GARY MOORHEAD. CSL- It Could Have Been Worse; Can It Be Better?

Back in 2010, Australia’s privatised Commonwealth Serum Laboratories (now CSL) was being tempted to move its vaccine research facilities to Switzerland, where it had been promised a better tax deal.

To remain in Australia, CSL wanted a sweetener of comparative value from the Australian Government. Key public services agencies and members of the Rudd Cabinet were resistant – “industry welfare” was never popular, especially in the aftermath of the GFC bailouts.

The decision swung in favour of paying to keep the facility in Australia when Rudd was made aware of a recently produced Report from the Prime Minister’s Science Engineering and Innovation Council (PMSEIC) titled “Epidemics in a Changing World, 1 October 2009”. https://www.chiefscientist.gov.au/2009/10/epidemics-in-a-changing-world

The Report described scenarios that will sound very familiar today, for instance:

· infectious agents that cause such diseases constantly evolve. This makes the prediction of future threats very difficult — so we must expect to be surprised.

The Report was prepared for PMSEIC by an Expert Working Group whose members drew heavily on their extensive scientific knowledge and expertise in fields including virology, entomology, epidemiology, medical science and veterinary science to produce recommendations, including:

· Australia possesses the human capacity to combat potential epidemics:

· This requires that we develop, maintain and retain skilled people through:

· conducting ongoing national workforce planning for expertise in human and animal epidemic diseases; and

· boosting higher education and research training in areas of need.

· In order to provide early warning of the emergence of epidemic diseases the Group recommended that:

· Australia possesses a long term biosecurity information collection, analysis and interpretation capability that can collect, analyse and interpret disease surveillance information.

· In order to secure the front-line defences needed to deal with emerging epidemic diseases the Group recommended that:

· Australia has a self-sufficient vaccine development and production capacity, and

· Australia needs to retain and enhance its onshore development and production capacity for vaccines. This is essential for domestic preparedness and the focus should be on the onshore development and production capacity.

Interestingly, it is rumoured that none of the agency advice initially provided to the decision-makers made reference to this Report – or took into account the issue of on-going national security from a health perspective. It was all about the money and not interfering with “the market”.

As soon as Rudd was made aware of the expert advice, he over-rode the views of the key agencies as well as the concerns of the neo-liberals in his own Government and agreed to the funding for the CSL research facility. This was (ironically) announced by his successor. http://www.ausinnovation.org/articles/investing-in-csl-research.html

The bigger issue for today of course, is how far have we managed to come in acting on these recommendations?

In 2015, the Office of the Chief Scientist produced a paper titled: “Vaccines in the Frontline Against Infectious Disease”. https://www.chiefscientist.gov.au/2015/06/paper-vaccines-on-the-frontline

This paper provided more detail on the dimensions of the problem, but was less prescriptive in terms of what was required to make Australia safe. For example it said:

New strains of the influenza virus are expected to cause three severe influenza pandemics every century. The last pandemic in 2009 turned out to be mild, but exposed our limited capacity to produce influenza vaccines, with a global production capacity of 850 million doses. Major changes are required in both influenza vaccine production and pandemic preparedness to produce and quickly supply the billions of doses that could be required during a severe influenza pandemic.

And concluded by saying:

The challenge for all nations is to foster both the science and the scientific awareness of vaccination to keep our communities safe.

The question for now is: Have we done this – and is it enough?

Our stuttering response to the COVID 19 crisis would indicate that it is not.

In the aftermath of two and a half decades of privatisation and deregulation, Australian Governments have struggled to deal with real world issues like energy transition, depleting natural resources, waste management and even managing the quality of building and construction. This has been exacerbated by our unique capacity to weaponise and politicise issues (like energy transition) to an extent that paralyses responses.

This has been further exacerbated by cuts to science and research funding (the cuts proposed in the R&D Bill currently before Parliament is the latest example) and a hostility towards support for manufacturing industry that has seen Australia slide to 93rd on the Harvard Atlas of Economic Complexity, a measure of a nation’s capacity to adapt its industries to meet changing needs. https://dataverse.harvard.edu/dataverse/atlas

CSL has grown and thrived since the Rudd support package, to become the fourth biggest company on the ASX, but does this mean CSL will make Australia’s needs the priority over servicing its shareholders’?

When our Government is unique in the world for not standing up to gas exporters to ensure we have sufficient gas reserved for our own industries, will it have the courage to tell CSL that the vaccines CSL produces must be for Australians first?

Most recently  Garry Moorhead was consultant to the St Baker Energy Innovation Fund (Sep 2019 – March 2020). Previously he was Chief of Staff to Senator Kim Carr (Shadow Minister/Minister for Innovation, Industry Science and Research 2017-2019; 2009 – 2013).

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15 Responses to GARY MOORHEAD. CSL- It Could Have Been Worse; Can It Be Better?

  1. Avatar Jerry Roberts says:

    Interesting thanks David. Sounds like the company is employing good people.

  2. Avatar David Maxwell Gray says:

    CSL is one of the very few success stories of an Australian company employing real innovation and a high rate of expenditure on R&D and collaboration around the world. It has had stunning success, both commercially and in terms of medical technology, at a level most Australian captains of industry can only drool at. It is one of the few cases where privatization has really worked, in my view. It comprises an exemplar in terms of strategic nous for high-tech success for Australian companies, in many ways.

    It collaborates all around the world, with those involved with R&D in its fields of endeavour. It is currently working on aspects of containing Covid-19, including a hyperimmune serum, derived from plasma extracted from formerly infected people.
    And from memory, it is the world’s second-biggest producers of vaccines for humans. Check out its website(s)!

  3. Avatar Jerry Roberts says:

    I had no idea that the Commonwealth Serum Laboratories were big time on the stock market. Does this mean they have joined Big Pharma?

  4. Avatar Anthony Pun says:

    CSL was the second flagship of scientific and medical research (after CSIRO) in the 1960s-2000 in Australia and many PhD graduates in biosciences consider CSL their next career job. As a Lab Immuno-haematologist, I have used many CSL products including materials used for intravenuous injections and infusions. My personal view is that CSL should remain the No 1 bio-scientific/engineering for research and development and should be owned by Australians, located in Australia, and develop appropriate health products for Australia.
    I have no reservation of partnership of foreign government in research and development projects as they are mutually benefits to both nations.
    Brain drain to other countries (US, UK, EU) occurs where we have no place to park our top research graduates when they returned home after a post-doc research in the US or UK.
    If we gauge the useful of CSL on how much profit it generates, then the institution becomes a multi-national with head office in another country and covid19 has fast forward the crystal ball to show that we could be dependent on the foreign supplier and pay a ransom for the goods (eg allegations of 3M profiteering on N95 mask by 6x retail price). We have lost the Holden and we don’t want to lose CSL.
    If national security is not an inhibitor, then partnership with China would be a great joint partnership in research/development which can kill many birds with one stone, ie. maintain CSL as Australia No 1 bio-research center, prevent brain drain by keeping them at home, develop warm relations with China through academic/research exchange, maintain profitability with vast market in China, and lastly, maintain the warm trading relations with China.

    • Avatar Gary Moorhead says:

      Rudd’s battle referred to here was to retain the CSL research capacity in Australia. Clearly, the company – and presumably advice provided by agencies – was that moving this would be in accord with the Act.

      The wider issue is deciding, as Anthony Pun alludes in his comment, what capacities we want/need to retain in our national interest?

      In defence of the public servants who wrote the Act in the 1990’s, it is very hard to anticipate every circumstance decades into the future and how clauses might be interpreted.

      The FIRB guidelines on strategic national assets seemed straightforward about power stations being just that, but Alinta was able to buy Loy Yang B in 2018 when strategic national asset was defined as bigger than 1200MW.

  5. Avatar Tony G Curtin says:

    Ah, here we see a re-emergence of the ‘…if you disagree with me you must be wrong…’ argument. A properly established and governed public owned CSL would have been entirely capable of its observed, ahem, ‘powerhouse’ performance under government ownership if that ownership model observed some intelligent principles and had been allowed to operate with a sensible degree of independence. I appreciate that some pro-privitisation enthusiasts see such a situation as impossible, but that seems like a failure of imagination rather than any particular insight. I only say this having worked across the private sector, the public sector and in a privatised public company.

  6. Avatar Jerry Roberts says:

    Hi Kevan. Are you the gent featured in Hugh’s chapter? Hugh is no longer with us, unfortunately. A global power house in blood products! Gee whiz.

  7. Avatar Kevan Daly says:

    Sorry Garry Moorhead but you’re out of date with regards to the size of CSL on the ASX. For the last 2 months the pecking order on market capitalisation has been CSL, CBA, BHP …

  8. Avatar Peter Graves says:

    Thanks for these comments. I would like to think that someone in the Health Department of 1992/93 (in drafting the provisions of CSL’s sale) actually had a long-term view of the value of CSL’s products to Australia’s health. And anchored its basis, its governance and some of its products to Australia.

  9. Avatar Peter Graves says:

    You might also care to examine the significant national interest provisions still there in the Commonwealth Serum Laboratories Act 1961 – still in force too, despite the sale of CSL in 1993.

    Part 3A of that 1961 Act “National interest restrictions on CSL Limited” restrict CSL’s articles: foreign shareholdings (19C)
    (d) a provision requiring that the head office of CSL always be located in Australia; and
    (e) a provision requiring that the principal facilities used by CSL and any CSL subsidiaries to produce products derived from human plasma collected from blood or plasma donated by individuals in Australia always be located in Australia; and
    (f) a provision requiring that, at all times, at least two‑thirds of the directors of CSL be Australian citizens; and
    (g) a provision requiring that the presiding director (however described) at a meeting of the board of directors of CSL be an Australian citizen; and
    (h) a provision prohibiting CSL from taking any action at any time to become incorporated outside Australia. and
    19E CSL to maintain a register of foreign‑held voting shares
    (1) CSL must on and after the sale day maintain a register of foreign‑held voting shares.

    • Avatar Kevan Daly says:

      As far as CSL’s profitability is concerned Australia is too small to be significant. Yet, to my knowledge, all the conditions you mention have been met. For example, Paul MacNamee, an Australian citizen, is Chairman and its head office is in Melbourne. CSL holds is AGM in Australia (so far only Sydney and Melbourne) but its accounts are stated in US dollars. Having two thirds of its directors Australian citizens will be increasingly difficult as less of its capital is deployed in Australia.

  10. Avatar Jerry Roberts says:

    Thank you for this post. I bet many Australians are still unaware that their Commonwealth Serum Laboratories were privatised in the first place.

    Hugh Stretton in his book “Australia Fair” devoted a chapter to the privatisation of the Commonwealth Serum Laboratories as a case study in the evils of the great wave of privatisation policies that he opposed from the outset. So did I and I sent copies of Hugh’s political essay on the subject to newspaper people in a futile effort to slow down this massive confidence trick conducted by international finance.

    Are we interested in companies doing well on the stock exchange and paying executives million dollar salaries or are we interested in public health?

    • Avatar Lorraine Osborn says:

      Agree that many Australian’s don’t know CSL was privatised or understand the implications for our well being. Seeing the reports of the booming share price makes me furious. Another example of selling off the farm. It gives me no pleasure to write that Labor has a lot to answer for selling this, the Commonwealth Bank and many other assets needed to future proof the country.

    • Avatar Kevan Daly says:

      “Are we interested in companies doing well on the stock exchange and paying executives million dollar salaries or are we interested in public health?”

      With CSL you get both.
      When you get your fluvax injection this autumn, you”ll probably find that it’s produced by CSL subsidiary, “Seqirus”.
      If you really think that CSL would have grown under government ownership to be the global powerhouse in blood products that it’s become then you’re simply wrong.

      • Avatar Peter Graves says:

        So Brian McNamee was the CEO from 1990 – before its privatisation. He then led the company afterwards until 2013.

        So he may well also have succeeded as the CEO of a Government-owned CSL to have become the powerhouse (and returned its profits to the Treasury).

        Just speculating over those consequences of privatisation – hasn’t the Commonwealth Bank been such a shining example of – what ?

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