EXPLANATORY STATEMENT
INSTRUMENT NUMBER PB 95 OF 2009
NATIONAL HEALTH ACT 1953
AMENDMENT DETERMINATION UNDER SECTION 99ADB
Purpose and operation
Part VII of the National Health Act 1953 (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). These are listed drugs as defined in subsection 84(1).
The Minister can, by legislative instrument, determine 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) 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.
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.
Section 99ADB 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 subsection 99ADB(5).
Under subsection 99ADB(4) the Minister may, by legislative instrument, determine the weighted average disclosed price of a brand of a pharmaceutical item in accordance with the method set out in the regulations. The Minister will use information disclosed under the price disclosure requirements related to a particular period, along with other information referred to in the method set out in the regulations, to arrive at the weighted average disclosed price.
Under subsection 99ADB(5), if the Minister determines a weighted average disclosed price for one brand of a pharmaceutical item under s99ADB(4) then the Minister must, by legislative instrument, do so for all brands of a pharmaceutical item with the same drug and the same manner of administration. The weighted average disclosed price for these brands of pharmaceutical items will be 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.
In summary, a price reduction will occur if:
- the Minister determines the weighted average disclosed price of a brand of a pharmaceutical item under section 99ADB;
- a price agreement or price determination applies in relation to that brand of a pharmaceutical item;
- the weighted average disclosed price of the brand of pharmaceutical item is at least 10% less than the approved ex-manufacturer price; and
- the responsible person is notified of the new adjusted approved ex-manufacturer price (that is equal to the weighted average disclosed price), the adjusted approved price to pharmacist and the day the adjusted approved price to pharmacist comes into force.
The adjusted approved price to pharmacist will be based on the adjusted approved ex-manufacturer price using the method set out in the regulations.
Price reductions that result from price disclosure will apply to all brands and forms of the drug with the same manner of administration. This will be the case irrespective of whether the brands themselves were subject to price disclosure requirements.
This instrument amends the weighted average disclosed price determined on 31 July 2009 for brands of certain pharmaceutical items containing orally administered meloxicam. This instrument also amends the weighted average disclosed price determined on 31 July 2009 of every brand of every pharmaceutical item that has the same drug and manner of administration as the first items. This amendment to the determination made on 30 July 2009 results from submission, by some responsible persons, of amended data used to arrive at the weighted average disclosed price.
A provision-by provision description of the instrument is contained in the Attachment.
The instrument is expressed to commence on 30 September 2009. It amends the instrument that was made on 30 July 2009 and commenced on 31 July 2009 (PB 74 of 2009).
Consultations
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.
Pharmaceutical companies with a brand of a pharmaceutical item subject to the price disclosure requirements have been provided further information on the requirements by letter and have disclosed information relevant to this determination directly to the Department of Health and Ageing (the Department). The Department provided to the responsible persons that disclosed information to the Department an opportunity to check that the information disclosed to the Department had been translated correctly to Departmental data files. After the making of the determination on 30 July 2009 some amended data was submitted to the Department. The amended data was then used to undertake the calculations set out in the Regulations required to arrive at the weighted average disclosed price.
ATTACHMENT
Paragraph 1: Provides that the instrument commences on 30 September 2009.
Paragraph 2: Provides that instrument PB 74 of 2009 is amended.
Paragraph 3: Determines the amended weighted average disclosed price of a brand of various pharmaceutical items (the first items) as set out in Schedule 1.
Paragraph 4: Determines the amended weighted average disclosed price of every brand of every pharmaceutical item that has the same drug and manner of administration as the first items, as set out in Schedule 2.
Schedule 1: [1] Sets out the amended weighted average disclosed price of a brand of the first items.
[2] Sets out the amendment to the wording for the column headed ‘Form’ for two pharmaceutical items.
Schedule 2: Sets out the amended weighted average disclosed price of every brand of every pharmaceutical item that has the same drug and same manner of administration as the first items.