EXPLANATORY STATEMENT
NATIONAL HEALTH ACT 1953
DETERMINATION UNDER PARAGRAPH 98B (1) (a)
Paragraph 98B (1) (a) of the National Health Act 1953 (“the Act”) provides that a function of the Pharmaceutical Benefits Remuneration Tribunal (“the PBRT”) is to determine the manner in which the Commonwealth price for all or any pharmaceutical benefits is to be worked out for the purpose of payments to approved pharmacists for the supply of pharmaceutical benefits.
Subsection 98BAA (1) of the Act requires that, where the Commonwealth and the Pharmacy Guild of Australia (or another pharmacists’ organisation representing a majority of approved pharmacists) enter into an agreement relating to the manner in which the Commonwealth price for pharmaceutical benefits is to be calculated, the PBRT, when making a determination pursuant to paragraph 98B (1) (a) of the Act, is to give effect to the terms of that agreement.
The Third Community Pharmacy Agreement (“the Third Agreement”) between the Commonwealth and the Pharmacy Guild of Australia, signed on 16 May 2000 and due to expire on 30 September 2005, is an agreement for the purposes of subsection 98BAA (1) of the Act. The Third Agreement sets out the manner in which the Commonwealth price for pharmaceutical benefits is to be calculated. A component of the Commonwealth price is the pharmacists’ dispensing fees. The formula by which the pharmacists’ dispensing fees is to be indexed, with effect from 1 July of each year from the 2001-02 financial year to the 2005-06 financial year, is also set out in the Third Agreement.
In accordance with the Third Agreement, the Minister for Health and Ageing (on behalf of the Commonwealth) and the Pharmacy Guild of Australia have agreed to the amount of the pharmacists’ dispensing fees to have effect from 1 July 2005.
On 16 June 2005, the PBRT made a determination pursuant to paragraph 98B (1) (a) of the Act (“the Determination”), which gives effect to the terms of the Third Agreement concerning the Commonwealth price for pharmaceutical benefits. The Determination, which revokes the determination made on 28 June 2004, will commence on 1 July 2005 and will remain in effect until the PBRT makes a further determination.
The only change to the manner in which the Commonwealth price is calculated is that the pharmacists’ dispensing fees in respect of ready-prepared and extemporaneously-prepared pharmaceutical benefits have been indexed in accordance with the Third Agreement.
The dispensing fee for ready-prepared pharmaceutical benefits will increase by 5 cents to $4.75 and the dispensing fee for extemporaneously-prepared pharmaceutical benefits will increase by 8 cents to $6.78.
Further details of the Determination are set out in the Attachment.
The Determination is a legislative instrument for the purposes of the Legislative Instruments Act 2003. The Pharmacy Guild of Australia, an organisation representing a majority of approved pharmacists, is a party to the Third Agreement and has agreed to the quantum of increase for this year’s indexation of the pharmacists’ dispensing fees.
The Department of Finance and Administration has also been consulted to ensure that the calculations for the indexation of the pharmacists’ dispensing fees are in accordance with the formula set out in the Third Agreement, and have ratified the calculations.
ATTACHMENT
PART 1 - General
Paragraph 1 states the authority for the making of the Determination and provides that the Determination sets out the manner in which the Commonwealth price of pharmaceutical benefits is calculated for the purpose of payments by the Commonwealth to approved pharmacists.
Paragraph 2 provides that the Determination commences on 1 July 2005 and will remain in effect until the PBRT makes another determination.
Paragraph 3 repeals, as of 1 July 2005, the previous determination made on 28 June 2004.
Paragraph 4 provides that the Determination comprises of three parts and the appendices.
Paragraph 5 provides that the Determination does not apply to pharmaceutical benefits supplied pursuant to section 93 of the Act.
Paragraph 6 defines common terms used in the Determination, including the dollar amounts for the dangerous drug fee, the extemporaneously-prepared dispensing fee and the ready-prepared dispensing fee.
Paragraph 7 provides that the amount calculated in respect of ready-prepared pharmaceutical benefits will also include a dangerous drug fee for:
- those ready-prepared pharmaceutical benefits specified to be dangerous drugs in Schedule 3 to the determination made under paragraph 98C (1) (b) of the Act; and
- those ready-prepared pharmaceutical benefits which, under State/Territory legislation, are to be treated similarly to dangerous drugs.
Paragraph 8 provides that, where a pharmaceutical benefit is supplied from premises in Western Australia, the amounts calculated in respect of ready-prepared and extemporaneously-prepared pharmaceutical benefits will include a prescribed freight allowance.
Paragraph 9 describes the types of manufacturers’ packs of pharmaceutical benefits on which the approved prices to pharmacists are based.
Paragraph 10 provides the manner in which the Commonwealth price is to be calculated in circumstances where a medical practitioner prescribes that the equivalent of a repeat supply of pharmaceutical benefits is to be supplied on one occasion.
Paragraph 11 provides that payment for the supply of a pharmaceutical benefit will only be made where the supply was made in accordance with the relevant legislation.
Paragraph 12 provides that, where there is a determination in effect under subsection 85 (6) of the Act for the supply of a brand or brands of a drug or medicinal preparation as a pharmaceutical benefit under Part VII of the Act, the Commonwealth will not make a payment for the supply of any other brand or brands of that drug or medicinal preparation.
Part 2– Ready-Prepared Pharmaceutical Benefits
Paragraph 13 provides that the components and amount of the Commonwealth price in respect of ready-prepared pharmaceutical benefits will differ, depending on whether the amount of the benefit ordered and supplied is equal to, less than or more than the amount contained in a standard or non-standard pack. The components of the Commonwealth price comprise of:
- an amount based on the approved price to pharmacists (the precise amount differs, depending on the quantity of the benefit ordered and supplied);
- a container fee worked out in accordance with paragraph 15 (where the quantity of a benefit ordered and supplied is less than the quantity in a standard or non-standard pack);
- a mark-up worked out in accordance with paragraph 14; and
- either a ready-prepared dispensing fee or an extemporaneously-prepared dispensing fee.
Paragraph 14 provides the amount of mark-up in respect of calculating the Commonwealth price for ready-prepared pharmaceutical benefits.
Paragraph 15 provides the manner for calculating the price for containers in respect of calculating the Commonwealth price for ready-prepared pharmaceutical benefits.
Paragraph 16 provides that the price for a benefit or container will be rounded to the nearest cent.
Paragraph 17 provides the manner for calculating a component of the Commonwealth price for ready-prepared pharmaceutical benefits, where the quantity of a benefit used or supplied is less than the quantity in a standard or non-standard pack (see paragraph 13).
Paragraph 18 provides a maximum in calculating the Commonwealth price for ready-prepared pharmaceutical benefits.
Paragraph 19 provides that, where a lesser quantity of a pharmaceutical benefit which is specified in Schedule 4 to the determination made under paragraph 98C (1)(b) of the Act is prescribed, the Commonwealth price shall be calculated as if the complete pack of the pharmaceutical benefit was supplied.
Part 3 – Extemporaneously-Prepared Pharmaceutical Benefits
Paragraph 20 defines the term “wastage”, which relates only to Part 3 of the Determination.
Paragraph 21 provides that, subject to paragraph 37, the Commonwealth price in respect of extemporaneously-prepared pharmaceutical benefits comprises of:
- the amount in respect of the quantity of the ingredients, calculated in accordance with paragraphs 22 to 25;
- the applicable container fee calculated in accordance with paragraph 31; and
- an extemporaneously-prepared dispensing fee.
Paragraph 22 provides the manner for calculating the ingredient cost for an extemporaneously-prepared pharmaceutical benefit, where the quantity of the ingredients is equal to the agreed purchase quantity. The components of the ingredient cost include the basic wholesale price of the ingredient, a mark-up worked out in accordance with paragraph 23 and, where applicable, a mark-up for wastage, worked out in accordance with Appendix A.
Paragraph 23 provides the amount of mark-up in respect of calculating the ingredient cost for extemporaneously-prepared pharmaceutical benefits.
Paragraph 24 provides the manner for calculating the ingredient cost for an extemporaneously-prepared pharmaceutical benefit, where the quantity of the ingredient is less than the agreed purchase quantity.
Paragraph 25 provides the manner for calculating the ingredient cost for an extemporaneously-prepared pharmaceutical benefit, where the quantity of the ingredient is more than the agreed purchase quantity.
Paragraphs 26, 27 and 28 provide the manner for calculating the Commonwealth price for an extemporaneously-prepared pharmaceutical benefit, which consists of a vehicle specified in the prescription and one or more additional ingredients.
Paragraph 29 provides the manner for calculating the basic wholesale price of a drug used in the preparation of an extemporaneously-prepared pharmaceutical benefit, when calculating the Commonwealth price for extemporaneously-prepared pharmaceutical benefits.
Paragraph 30 provides that amounts in respect of an ingredient or basic wholesale price will be rounded to the nearest cent.
Paragraphs 31 to 34 provide the manner for calculating the container costs for extemporaneously-prepared pharmaceutical benefits under various circumstances, and that these amounts will be rounded to the nearest cent.
Paragraph 35 provides a maximum in calculating the Commonwealth price for the supply of a quantity of an extemporaneously-prepared pharmaceutical benefit.
Paragraph 36 provides a maximum in calculating the Commonwealth price for an ingredient of an extemporaneously-prepared pharmaceutical benefit.
Paragraph 37 provides the manner for calculating the Commonwealth price of extemporaneously-prepared pharmaceutical benefits which are not standard formula preparations and are specified in the Fourth Schedule to the determinations made under sections 85, 85A and 88 of the Act. The two exceptions to this are for exceptional prescriptions or where the pharmacist makes an election as described in paragraph 38.
Paragraph 38 provides that a pharmacist may elect to calculate the Commonwealth price for a non-standard formula extemporaneously-prepared pharmaceutical benefit in accordance with paragraph 21, rather than receive payment as described in paragraph 37.
Paragraph 39 provides that if a pharmacist fails to elect the method of calculation of the Commonwealth price for a non-standard formula extemporaneously-prepared pharmaceutical benefit and there is no standard formula preparation of the form supplied, the method of calculation will automatically be calculated in accordance with paragraph 21.
Paragraph 40 provides the manner for calculating the Commonwealth price of an extemporaneously-prepared pharmaceutical benefit, which consists of a standard formula preparation and an additive. Depending on whether the pharmacist has elected the method of calculation as described in paragraph 38, or has indicated that the pharmaceutical benefit is to be priced as if the prescription specified only the standard formula preparation, the Commonwealth price will be calculated in accordance with either paragraph 37 or paragraph 21.
Paragraph 41 provides that, in respect of exceptional prescriptions, the method for calculating the Commonwealth price may be done in accordance with paragraph 21, even where a pharmacist has not made an election as described in paragraph 38.
Appendix A – Classification and Mark-up Tables
Tables 1, 2 and 3 of Appendix A provide classifications and respective mark-ups for calculating the ingredient cost in respect of extemporaneously-prepared pharmaceutical benefits, as described in paragraph 22. The pharmaceutical benefits are divided into three categories:
- table 1 sets out items which are not more than $180;
- table 2 sets out items which are more than $180 but not more than $450; and
- table 3 sets out items which are more than $450.
Appendix B – Basic Pricing Units
Appendix B provides quantities and respective pricing units for calculating the ingredient cost in respect of extemporaneously-prepared pharmaceutical benefits, as described in paragraph 24.