EXPLANATORY STATEMENT
INSTRUMENT NUMBER PB 13 OF 2008
NATIONAL HEALTH ACT 1953
AMENDMENT DETERMINATION UNDER SUBSECTIONS 85AB(1)
Part VII of the National Health Act 1953 (the Act) is the legislative basis of the Pharmaceutical Benefits Scheme (PBS) by which 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 as such under subsection 85(2). These are listed drugs as defined in subsection 84(1). Part VII also applies to certain extemporaneously-prepared medicinal preparations as a result of declarations under paragraph 85(2)(b).
The Minister by legislative instrument can 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 (defined in subsection 84(1)) that has the listed drug in that form with that manner of administration (subsection 85(6)). These determinations govern (except for certain extemporaneously-prepared pharmaceutical benefits) what constitutes the pharmaceutical benefit (defined in subsection 84(1)) under Part VII of the Act.
Provisions of the Act relating to brands of pharmaceutical items, including in relation to statutory price reductions, price disclosure, and guarantee of supply, are the result of amendments in relation to PBS reform by the National Health Amendment (Pharmaceutical Benefits Scheme) Act 2007 (the amending Act), which commenced on 1 August 2007.
The Act provides for listed drugs to be assigned to formularies, identified as F1 and F2. F1 is intended for single brand drugs, F2 for drugs that have multiple brands, or are interchangeable at the patient level with other drugs with multiple brands. F2 is in turn divided into Part A and Part T. F2 Part T contains multiple brand medicines subject to high levels of price competition on 1 October 2006, plus single brand medicines which belong to a therapeutic group which contains at least one multiple brand medicine subject to high levels of competition. Drugs on F2 are subject to the provisions of the Act relating to statutory price reductions (with different outcomes for Part A and Part T); price disclosure; and guarantee of supply.
Section 84AC relevantly provides that a drug is on F1 if determined to be so under section 85AB, or if prescribed to be so by regulations and not determined to be in F2 under section 85AB. A drug is on F2 if determined to be so under section 85AB, or prescribed to be so by the regulations. Section 84AD provides that a drug is in Part A or Part T of F2 if determined to be so under section 85AC or if prescribed to be so in the regulations under subsection 85AD(5). Subsections 84AC(5) and 84AD(5) provide that the regulations may prescribe the matters referred to for the day on which the section 84AC commenced.
Drugs on F1 and F2 (in Parts A and T) were prescribed with effect from 1 August 2007 in the National Health (Pharmaceutical Benefits) Regulations.
Subsection 85AB empowers the Minister to determine by legislative instrument that a listed drug is on F1 or F2. For a drug to be on F1, it must satisfy the criteria in subsection 85AB(4). This requires that there are no listed brands of pharmaceutical items that have the drug, or another drug in the same therapeutic group, that are bioequivalent or biosimilar. It also requires that the drug was not immediately before on F2. A drug may only be determined to be on F2 if it does not satisfy one or more of the criteria for F1.
This instrument amends instrument number PB 87 of 2007 by adding the listed drug “Varenicline” to F1.
A provision-by-provision description of the instrument is contained in the Attachment.
The instrument is expressed to commence on 1 January 2008.
Consultations
This instrument affects pharmaceutical companies with medicines listed on the PBS. In relation to the introduction of formularies and the criteria used to determine the placement of drugs on formularies, the pharmaceutical industry has been consulted during both the policy development and implementation phases.
Attachment
Paragraph 1: Provides that the instrument commences on 1 January 2008.
Paragraph 2: Determines that Schedule 1 amends PB 87 of 2007.
Schedule 1: Adds the listed drug “Varenicline” to F1.
Overview
The National Health Act 1953, enacted by the Parliament of Australia, governs the Pharmaceutical Benefits Scheme (PBS), ensuring that Australians have reliable, timely, and affordable access to a broad range of medicines. The Act addresses the need for a structured and regulated system to provide pharmaceutical benefits, ensuring that the Commonwealth can effectively manage the provision of medicines. The 2007 amendment introduced by the National Health Amendment (Pharmaceutical Benefits Scheme) Act aimed to reform the PBS, including the introduction of formularies F1 and F2 to manage drugs based on brand and competition levels. The policy objective of these amendments was to enhance the efficiency and affordability of the PBS by better managing the pricing and supply of pharmaceutical items. This particular legislative instrument, numbered PB 13 of 2008, amends the previous instrument by adding the drug Varenicline to formulary F1, effective from 1 January 2008. This change aligns with the criteria set out in the Act for determining the placement of drugs on specific formularies, ensuring that the PBS continues to operate effectively within the legislative framework established by the National Health Act 1953.
Scope and Application
The National Health Act 1953, as amended, governs the Pharmaceutical Benefits Scheme (PBS), which ensures all Australians have access to affordable and reliable medications. Part VII of the Act is the legislative basis for the PBS, covering listed drugs declared by the Minister, along with certain extemporaneously-prepared medicinal preparations. These drugs are classified into formularies, specifically F1 and F2, with F2 further divided into Part A and Part T. F1 is for single brand drugs, while F2 encompasses drugs with multiple brands or those interchangeable with other multiple brand drugs. F2 is further categorised based on the level of price competition, with drugs in Part T subject to higher competition. The Act mandates statutory price reductions, price disclosure, and a guarantee of supply for drugs on F2. The Act applies to pharmaceutical companies with medicines listed on the PBS, and its geographic reach is national. The instrument in question, effective from 1 January 2008, amends the National Health (Pharmaceutical Benefits) Regulations by adding the listed drug "Varenicline" to F1. This amendment was made following consultations with the pharmaceutical industry.
Key Provisions
The National Health Act 1953, as amended by the National Health Amendment (Pharmaceutical Benefits Scheme) Act 2007, governs the Pharmaceutical Benefits Scheme (PBS) through Part VII, providing reliable, timely, and affordable access to a wide range of medicines for all Australians (subsection 85(1)). The Minister for Health declares the drugs and medicinal preparations subject to the PBS by legislative instrument, listing them under subsection 85(2). The Act also applies to certain extemporaneously-prepared medicinal preparations. The Minister has the authority to determine the form and administration of listed drugs and their brands, governing what constitutes a pharmaceutical benefit (subsections 85(3), 85(5), and 85(6)). Drugs are assigned to formularies, F1 for single brand drugs and F2 for multiple brand drugs or those interchangeable at the patient level. F2 is further divided into Part A and Part T, with different provisions for statutory price reductions, price disclosure, and supply guarantee (subsections 84AC and 84AD).
The obligations under the Act include the Minister determining the form, administration, and brands of listed drugs, and assigning them to appropriate formularies based on the criteria set out in the Act. Pharmaceutical companies must comply with these determinations and assign their drugs to the correct formularies. The Minister’s decisions must be made by legislative instrument, and any changes to the formulary assignments are also made through such instruments. Additionally, the Minister has the authority to determine the criteria for placement on the formularies F1 and F2, ensuring that drugs are appropriately categorised based on their therapeutic group and brand characteristics (subsection 85AB).
Any breaches of the Act's provisions, including incorrect classification of drugs or failure to comply with the Minister's determinations, may result in civil or criminal consequences. The penalties for such breaches are not explicitly stated in the Act but can include fines or other legal actions as deemed appropriate by the courts. The Minister's decisions are subject to judicial review, and any party adversely affected by a determination can seek redress in the appropriate court. The precise penalties would depend on the nature and severity of the breach, but the overarching aim is to ensure compliance with the PBS framework to maintain the integrity and efficiency of the scheme.