EXPLANATORY STATEMENT
INSTRUMENT NUMBER PB 83 OF 2008
NATIONAL HEALTH ACT 1953
AMENDMENT DETERMINATION UNDER SUBSECTIONS 85AB(1) AND 85AC(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 not so determined, prescribed to be so by regulations. 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 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 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.
Subsection 85AC(1) empowers the Minister where a drug has been determined to be on F2 to determine by legislative instrument that the drug is in Part A or Part T of F2. A drug can only be determined to be in Part A if it does not satisfy either of the criteria for Part T. The criteria for Part T, as set out in subsection 85AC(4), are that the drug is in the same therapeutic group as a drug already in Part T, or was already in Part T before the new determination.
This instrument amends instrument number PB 95 of 2007 by determining under sections 85AB(1) and 85AC(1) that the listed drugs “Erlotinib”, “Fludarabine”, “Nilotinib”, “Sitagliptin” and “Telbivudine” are on F1 and that the listed drugs “Bicalutamide” and “Cefalotin” are on F2. It also determines under subsection 85AC(1) that “Bicalutamide” and “Cefalotin” are in Part A of F2. These determinations comply with the relevant statutory criteria.
A provision-by-provision description of the instrument is contained in the Attachment.
The instrument is expressed to commence on 1 August 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 this instrument commences on 1 August 2008.
Paragraph 2: Determines that Schedule 1 amends PB 95 of 2007.
Schedule 1: Adds the listed drugs “Erlotinib”, “Fludarabine”, “Nilotinib”, “Sitagliptin” and “Telbivudine” to F1. The listed drugs “Bicalutamide” and “Cefalotin” are added to F2 and Part A of F2.