National Health Act 1953 - Determination under section 99ADB - weighted average disclosed price (No. PB 18 of 2009)

Administered by Department of Health, Disability and Ageing

Legislation au F2009L00239 Not in force Legislative Instrument

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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.

 

 

 

Overview

The National Health Act 1953, as amended by the National Health Amendment (Pharmaceutical Benefits Scheme) Act 2007, was enacted to provide reliable, timely, and affordable access to a wide range of medicines for all Australians through the Pharmaceutical Benefits Scheme (PBS). The primary objective of the Act is to ensure that the Commonwealth provides pharmaceutical benefits in accordance with Part VII, including the determination of listed drugs and their forms, which are declared by the Minister through legislative instruments. The 2007 amendments introduced new pricing arrangements to capture the benefits of competition among multiple brands of the same drug, thereby positioning the PBS for the future and ensuring its sustainability. The Act also mandates price disclosure requirements for certain brands of pharmaceutical items to facilitate price reductions where the disclosed price is significantly lower than the approved ex-manufacturer price. The determination under section 99ADB of the Act sets out the weighted average disclosed price for specific brands of pharmaceutical items and for all brands with the same drug and manner of administration. This legislative instrument, effective from 1 February 2009, is designed to implement the price disclosure requirements and associated price reductions, ensuring that the PBS remains competitive and affordable for consumers. The process involved extensive consultations with pharmaceutical companies and industry bodies to ensure the smooth introduction of these reforms.

Scope and Application

The National Health Act 1953, as amended, applies to the Pharmaceutical Benefits Scheme (PBS), which is designed to ensure Australians have access to reliable, timely, and affordable medicines. This Act applies to all pharmaceutical benefits listed under the Act, including drugs and certain extemporaneously-prepared medicinal preparations declared by the Minister. The Act governs the form and administration of these listed drugs, as well as their brands, and determines what constitutes a pharmaceutical benefit under the PBS. The Act's provisions include statutory requirements for price disclosure, reductions, and the guarantee of supply for brands of pharmaceutical items. The Act extends to all brands of pharmaceutical items listed on the PBS, irrespective of whether the individual brands were subject to price disclosure requirements. The instrument setting out these provisions commences on 1 February 2009 and includes specific determinations for the weighted average disclosed price of various pharmaceutical items, which is calculated based on the method set out in the regulations. Pharmaceutical companies with medicines listed on the PBS are directly affected by these provisions and have been consulted extensively during the development and implementation phases of this legislation.

Key Provisions

The primary sections of the legislation (subsections 85(2) and 85(3)) require the Minister to declare by legislative instrument the drugs and medicinal preparations to which Part VII of the National Health Act 1953 applies. These are listed drugs as defined in subsection 84(1). The Act also applies to certain extemporaneously-prepared medicinal preparations as a result of declarations under paragraph 85(2)(b). The Minister 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 what constitutes a pharmaceutical benefit under Part VII of the Act. The obligations imposed by this legislation include the requirement for the Minister to declare by legislative instrument the drugs and medicinal preparations to which Part VII applies, and to determine the form, manner of administration, and brand of the pharmaceutical item. Additionally, the responsible person for certain brands of pharmaceutical items must comply with price disclosure requirements for each brand of a pharmaceutical item supplied. This includes the obligation to notify the Minister of the weighted average disclosed price of a brand of a pharmaceutical item, and to ensure that the weighted average disclosed price is at least 10% less than the approved ex-manufacturer price. The legislation provides for civil and criminal penalties for non-compliance. The specific penalties are not detailed in the explanatory statement, but typically, breaches of the National Health Act 1953 may result in fines and/or imprisonment. The exact penalties would depend on the nature and severity of the breach, and would be determined by a court. It is important to note that the penalties for breaches of the Act can be severe, and legal advice should be sought if there is any uncertainty about compliance with the legislation.

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Area of Law
Health Law
Instrument
Legislative Instrument
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Definitions & Interpretation
Reporting & Disclosure Obligations
Regulatory Standards
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