An inquiry into the federal government's $20 billion Medical Research Future Fund has been warned funds could be hijacked by special interest groups.

The federal government is being urged to ensure its $20 billion Medical Research Future Fund isn't hijacked by special interest groups tugging on politicians' heartstrings.

Phoebe Phillips, president of the Australian Society for Medical Research, says there should be a compulsory peer review process before funds are allocated to projects.

"It needs to be peer-reviewed so that rigorous questions are asked," Dr Phillips told a Senate inquiry into the fund on Tuesday.

"What we don't want to happen is the loudest speaker being able to approach the Minister for Health."

Labor senator Jan McLucas said the legislation on how funding is to be allocated should be tightened to protect the health minister from emotional pleas for funding.

"Repeatedly I have people from very small cohorts of the population who complain that the (National Health and Medical Research Council) will never fund their one researcher in Australia who's just finished their PhD and why can't we get $20 million for my thing that my child has," she said.

"You almost can't answer that question."

Drug manufacturer CSL told the inquiry that Australia's tax system was turning companies off investing locally.

Chief scientific officer Andrew Cuthbertson warned the fund could leave Australia funding medical research and development for other countries to make money on, if businesses aren't given more incentive to invest locally.

He said Australia struggled to commercialise its intellectual property, with ideas either going offshore to be developed, or never translating into a product at all.

"Australia misses out on the real economic payback," Dr Cuthbertson said.

"You want Australia to reap the really big economic and productivity benefits that flow from commercialisation."

CSL, Australia's largest private sector investor in research and development, wants at least 20 per cent of the fund's disbursements spent on translational research - turning ideas into products.

Dr Cuthbertson says Australia is failing to compete with countries like Switzerland, Singapore, Ireland and the UK, which offer expedited processes for investment and an advanced manufacturing corporate tax rate of 10 per cent, compared with 30 per cent in Australia.

CSL last year decided to build a $500 million manufacturing plant in Switzerland instead of Australia, which could have created 500 new jobs and doubled the company's economic contribution to Australia to around $5 billion a year, he said.

"By choosing to invest in Australia, CSL would have been putting ourselves and importantly, CSL shareholders ... at a significant competitive disadvantage," he said.

He urged the government to reform Australia's "uncompetitive" tax system which is stopping the nation from hosting the manufacturing that could flow from its investment in research and development.

"If that could be done the economic multiplier from each dollar the Medical Research Future Fund spends would be significantly greater," he said.