this hearing.

Senator McLUCAS: I understand that, but it has been probably the principal point of discussion around this inquiry, and I was hoping that we might be able to have a conversation about the thinking that both the NHMRC and the department might have brought to these pretty fundamental questions. There are questions about seamlessness—that there is a pathway of research that starts with basic research that goes through into an applied solution, if I use the broadest term. There is an argument that says that there is an advantage in having this process move in one organisation. There is a different point of view that we had from other witnesses: that the two organisations—one that is already there, one that is to be formed—have a different process. But I think it is a pretty fundamental question. I accept your point, but, if it is at all possible that the department or the NHMRC can give us their views about those policy questions without going to advice to government, it would be helpful.

CHAIR: It is not up to them to give their views as such. As I said in my opening statement, it is not up to them to give their opinions on matters of policy. If they want to explain the policy, how it will work, Mr Cormack, of course, is free to do that.

Mr Cormack : Thank you, Chair. Senator, I think that is a fair question, and I think the best and most succinct summary in response to that is on page 2 of the explanatory memorandum:

The Government is committed to boosting health and medical research. This must not just do more of the same, but demonstrate greater value and returns to the Australian people. The MRFF will give particular impetus to the translation of medical research into health and economic benefits. The MRFF will complement the Medical Research Endowment Account operated by the National Health and Medical Research Council (NHMRC), and leverage the existing capabilities of the NHMRC, including peer review, grants management, and the provision of expert advice.

I think that is a very succinct summary of the government's intent here. We see this reflected in the amendments, in that we see the role of the NHMRC embedded more firmly now. We see the chair of the NHMRC involved as a member of the advisory board. We see the NHMRC's legislative requirement to produce a strategy informing the basis of advice to government. Through that, we also leverage, rather than duplicate, the considerable—in fact internationally renowned—capabilities of the NHMRC in the overall management of the research process. Put simply, we think it is complementarity.

Senator McLUCAS: Professor Kelso, did you want to add to that?

Prof. Kelso : I cannot really add anything to Mr Cormack's response there. We are very happy to work in whatever way the minister requires us to, drawing on all the skills and experience we have.

Senator McLUCAS: Earlier today, we had evidence from a number of submitters around the way, practically, that allocations of approved grants could be made using existing NHMRC practices. The example was given of the state based cancer councils, who essentially commission, is my understanding, Professor Kelso, the NHMRC to disburse funds on their behalf. Can you explain that process to us, please?

Prof. Kelso : Yes. There are a number of organisations like Cancer Australia that draw on us to undertake peer review of the applications on their behalf and then provide them with ranked recommendations. That is a really excellent way of reducing the enormous cost of setting up new committees and drawing on the same pool of researchers to provide the advice in reviewing applications. I think it has been a very efficient process over some years now. Cancer Australia does that but a number of other organisations do as well.

Senator McLUCAS: Has there been consideration that that model would be utilised in the delivery of the MRFF? Have those conversations been had to this point?

Prof. Kelso : It depends on the particular scheme or the type of funding we might be requested to disburse. I imagine that we would be establishing different peer review committees, depending on the type of scheme that is proposed—for example, if it was research that was specifically associated with early commercial research, and we do have one scheme in that area. If it was an area of work which was for later stage commercial research than that which we currently support then we would be well capable of establishing appropriate peer review committees with that relevant expertise—so using our fundamental processes of peer review but with specialist panels according to the goals of the scheme, whether funded by the MRFF or by the MREA. I hope that answers the question.

Senator McLUCAS: So in the planning for the development of the MRFF, have those conversations been had about the sorts of requests that could be made of the NHMRC to do the assessment process and the rankings?

Prof. Kelso : I have not been involved in any such discussions up to this point, so it is really an in-principle statement of what we could do according to what is asked of us.

Senator McLUCAS: Mr Cormack, is it too early days for those sorts of things?

Mr Cormack : I really refer, again, to the essence of the legislation which is now quite explicit—more explicit in terms of leveraging the capacities of the NHMRC, but also not exclusively the NHMRC. There are other organisations that have capabilities. The MRFF special account can be flowed in a number of ways for specific purposes, particularly in relation to leveraging the capabilities or indeed the coinvestment of capable state government based activities. There is a provision in the legislation, and in the way that the account works for those funds, to be flowed through the COAG reform fund—again, for a particular type of research for which state governments and the institutions they fund and operate may have a natural comparative advantage for a particular type of research endeavour.

Secondly, and this is where a large proportion of the funding will no doubt flow, is the MRFF health special account, which enables a flow through directly to the NHMRC—directly in some cases to research institutes and directly to corporations. So in that pathway, the decision made each year at the program level to disburse funds through the budget process would flow directly, in that instance, to the NHMRC. The NHMRC is able then to utilise its peer review capabilities and grant management capabilities to disburse that.

I guess the other flow is through other corporate Commonwealth entities such as the CSIRO and the ARC. Again, they all do different things. They all do them well, and I think it is certainly likely that, for example, the CSIRO, with its particular advantages, may be a most appropriate program level decision in a given year for investments from the MRFF account, as indeed it may be for the NHMRC. I think the act is pretty explicit in how these things could flow. Each of those vehicles give flexibility to government while at the same time leveraging the very substantial capabilities of those organisations and, indeed, the state governments in their current research endeavours.

Senator McLUCAS: The other issue that is raised out of that comment is the number of times we have had requests today for nimbleness and have heard that we need to be able to deal with changing circumstances quickly—not just the comments we heard from the action group here—and that we need to have numbers of rounds that are going to be able to respond to emerging research needs.

Mr Cormack : Yes, indeed.

Senator McLUCAS: Can you point me to where in the legislation that is facilitated, or is it implicit?

Mr Cormack : There is the strategy, which provides a five year framework for dealing with these things, and the advisory board, in its wisdom, will no doubt foresee the requirement within a five-year strategy to adopt nimbleness as one of its objectives. Secondly, through the setting of the Australian medical research and innovation priorities, there is a formalised, publishable requirement to refresh and focus on individual priorities. Thirdly, through the disbursement mechanisms and the annual budget process, there is the capacity to move funds at the program level into the most nimble vehicle available to the government of the day at the time. I think that is a very specific, explicit advantage of the bill as it stands.

Senator McLUCAS: A couple of witnesses have talked to us about a desire to allocate a proportion of the funds—the figure of 20 per cent to translational research has been proposed. Does the department have a view? I know departments do not have views, I should not say that.

Mr Cormack : My way of explaining that, rather than expressing a view, is to go back to the explanatory memorandum, which clearly outlines what is really trying to be achieved here. I think that is probably the best response I can give—to repeat what I said earlier.

Senator McLUCAS: What is the discretion for the minister of the day to make a decision on their motion, for want of a better word? I had this conversation with the action group just before. I do not know if you were in the room.

Mr Cormack : I think that we need to look at the responsibilities of the minister, and they are outlined in the bill. The minister has the responsibility for appointing members of the advisory board, and I think we heard some highly relevant comments about the seriousness with which those people will take their responsibilities for overseeing such an important investment. The minister has responsibility for developing proposals for the disbursement of the funds in line with the priorities. There are mechanisms in place through the strategy and the priorities, and there is a requirement for those to be published—they are instruments—and for the minister to give an account every two years of the government's response to those. Then, at the individual program level, the minister is required to bring forward proposals for consideration during the budget process, and the budget process is obviously subject to very significant scrutiny. The bill really provides for a very significant level of transparency and a very high degree of accountability on the minister to give an account for the ultimate program level decisions of government, and their consistency with the priorities and the strategies which are published as instruments. So I think there is a lot of transparency to judge and assess the actions of the government of the day as outlined in these amendments.

Senator McLUCAS: If a minister did make a decision to allocate funds to a research activity that was outside of the strategy or outside of those systems as you have just described, that would be possible, I understand?

Mr Cormack : I have just outlined the checks and balances within the legislation.

Senator McLUCAS: Sorry, it is a different question. It is possible for a minister to make a decision to allocate funds outside of those structures that you have just described to me?

Mr Cormack : The bill, as it stands, includes very significant levels of accountability and reporting requirements. The minister of the day will be mindful of the legislation and the requirements for transparency in relation to the decisions of government as reflected against this bill and this legislation.

Senator McLUCAS: So if the minister of the day did make a decision to allocate funds to an entity, it would be post event that that was made public?

Mr Cormack : The accountability provisions are very clear in this bill. As you are well aware, the actions of ministers and indeed the actions of officials are heavily scrutinised through our current parliamentary processes.

Senator McLUCAS: Yes, but it would be after the event happened that it would become public that a decision had been made?

Mr Cormack : I am simply saying what the bill, as it stands, says. There are significant accountability standards. There are instruments that are produced. There is a very high expectation of the advisory board as to the seriousness to which they will exercise their responsibilities, the advice that they will give to government through the publication of the strategy and the priorities, and the budget process that ensues. I think that we have spun this round three or four times already.

Senator McLUCAS: So the answer is yes?

Mr Cormack : I have just given my answer.

Senator McLUCAS: Thank you. My final question goes to time lines. This bill is meant to come into the parliament shortly, isn't it? Can you step us out the time lines as you know them?

Mr Cormack : The time lines are that the bill is due to go back next week; it will go through the processes of parliament. Assuming that the bill is passed into law, the sequence is: the establishment of the advisory board, the commissioning of the advisory board to undertake the development of the strategy and, subsequent to that, the priorities. Against that, there is a 2015-16 allocation of approximately $10 million, which will be a program level decision for the minister to take in the context of the current year approved budget.

Senator McLUCAS: Has preparatory work begun on the members of the advisory board?

Mr Cormack : We have certainly prepared a significant amount of advice for the minister to consider in discharging the roles under the act, including the appointment of the advisory board.

Senator McLUCAS: So the advisory board would have to be appointed by what date in order for the process to acquit the $10 million?

Mr Cormack : I cannot be held to a specific date because there is a lot in play, but we are certainly confident that, if the passage of the bill is not delayed, the necessary processes to expend the $10 million in 2015-16 will be able to be completed to enable those disbursements to be made.

Senator McLUCAS: Have you got an indicative time frame for that?

Mr Cormack : It will be completed within this current financial year. They are all the steps that are needed to be able to get the funds disbursed. That is what we are working towards. I do not have a detailed project plan in front of me, I am sorry.

Senator McLUCAS: But there is one?

Mr Cormack : We are providing comprehensive advice to the minister on all of the necessary steps that need to be put in place to enable the 2015-16 allocation to be disbursed consistent with the objects of the act.

Senator McLUCAS: What month is proposed in the time frame that the disbursements would occur?

Mr Cormack : I do not have a specific month available to give to you today, but we do have a lot of work to progress, including the establishment of the advisory board, their commencement of the development of the strategy and the provision of advice to the minister to enable the disbursements to be made. We are confident that that will be undertaken this financial year. I think that is as much as I can say.

Senator McLUCAS: I am sorry to be persistent, Mr Cormack, but is that because that time line is not in the papers that you have with you, or is it because that time line has not yet been drawn up?

Mr Cormack : The time line is contingent upon a number of factors. I do not have a time line in front of me. But, as I said, it is our intention to complete the necessary work to make the disbursements complete within this financial year.

Senator McLUCAS: Thank you.

CHAIR: I think that is all the questions we have. Thank you very much for your time.