EXPLANATORY STATEMENT
INSTRUMENT NUMBER PB 18 OF 2009
NATIONAL HEALTH ACT 1953
DETERMINATION UNDER SECTION 99ADB
Purpose and operation
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 to be so 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 a 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 made by the National Health Amendment (Pharmaceutical Benefits Scheme) Act 2007 (the Amending Act), expressed to commence on
1 August 2007. The purpose of the Amending Act was to position the PBS for the future by changing the way in which certain drugs are priced 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 brand of a pharmaceutical item supplied.
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.
Under subsection 99ADB(5), if the Minister determines a weighted average disclosed price for one brand of a pharmaceutical item 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 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 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 determines the weighted average disclosed price of the brands of various pharmaceutical items (the first items). This instrument also determines the weighted average disclosed price of every brand of every pharmaceutical item that has the same drug and manner of administration as the first items.
A provision-by provision description of the instrument is contained in the Attachment.
The instrument is expressed to commence on 1 February 2009.
Consultations
This instrument affects pharmaceutical companies with medicines listed on the PBS. In relation to the introduction of price disclosure requirements, pharmaceutical companies have been consulted 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.
ATTACHMENT
Paragraph 1: Provides that the instrument commences on 1 February 2009.
Paragraph 2: Determines the weighted average disclosed price of the brands of various pharmaceutical items (the first items) as set out in Schedule 1.
Paragraph 3: Determines the 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: Sets out the weighted average disclosed price of the first items.
Schedule 2: Sets out the 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.