National Health Act 1953 - Amendment determination under section 99ADB (No. PB 12 of 2010)

EXPLANATORY STATEMENT

INSTRUMENT NUMBER PB 12 OF 2010

NATIONAL HEALTH ACT 1953

AMENDMENT DETERMINATION UNDER SECTION 99ADB

Purpose and operation

This legislative instrument is made pursuant to subsections 99ADB(4) and 99ADB(5) of the National Health Act 1953 (“the Act”) and amends determination PB 74 of 2009 (as amended) (“the July 2009 WADP determination”) to remove certain brands of pharmaceutical items and their corresponding weighted average disclosed price.

Part VII of the Act is the legislative basis for the Pharmaceutical Benefits Scheme (PBS) by which the Commonwealth provides reliable, timely, and affordable access to a wide range of medicines for all Australians.

Subsection 85(1) provides that benefits are to be provided by the Commonwealth in accordance with Part VII in respect of pharmaceutical benefits.

Drugs and medicinal preparations to which Part VII applies are declared by the Minister by legislative instrument to be so under subsection 85(2) of the Act.  These are listed drugs as defined in subsection 84(1). 

The Minister may also determine, by legislative instrument, the form or forms of a listed drug by reference to strength, type of unit, size of unit or otherwise (subsection 85(3)); the manner of administration of the form of the listed drug so determined (subsection 85(5)); and a brand of the pharmaceutical item (subsection 85(6)).  A pharmaceutical item is a listed drug in a form determined under subsection 85(3) of the Act and with a manner of administration for that form of the drug determined under subsection 85(5) of the Act. A brand of a pharmaceutical item is a pharmaceutical benefit under Part VII of the Act.

Amendments to the Act made by the National Health Amendment (Pharmaceutical Benefits Scheme) Act 2007 (the Amending Act), which commenced on 1 August 2007, included provisions in relation to statutory price reductions, price disclosure, and guarantee of supply.  The purpose of the Amending Act was to position the PBS for the future by changing, or placing in the legislation, the way in which certain drugs are priced at the time of listing, or after they are listed on the PBS. New pricing arrangements contained in the Amending Act have enabled the Government to capture the benefits of competition where drugs have multiple brands, providing the foundation for a sustainable PBS.

Subsections 99ADB(4) and 99ADB (5) are located in Division 3B of the Act, which relates to price disclosure. Division 3B of the Act requires the responsible person for certain brands of pharmaceutical items to comply with price disclosure requirements for each supply of a relevant brand of a pharmaceutical item.  In some circumstances price disclosure is mandatory, and in others it is voluntary. In addition, Division 3B provides for reduction to the approved price to pharmacists of the brand of the pharmaceutical item in specified circumstances.

Subsection 99ADB(1) defines various terms used in Division 3B. One of these terms is the “weighted average disclosed price”. In summary, the weighted average disclosed price of a brand of a pharmaceutical item is the price determined by the Minister in accordance with subsection 99ADB(4) or 99ADB(5).

Subsection 99ADB(4) provides that the Minister may, by legislative instrument, determine the weighted average disclosed price (“WADP”) of a brand of a pharmaceutical item in accordance with the method set out in the National Health (Pharmaceutical Benefits) Regulations 1960 (“the Regulations”).  The Minister uses information disclosed under the price disclosure requirements related to a particular period, as set out in the Regulations, to arrive at the WADP.

Subsection 99ADB(5) provides that if the Minister determines a WADP for one brand of a pharmaceutical item under subsection 99ADB(4) (“the first item”), then the Minister must, by legislative instrument, determine the WADP for every brand of every pharmaceutical item with the same drug and the same manner of administration as the first item. The WADP for these brands of pharmaceutical items is also calculated in accordance with the method set out in the Regulations.

Section 99ADH sets out when a price reduction, based on price disclosure, will occur, and how the new price will be set. Price disclosure related price reductions may only occur on     1 April or 1 August, being the reduction days prescribed by the Regulations.

In summary, section 99ADH will apply to a brand of pharmaceutical item if the following requirements are met:

• the Minister determines the WADP of a brand of a pharmaceutical item under subsection 99ADB(4) or 99ADB(5); 
• a price agreement or price determination is in force in relation to that brand of a pharmaceutical item;
• the WADP of the brand of pharmaceutical item is at least 10% less than its approved ex-manufacturer price; and
• the responsible person was issued a notice pursuant to paragraph 99ADH(1)(d) within the required timeframe that sets out the following information:
  • the adjusted approved ex-manufacturer price (that is equivalent to the WADP);
  • the adjusted approved price to pharmacists (this is calculated in accordance with the method set out in the Regulations and is based on the adjusted approved ex-manufacturer price) ; and
  • the reduction day.

The July 2009 WADP determination determines, pursuant to subsections 99ADB(4) and 99ADB(5), the WADP for all brands of pharmaceutical items that are subject to a                  1 April 2010 reduction day.

The July 2009 WADP determination currently includes, amongst other things, the WADP for all brands of pharmaceutical items containing each drug specified in column 1 of an item in the table below that have the manner of administration specified in column 2 of the corresponding item number in the same table:

This amendment determination varies the July 2009 WADP determination to remove the brands of pharmaceutical items with the drug and manner of administration specified in the above table and their corresponding WADP. These brands of pharmaceutical items will no longer be subject to a price disclosure related price reduction on 1 April 2010.

In relation to all brands of pharmaceutical items containing orally administered meloxicam (item 2 in the above table), it was conceded by the Department that the notice made pursuant to paragraph 99ADH(1)(d) and issued on 30 September 2009 or 1 October 2009 was invalid. These brands of pharmaceutical items will not be subject to a price disclosure related price reduction on 1 April 2010.

All other brands of pharmaceutical items containing a drug and manner of administration specified in the above table (items 1, 3 and 4), except for one brand of one pharmaceutical item, took an administrative price reduction on 1 December 2009. This means that the price disclosure related price reduction proposed for 1 April 2010 related to the July 2009 WADP determination already took effect on 1 December 2009. In respect of the one remaining brand of pharmaceutical item, an administrative price reduction for 1 April 2010 will be sought.

The brands of pharmaceutical items removed from the July 2009 WADP determination by this variation are included in a January 2010 WADP determination (PB 13 of 2010), related to the 1 September 2008 to 31 August 2009 data collection period, for a reduction day of       1 August 2010.

A provision-by provision description of the instrument is contained in the Attachment.

This instrument commences the day after it is registered on the Federal Register of Legislative Instruments. 

Consultation

This instrument affects pharmaceutical companies with medicines listed on the PBS.  Pharmaceutical companies have been consulted in relation to the introduction of price disclosure requirements during both the policy development and implementation phases.  This has occurred through meetings with both peak body organisations and individual companies.  Information on this measure has been disseminated through peak industry bodies and during regular meetings with a Stakeholder Reference Group.  Peak bodies were provided with the opportunity to comment on the Guide to the PBS Reform legislation and the Exposure Draft of the National Health Amendment (Pharmaceutical Benefits Scheme) Bill 2007.

Consultation has taken place with the responsible persons for all brands of pharmaceutical items whose WADP is being removed from the July 2009 WADP determination.

ATTACHMENT

1 Name of Determination

Paragraph 1 provides that the name of this determination is the Amendment determination under section 99ADB of the National Health Act 1953, and that this determination may also be cited as PB 12 of 2010.

2 Commencement

Paragraph 2 provides that this determination commences on the day after it is registered.

3 Definition of PB 74 of 2009

Paragraph 3 provides that, in this determination, PB 74 of 2009 means the determination made under section 99ADB of the National Health Act 1953 dated 30 July 2009, as amended.

4  Amendment of PB 74 of 2009

Paragraph 4 provides that Schedule 1 amends PB 74 of 2009.

Schedule 1  Amendments

Items 1 and 2 of Schedule 1 omit certain brands of pharmaceutical items and their corresponding weighted average disclosed price from Schedule 1 of PB 74 of 2009.

Items 3 and 4 of Schedule 1 omit certain brands of pharmaceutical items and their corresponding weighted average disclosed price from Schedule 2 of PB 74 of 2009.