National Health Act 1953 - Determination under subsection 99ACA(3) - classes of pharmaceutical items to which 12.5% administrative price reduction has applied (No. PB 59 of 2007)

Administered by Department of Health, Disability and Ageing

Legislation au F2007L02405 Not in force Legislative Instrument

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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.

Overview

The National Health Act 1953, enacted by the Parliament of Australia, serves as the legislative foundation for the Pharmaceutical Benefits Scheme (PBS), which ensures Australians have reliable, timely, and affordable access to a broad range of medicines. This Act facilitates the Commonwealth's provision of pharmaceutical benefits in accordance with Part VII, with drugs and medicinal preparations declared by the Minister through legislative instruments. The National Health Amendment (Pharmaceutical Benefits Scheme) Act 2007 introduced several amendments, including the insertion of section 99ACA, aimed at addressing statutory price reductions for listed brands of pharmaceutical items. Specifically, section 99ACA(3) empowers the Minister to determine through legislative instruments the classes of pharmaceutical items to which a 12.5% administrative price reduction has applied. The policy objective behind this amendment is to prevent the duplication of price reductions for new brands that are bioequivalent or biosimilar to existing brands, ensuring a consistent and fair approach to pricing within the PBS.

Scope and Application

The National Health Act 1953 applies to the Pharmaceutical Benefits Scheme (PBS) which ensures Australians have access to a range of medicines at affordable prices. Under the Act, the Minister can declare drugs and certain extemporaneously-prepared medicinal preparations as listed drugs, thereby making them eligible for pharmaceutical benefits. The Minister can also determine the form and manner of administration of these drugs, as well as the brand of pharmaceutical items, thereby governing what constitutes a pharmaceutical benefit. Additionally, the Act includes provisions for statutory price reductions, price disclosure, and a guarantee of supply for brands of pharmaceutical items. The Act applies to all entities involved in the production, distribution, and sale of listed drugs within Australia. The legislation extends its reach nationally, as it is a Commonwealth Act. The Act does not specify exclusions or exemptions but does provide for classes of pharmaceutical items to which a 12.5% administrative price reduction has applied, as determined by legislative instrument under subsection 99ACA(3). This legislative instrument helps avoid duplication of the 12.5% price reduction where it has already occurred.

Key Provisions

The main operative sections of this legislation are sections 99ACA(3) and 99ACB, which together establish the framework for determining the classes of pharmaceutical items to which a 12.5% administrative price reduction has applied and the conditions under which this reduction must be applied to new brands of pharmaceutical items (subsection 99ACB(5)). Section 99ACA(3) allows the Minister to determine by legislative instrument the classes of pharmaceutical items to which the 12.5% reduction has already been applied. Once these classes are determined, section 99ACB(2) prevents the application of the 12.5% reduction to new brands of pharmaceutical items if they fall within these classes. These sections ensure that the price reduction does not apply more than once to the same class of pharmaceutical items, thereby avoiding duplication of the reduction. The obligations and requirements imposed by this Act are primarily directed at pharmaceutical companies and the Minister. Pharmaceutical companies must ensure that any new brands of pharmaceutical items they introduce comply with the requirements of section 99ACB, specifically that the agreed price must be at least 12.5% lower than the approved price of an existing brand if the new brand is bioequivalent or biosimilar to an existing brand and falls outside the determined classes of pharmaceutical items. The Minister, on the other hand, is required to determine, by legislative instrument, the classes of pharmaceutical items to which the 12.5% administrative price reduction has already applied. This involves identifying the listed drugs and manners of administration that fall within these classes and ensuring that this information is accurately reflected in Schedule 1 of the legislation. The legislation also sets out consequences for non-compliance. While the specific penalties are not detailed in the explanatory statement, it is clear that any pharmaceutical company that fails to comply with the pricing requirements under section 99ACB could face significant financial penalties. The precise nature of these penalties would typically be determined by the broader legislative framework governing the Pharmaceutical Benefits Scheme (PBS) and the specific terms of any relevant price agreements. Additionally, there could be civil or administrative consequences for non-compliance, such as fines or other sanctions, although these are not explicitly mentioned in the explanatory statement. The overarching aim is to ensure that the price reduction measure is applied fairly and consistently across the PBS, thereby promoting affordability and accessibility of medicines for all Australians.

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Area of Law
Health Law
Pharmaceutical Law
Instrument
Legislative Instrument
Concepts
Definitions & Interpretation
Regulatory Standards
Reporting & Disclosure Obligations
Price Control

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Sourced from the Federal Register of Legislation at 26 August 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au.