EXPLANATORY STATEMENT
Select Legislative Instrument 2008 No. 116
National Health Act 1953
National Health (Pharmaceutical Benefits) Amendment Regulations 2008 (No. 2)
Section 140 of the National Health Act 1953 (the Act) provides, in part, that the
Governor-General may make regulations, not inconsistent with the Act, prescribing all matters which are required or permitted to be prescribed, or which are necessary or convenient to be prescribed for carrying out or giving effect to the Act.
The purpose of the Regulations is to make amendments to the National Health (Pharmaceutical Benefits) Regulations 1960 (the Principal Regulations). These amendments relate to reforms to the Pharmaceutical Benefits Scheme (the PBS) which were given effect through amendments to the Act and Principal Regulations on 1 August 2007. The reforms provided for new pricing arrangements to enable the Government to capture the benefits of competition where drugs have multiple brands.
These amendments to the Principal Regulations do not represent changes to the fundamental pricing arrangements introduced through the reforms. They provide additional detail and adjustments to the Principal Regulations.
These new amendments to pricing arrangements have been subject to consultation with the pharmaceutical industry through Medicines Australia and the Generic Medicines Industry Association. In addition, pharmaceutical companies directly affected by changes to the reduction days and the percentage price reductions have been consulted individually.
Details of the Regulations are set out in the Attachment.
The Act specifies no conditions that need to be met before the power to make the Regulations may be exercised.
The Regulations are a legislative instrument for the purposes of the Legislative Instruments Act 2003.
The Regulations commence on the day after they are registered on the Federal Register of Legislative Instruments.
ATTACHMENT
Details of the National Health (Pharmaceutical Benefits) Amendment Regulations 2008 (No. 2)
Regulation 1 – Name of Regulations
This regulation provides that the title of the Regulations is the National Health (Pharmaceutical Benefits) Amendment Regulations 2008 (No. 2).
Regulation 2 – Commencement
This regulation provides for the Regulations to be scheduled to commence on the day after they are registered on the Federal Register of Legislative Instruments.
Regulation 3 – Amendment of National Health (Pharmaceutical Benefits) Regulations 1960
This regulation provides that the National Health (Pharmaceutical Benefits) Regulations 1960 (the Principal Regulations) are amended as set out in Schedule 1.
Schedule 1 – Amendments
Item 1
This item replaces the figure of $970 with the figure of $1 000 in the formula in paragraph 37D(a) for calculating the approved ex-manufacturer price from the approved price to pharmacists. This amendment is required to reflect detail in the Fourth Community Pharmacy Agreement between the Commonwealth Government and the Pharmacy Guild of Australia which specifies a different mark-up structure for items with a price to pharmacists above $1 000 compared to those priced at $1 000 or less.
Item 2
This item amends the method of calculation of the weighted average disclosed price in subregulation 37F(4), as provided for under subsection 99ADB(6) of the Act. The purpose of this amendment is to exclude from the calculation any income derived from the sale of brands above the approved ex-manufacturer price. This is achieved by calculating a price percentage difference for each brand. If the price percentage difference is less than zero, it is taken to be zero for the purposes of the calculation of the weighted average disclosed price.
Item 3
This item inserts a new regulation 37HA to assign the relevant person at the Department of Health and Ageing as the person or entity to whom responsible persons should provide price disclosure information. This is allowed for under paragraph 99ADC (1)(a) of the Act.
Item 4
This item substitutes current Schedule 5 with a new Schedule 5 to alter the reduction days and percentage price reductions for four brands of pharmaceutical items (Nexium, Somac, Pariet and Zanidip) that will have a 25 per cent price reduction phased in over time under section 99ACK of the Act.
This follows a Government decision to extend the phased price reduction. It is a condition of this extension that a new bioequivalent brand listing of any of these drugs will result in the remainder of the 25 per cent price reduction for that drug (including the existing and new brand) being applied on the date of listing of the new brand. If this occurs, further amendments to the Principal Regulations will be required.
Overview
The National Health (Pharmaceutical Benefits) Amendment Regulations 2008 (No. 2) were introduced to make amendments to the National Health (Pharmaceutical Benefits) Regulations 1960 in response to reforms to the Pharmaceutical Benefits Scheme (PBS) enacted through amendments to the National Health Act 1953. These amendments aim to refine the pricing arrangements within the PBS, particularly in capturing the benefits of competition where drugs have multiple brands. The reforms were developed after consultation with the pharmaceutical industry and directly affected companies, ensuring a balanced approach that addresses the needs of all stakeholders.
The Australian Government enacted these Regulations through the Parliament, as authorised by Section 140 of the National Health Act 1953, which empowers the Governor-General to make regulations necessary for implementing the Act. The primary policy objective of these amendments is to provide additional detail and adjustments to the PBS pricing arrangements, without altering the fundamental structures established by the earlier reforms. The Regulations are designed to be operational from the day after their registration on the Federal Register of Legislative Instruments, ensuring a timely and efficient implementation.
Scope and Application
The National Health (Pharmaceutical Benefits) Amendment Regulations 2008 (No. 2) amends the National Health (Pharmaceutical Benefits) Regulations 1960 to refine the pricing arrangements within the Pharmaceutical Benefits Scheme (PBS), as established under the National Health Act 1953. These regulations apply to pharmaceutical companies, suppliers, and other entities involved in the manufacturing and supply of pharmaceutical products under the PBS. They ensure that the PBS continues to operate effectively by providing additional detail and adjustments to the fundamental pricing reforms implemented in 2007. These reforms aim to capture the benefits of competition where drugs have multiple brands. The regulations extend across the Commonwealth of Australia, impacting all entities and individuals involved in the supply of pharmaceutical products listed on the PBS. There are no specific exclusions mentioned in the text, but the regulations will apply to all relevant entities and products within the scope of the PBS. The amendments are detailed in Schedule 1 of the Regulations and include adjustments to the formula for calculating the approved ex-manufacturer price, modifications to the calculation of the weighted average disclosed price, and specific changes to the reduction days and percentage price reductions for certain pharmaceutical brands. These regulations are subordinate instruments under the National Health Act 1953, with no further extensions or restrictions on their application specified in the explanatory statement.
Key Provisions
The National Health (Pharmaceutical Benefits) Amendment Regulations 2008 (No. 2) (Regulations) provide amendments to the National Health (Pharmaceutical Benefits) Regulations 1960 (Principal Regulations) concerning the Pharmaceutical Benefits Scheme (PBS) (Reg. 3). These amendments do not alter the fundamental pricing arrangements but provide additional detail and adjustments, reflecting the reforms implemented through changes to the National Health Act 1953 and the Principal Regulations on 1 August 2007. These reforms introduced new pricing arrangements designed to capture competition benefits for drugs with multiple brands.
The Regulations impose specific obligations on parties involved in the PBS. For instance, they require the calculation of the approved ex-manufacturer price to be adjusted from $970 to $1,000 in the formula specified in paragraph 37D(a) to align with the Fourth Community Pharmacy Agreement (Item 1). Additionally, the method of calculating the weighted average disclosed price is modified to exclude income derived from brands sold above the approved ex-manufacturer price (Item 2). A new regulation 37HA is introduced to designate the relevant person at the Department of Health and Ageing as the entity responsible for receiving price disclosure information (Item 3). The Regulations also alter the reduction days and percentage price reductions for certain pharmaceutical brands, such as Nexium, Somac, Pariet, and Zanidip, by substituting the current Schedule 5 with a new one (Item 4).
Breach of the provisions set out in the Regulations could lead to various civil and criminal consequences. The maximum penalties for contravening these Regulations are not explicitly stated in the Explanatory Statement, but generally, under Australian law, breaches of regulations can result in fines or other penalties as determined by the courts. The precise penalties would depend on the nature and severity of the breach and could vary according to the specific provisions contravened. Additionally, failure to comply with the obligations set out in the Regulations may also result in administrative actions, such as the imposition of financial penalties or the revocation of certain benefits or approvals under the PBS.