EXPLANATORY STATEMENT
NATIONAL HEALTH ACT 1953
NATIONAL HEALTH (PRICE AND SPECIAL PATIENT CONTRIBUTION) AMENDMENT DETERMINATION 2012 (No. 6)
PB 72 of 2012
Authority
Subsections 85B(2), (3) and (4) of the National Health Act 1953 (the Act) provide for the Minister to determine, respectively, determined prices, claimed prices and the circumstances in which the Commonwealth will pay a special patient contribution. The National Health (Price and Special Patient Contribution) Determination 2010 (the Principal Determination) contains determinations of these matters.
Purpose
This Amendment Determination amends the Principal Determination to reflect amendments to the Act made by the National Health Amendment (Pharmaceutical Benefits Scheme) Act 2012 which commence on 1 October 2012.
The principal amendments to the Act which are reflected in this Amendment Determination are:
- the removal of the concept of an approved price to pharmacists and its replacement with the approved ex-manufacturer price as the base Pharmaceutical Benefits Scheme (PBS) price. The approved ex-manufacturer price of a brand of a pharmaceutical item is the price agreed or determined under the Act as the appropriate maximum price for the purposes of Part VII of the Act. The price for each brand of a pharmaceutical item must be agreed or determined by reference to the lowest pack quantity of any brand of the pharmaceutical item; this quantity is called the pricing quantity. The Act provides for proportional ex-manufacturer prices for other pack quantities;
- a price determined by the Minister under subsection 85B(2) must be a price for the pricing quantity of the brand, but claimed prices may be determined under subsection 85B(3) for any pack quantity of the brand. Also, where there is an agreed price for the pricing quantity, there may be claimed prices for any, or all, other pack quantities;
- the power to determine the circumstances in which the Commonwealth will pay a special patient contribution has been moved from subsection 85B(5) to subsection 85B(4), but the power itself has not changed. The concept of a special patient contribution was previously defined in subsections 85B(4) and 85B(6), but this definition has now been consolidated into one subsection, subsection 85B(5).
An explanation of each amendment made by this Determination is contained in the Attachment.
Background
Part VII of the Act is the legislative basis for the PBS under 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.
In the case of ready-prepared pharmaceutical benefits, the pharmaceutical benefit is a brand of a pharmaceutical item. That is, it is a brand of a listed drug, in a form and with a manner of administration, declared and determined under various provisions of Part VII.
Part VII also provides for numerous other matters, including pricing matters and matters relating to payments by the Commonwealth and charges to patients for pharmaceutical benefits.
- Section 85B
The Act provides for the Minister and the responsible person to agree a price that is taken to be the appropriate maximum price of a brand of a pharmaceutical item for the purposes of Part VII of the Act (section 85AD). Section 85B of the Act applies if the Minister and the responsible person have been unable to reach an agreement on a price for the pricing quantity. Whether or not an agreement is made for the pricing quantity, section 85B also applies if the responsible person is dissatisfied with the proportional ex-manufacturer prices that will apply to other pack quantities.
Subsection 85B(2) provides that the Minister may determine, by reference to the pricing quantity of a brand of a pharmaceutical item, an amount that is taken to be the appropriate maximum price of the brand for the purposes of Part VII of the Act. This is termed the ‘Determined Price’ in this Determination.
Subsection 85B(3) provides that the Minister may determine, by reference to a pack quantity of a brand of the pharmaceutical item, an amount that is taken to be the price claimed by the responsible person for the pack quantity of the brand, for the purposes of Part VII of the Act. This is termed the ‘Claimed Price’ in this Determination.
The Determined Price is the approved ex-manufacturer price and is used as the basis for working out the Commonwealth price for the brand of the pharmaceutical item (section 98B of the Act); for pack quantities other than the pricing quantity, the proportional
ex-manufacturer price is used as the basis. Approved pharmacists are entitled to payment from the Commonwealth equal to the Commonwealth price less the applicable patient co-payment (section 99 of the Act).
The difference between the responsible person’s Commonwealth price for a pack quantity (ie, the price that would be the Commonwealth price if the responsible person’s claimed price had become the approved ex-manufacturer price or the proportional ex-manufacturer price for that pack quantity) and the Commonwealth price for the pack quantity is defined in subsection 85B(5) of the Act as the special patient contribution. An approved pharmacist may charge a patient an amount equal to the special patient contribution, in addition to any other amount that may be charged (subsection 87(2A) of the Act).
Subsection 85B(4) of the Act provides that the Minister may determine the circumstances in which the Commonwealth is to pay the special patient contribution for a brand. In such cases the Commonwealth payment to the pharmacist is increased by the amount of the special patient contribution (subsection 99(2AA) of the Act) and the pharmacist may not charge the patient this amount (subsection 87(2A) of the Act).
The purpose of making subsection 85B(4) determinations is to enable patients for whom the base-priced brands (the ones without a special patient contribution) are not suitable, to obtain the higher priced brand (the one with the special patient contribution) without the need to pay the higher price. In such cases the Commonwealth pays the special patient contribution.
Consultation
This determination affects certain responsible persons with medicines listed on the PBS. Before a pharmaceutical benefit is listed on the PBS, and from time to time thereafter, price negotiations occur between the responsible person and the Minister for the purpose of reaching a price agreement for section 85AD of the Act. If the Minister and the responsible person cannot agree on a price, further consultation occurs with the responsible person, and thereafter the Minister determines the price that will be the approved ex-manufacturer price for the brand. The Minister also determines the corresponding price claimed by the responsible person which is used to calculate the special patient contribution that will apply to the brand.
Stakeholder briefings regarding the legislative changes for PBS pricing were provided by the Department of Health and Ageing in April and May 2012 for representatives of medicines industry, consumer, pharmacy and wholesaler organisations. The need for consequential changes to regulations and other legislative instruments was included in those discussions. Further information, briefings and presentations were provided for pharmaceutical companies and industry organisations in June 2012. No significant issues were raised.
This Determination commences on 1 October 2012.
This Determination is a legislative instrument for the purposes of the Legislative Instruments Act 2003.
ATTACHMENT
Details of the National Health (Price and Special Patient Contribution) Amendment Determination (No. 6) 2012
(PB 72 of 2012)
Section 1 Name of Determination
This section provides that the Determination is the National Health (Price and Special Patient Contribution) Amendment Determination (No. 6) 2012 and may also be cited as PB 72 of 2012.
Section 2 Commencement
This section provides that the Determination commences on 1 October 2012.
Section 3 Amendment of the National Health (Price and Special Patient Contribution) Determination 2010 (PB 109 of 2010)
This section provides that Schedule 1 amends the National Health (Price and Special Patient Contribution) Determination 2010 (PB 109 of 2010).
SCHEDULE 1 – AMENDMENTS
Item [1] – Subsection 4(1)
This item inserts a definition of the new term approved ex-manufacturer price. From
1 October 2012 this will be the base PBS price in the Act and legislative instruments. The Minister will agree an approved ex-manufacturer price for each brand of a pharmaceutical item with the responsible person for the brand, or will determine an approved ex-manufacturer price (ie, a ‘Determined Price’ under section 5 of the Principal Determination) if no agreement can be reached. Commonwealth payments in relation to the supply of pharmaceutical benefits will be based on the approved ex-manufacturer price under various legislative instruments from 1 October 2012.
Item [2] – Subsection 4(1)
This item inserts definitions of two new terms, pack quantity and pricing quantity.
They are new terms in the Act from 1 October 2012 and they have the same meaning in the Principal Determination as in the Act. The Minister will determine pack quantities for each listed brand of a pharmaceutical item. Responsible persons will request the Minister to determine pack quantities for each of their PBS pack sizes. The approved ex-manufacturer price for each brand of a pharmaceutical item will be agreed or determined by reference to the lowest pack quantity for any brand of that pharmaceutical item. This lowest pack quantity is called the pricing quantity. All other pack quantities will have proportional
ex-manufacturer prices calculated under the Act.
Item [3] –Subsection 4(1), definition of special patient contribution
This item substitutes a new cross-reference to subsection 85B(5) of the Act. Subsection 85B(5) now defines special patient contribution. Prior to 1 October 2012 this concept was defined in subsections 85B(4) and 85B(6). The consolidation of these two subsections into one new subsection has not changed the meaning of the concept.
Item [4] – Section 5
This item substitutes a new section 5. Section 5 determines, for subsection 85B(2) of the Act, a maximum price for a brand of a pharmaceutical item for PBS purposes where the Minister and the responsible person have not been able to agree a price. The price determined is defined in subsection 84(1) of the Act to be the approved ex-manufacturer price of the brand and becomes the basis for calculating the amount that the Commonwealth will pay to pharmacists and other approved suppliers in respect of the supply of the brand as a pharmaceutical benefit. New section 5 reflects amendments to the Act, specifically, that prices are now determined at the ex-manufacturer level and are determined with respect to the pricing quantity of the brand.
Item [5] – Section 6
This item substitutes a new section 6. Section 6 determines, for subsection 85B(3) of the Act, the price (or prices) claimed by the responsible person for a pack quantity (or pack quantities) of a brand of a pharmaceutical item. If the pack quantity is the same as the pricing quantity, it is the approved ex-manufacturer price, because there is no price agreement at that price. If the pack quantity is a quantity other than the pricing quantity, the claimed price is used instead of the proportional ex-manufacturer price for this quantity. The purpose of determining a claimed price is to enable the special patient contribution to be calculated. This is the additional amount the patient will be required to pay to obtain the brand in question. Any pack quantity of a brand which does not have a claimed price has no special patient contribution. New section 6 reflects amendments to the Act, specifically, that prices are now claimed (as well as determined or agreed) at the ex-manufacturer level and that prices must be claimed with respect to a pack quantity of the brand.
Item [6] – Subsection 7(1)
This item substitutes a new cross-reference to subsection 85B(4) of the Act. Subsection (4) now contains the power to determine the circumstances in which the Commonwealth will pay a special patient contribution, which is exercised in section 7 of the Principal Determination. On 1 October 2012 the power moved from subsection 85B(5) to subsection 85B(4), but the power itself has not changed.
Item [7] – Schedule 1
This item substitutes a new Schedule 1. Schedule 1 relates to sections 5 and 6 of the Principal Determination. It sets out Determined Prices and/or Claimed Price for brands of pharmaceutical items mentioned in the Schedule. New Schedule 1 differs from the previous Schedule 1 in several respects. The Determined Prices and Claimed Prices are
ex-manufacturer prices; there is at most one Determined Price for a brand of a pharmaceutical item and this is a price for the pricing quantity of the brand of the pharmaceutical item. The claimed prices are prices for pack quantities of the brand of the pharmaceutical item.
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
National Health (Price and Special Patient Contribution) Amendment Determination 2012 (No. 6)
This Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview of the Legislative Instrument
This legislative instrument, made under section 85B of the National Health Act 1953 (the Act), amends the National Health (Price and Special Patient Contribution) Determination 2010 (the Principal Determination), which provides for price determinations in relation to brands of pharmaceutical items listed on the Pharmaceutical Benefits Scheme (PBS) for which the Minister and the responsible person have not been able to make a price agreement. It also provides for the circumstances in which the Commonwealth will pay the special patient contribution resulting from these price determinations.
This instrument (the Amending Determination), amends the Principal Determination by inserting definitions of the new terms approved ex-manufacturer price, pack quantity and pricing quantity. The Principal Determination is also amended by the substitution of a new Schedule 1 to reflect that the Determined Prices and Claimed Prices are
ex-manufacturer prices and that there is at most one determined price for a brand of a pharmaceutical item. This is a price for the pricing quantity of the brand of the pharmaceutical item. The claimed prices are prices for pack quantities of the brand of the pharmaceutical item.
Human rights implications
This legislative instrument engages Articles 2 and 12 of the International Covenant on Economic, Social and Cultural Rights (ICESCR) by assisting with the progressive realisation by all appropriate means of the right of everyone to the enjoyment of the highest attainable standard of physical and mental health.
The PBS is a benefit scheme which assists with advancement of this human right by providing for subsidised access by patients to medicines. The recommendatory role of the Pharmaceutical Benefits Advisory Committee (PBAC) ensures that decisions about subsidised access to medicines on the PBS are evidence-based.
Conclusion
This Legislative Instrument is compatible with human rights because it advances the protection of human rights.
Tanya Plibersek
Minister for Health