EXPLANATORY STATEMENT
INSTRUMENT NUMBER PB 59 OF 2007
NATIONAL HEALTH ACT 1953
DETERMINATION UNDER SUBSECTION 99ACA(3)
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 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 by the National Health Amendment (Pharmaceutical Benefits Scheme) Act 2007 (the amending Act), expressed to commence on 1 August 2007. Included in these amendments is the insertion of section 99ACA into the Act.
Section 99ACA is a definitional section for the purposes of Division 3A of the Act. Division 3A is concerned with statutory price reductions for listed brands of pharmaceutical items.
Under section 99ACB, when a determination under subsection 85(6) of a new brand of a pharmaceutical item (other than a combination item as defined in subsection 84(1)) comes into force, and the new brand is bioequivalent or biosimilar to an existing brand of an existing pharmaceutical item having the same drug and manner of administration, the section applies to the new brand. The consequence of this is that under subsection 99ACB(5), the agreed price under a section 85AD price agreement for the new brand of the pharmaceutical item must be at least 12.5% lower than the approved price for the existing brand. This reduction can flow-on under section 99ACH to other listed brands of that pharmaceutical item, and to listed brands of pharmaceutical items having the same drug (or another drug belonging to the same therapeutic group) with the same manner of administration as the new brand.
The practice now legislated for under section 99ACB was the subject of earlier administrative arrangements. In order to avoid duplication of the 12.5% price reduction where this has already occurred, it is necessary avoid the application of section 99ACB to affected pharmaceutical items. Under subsection 99ACB(2), the section does not apply to the new brand if the pharmaceutical item or another pharmaceutical item that has the same drug (or a drug in the same therapeutic group) with the same manner of administration is “in a class of pharmaceutical items to which a 12.5% administrative price reduction has applied”. Subsection 99ACA(3) provides that the Minister by legislative instrument can determine that a 12.5% administrative price reduction has applied to a class of pharmaceutical items.
This instrument determines the classes of pharmaceutical items to which a 12.5% administrative price reduction has applied. The determined classes comprise pharmaceutical items which have a drug and manner of administration set out in Schedule 1.
A provision-by-provision description of the instrument is contained in the Attachment.
The instrument, which is expressed to commence on 1 August 2007, was made on 24 July 2007 in reliance on section 4 of the Acts Interpretation Act 1901.
Consultations
This instrument affects pharmaceutical companies with medicines listed on the PBS. In relation to the introduction of changes to the 12.5% price reduction measure, 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 have also been 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.
ATTACHMENT
Paragraph 1: Provides that the instrument commences on 1 August 2007.
Paragraph 2: Determines that the classes of pharmaceutical items to which a 12.5% administrative price reduction has applied are those set out in Schedule 1.
Schedule 1: Sets out the classes of pharmaceutical item by reference to listed drug and manner of administration.