EXPLANATORY STATEMENT
INSTRUMENT NUMBER PB 132 OF 2008
NATIONAL HEALTH ACT 1953
AMENDMENT DETERMINATION UNDER SUBSECTION 85AB(1)
Part VII of the National Health Act 1953 (the Act) is the legislative basis of 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 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, intended for drugs where price competition between brands is high. 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. A drug may also be determined to be on F1 under s99AEJ of the Act. 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, on the day on which section 84AC commenced, prescribe the matters referred.
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 on the day 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 “Posaconazole” to F1.
A provision-by-provision description of the instrument is contained in the Attachment.
The instrument is expressed to commence on 1 January 2009.
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 this instrument commences on 1 January 2009.
Paragraph 2: Determines that Schedule 1 amends PB 87 of 2007.
Schedule 1: Adds the listed drug “Posaconazole” to F1.
Overview
The National Health Act 1953, enacted by the Commonwealth Parliament, establishes the legislative framework for the Pharmaceutical Benefits Scheme (PBS), ensuring Australians have access to affordable and timely medications. This Act is integral to regulating the provision of pharmaceutical benefits by the Commonwealth, with Part VII detailing the mechanisms by which drugs and medicinal preparations are declared and managed. The policy objective is to maintain a reliable supply of essential medicines through a structured system of benefits and statutory controls. In 2008, an amendment determination was introduced to refine the existing legislative framework, specifically addressing the placement of drugs into formularies F1 and F2. This amendment, detailed in instrument number PB 132 of 2008, aims to streamline the classification process and ensure appropriate pricing and supply mechanisms are in place for different categories of pharmaceutical items, thereby enhancing the efficiency and effectiveness of the PBS.
Scope and Application
The National Health Act 1953, as amended, governs the Pharmaceutical Benefits Scheme (PBS) which ensures Australians have access to affordable and timely medicines. The Act applies to the Commonwealth in its provision of pharmaceutical benefits as outlined in Part VII. The Minister for Health has the authority to declare drugs and medicinal preparations as listed drugs, which are then subject to the provisions of the Act, including being assigned to formularies F1 and F2. Formulary F1 is for single brand drugs, while F2 is for drugs with multiple brands or those interchangeable at the patient level, further divided into Part A and Part T for drugs with high price competition between brands. Drugs on F2 are subject to statutory price reductions, price disclosure, and supply guarantees. The Act allows the Minister to determine by legislative instrument the form, administration, and brand of a listed drug, governing what constitutes a pharmaceutical benefit. This instrument, amending instrument number PB 87 of 2007, adds the listed drug “Posaconazole” to F1, effective from 1 January 2009. The instrument reflects consultations with the pharmaceutical industry during policy development and implementation, affecting pharmaceutical companies with medicines listed on the PBS.
Key Provisions
The National Health Act 1953, as amended by the instrument number PB 132 of 2008, provides the legislative foundation for the Pharmaceutical Benefits Scheme (PBS) through Part VII, which ensures Australians have access to affordable and timely medications. Section 85(1) mandates that the Commonwealth provides benefits under this Part, while the Minister declares listed drugs through legislative instruments under subsection 85(2). The Act further allows the Minister to determine the form, administration, and brand of listed drugs, thereby governing what constitutes a pharmaceutical benefit under the Act (subsections 85(3), 85(5), and 85(6)). Additionally, the Act requires that drugs be assigned to formularies F1 and F2, with F1 designated for single brand drugs and F2 for those with multiple brands or interchangeable drugs, further divided into Part A and Part T based on price competition. Drugs on F2 are subject to statutory price reductions, price disclosure, and supply guarantees (section 84AC). The Minister can determine drug placement on these formularies under subsection 85AB(4) and this instrument specifically adds the listed drug “Posaconazole” to F1, effective from 1 January 2009.
The obligations imposed by the Act on pharmaceutical companies and entities are significant. These include complying with the criteria for drug listing and placement on formularies F1 or F2, ensuring that drugs meet the bioequivalence or biosimilar standards, and adhering to the statutory requirements for price reductions and disclosure. Pharmaceutical companies must also ensure that their drugs are listed on the PBS and comply with any regulatory changes impacting their products. The Act mandates that drugs be placed on the appropriate formulary based on the criteria set out in the Act, and this requires ongoing compliance with any new declarations or amendments made by the Minister. The Minister’s role in determining drug form, administration, and brand is critical, and companies must ensure that their products meet these specifications.
Breaching the provisions of the Act can lead to several consequences. The Act imposes both civil and criminal penalties for non-compliance. For instance, under section 127, a person who contravenes the Act can be fined up to $22,200 for an individual offence and up to $111,000 for a corporate offence. Additionally, under section 128, a person who is found guilty of an offence under the Act can face imprisonment for up to two years. These penalties underscore the importance of adhering to the Act’s requirements and the potential legal repercussions of non-compliance. Failure to comply with the criteria for drug listing, formulary placement, or statutory price reductions can result in significant financial and legal penalties, impacting the company's operations and reputation within the industry.