EXPLANATORY STATEMENT
INSTRUMENT NUMBER PB 126 OF 2015
NATIONAL HEALTH ACT 1953
National Health (Weighted average disclosed price – April 2016 reduction day)
Determination 2015
Authority
This legislative instrument is made pursuant to subsection 99ADB(4) and paragraph 99ADH(1)(aa) of the National Health Act 1953 (the Act) and makes certain determinations relating to price disclosure for brands of pharmaceutical items with a data collection period ending 30 September 2015 (2016 April Cycle).
Purpose
This legislative instrument determines a ‘weighted average disclosed price’ (WADP) for listed brands in the 2016 April Cycle under subsection 99ADB(4) of the Act.
This legislative instrument also determines a reduction day of 1 April 2016 for listed brands in the 2016 April Cycle with a data collection period ending on 30 September 2015.
Part VII of the Act is the legislative basis for the Pharmaceutical Benefits Scheme (PBS) by which the Commonwealth provides reliable, timely, and affordable access to a wide range of medicines for all Australians.
Part VII, Division 3B of the Act deals with price disclosure. Price disclosure provides for the ‘approved ex-manufacturer price’ of a ‘brand of a pharmaceutical item’ to be reduced on a reduction day in certain specified circumstances. The reduction is based on sales revenue, incentives and volume data collected from responsible persons (drug companies) and occurs in accordance with the Act and the National Health (Pharmaceutical Benefits) Regulations 1960 (the Regulations).
A responsible person for a listed brand in Schedule 1 of this instrument, provided that the ‘approved ex-manufacturer price’ for the listed brand on 1 April 2016 would otherwise be more than the ‘adjusted approved ex-manufacturer price’, will receive a price reduction for the listed brand on and from 1 April 2016: subsections 99ADH(3) and (4).
Subsection 99ADB(4) – ‘weighted average disclosed price’
Subsection 99ADB(4) of the Act provides that the Minister may, by legislative instrument, determine the WADP of a listed brand in accordance with the Regulations.
Subsection 99ADB(6) of the Act provides that without limiting subsection 99ADB(4), the regulations may prescribe a method for determining the WADP for a listed brand. The method may take into account information (if any) that has been provided in compliance with the price disclosure requirements, and any other information, about the listed brand, other listed or delisted brands of the same pharmaceutical item, and all listed or delisted brands of all pharmaceutical items that have the same drug and manner of administration as the pharmaceutical item.
Part 6A, Division 2, Subdivision 2 of the Regulations provides the method for determining a WADP for a listed brand of pharmaceutical item for a ‘data collection period’. ‘Data collection period' is defined in regulation 37C.
The Act and Regulations provide for brands that are part of the 2016 April Cycle. A brand is in the 2016 April Cycle if:
- the listed brand had a data collection period of six months or more on 30 September 2015;
- the brand was in the 2015 October Cycle; or
- the price disclosure requirements first apply to a brand on a day, and another brand with the same drug and manner of administration is in the 2016 April Cycle.
A brand of an exempt item (section 84AH) is excluded from price disclosure and so does not have data collected or a determination for a reduction day: section 99ADA of the Act.
The price for new brands of existing pharmaceutical items listed on the PBS after
30 September 2015 will be reduced as a flow-on reduction under section 99ADHA on 1 April 2016 if at least one existing brand of the same pharmaceutical item is in
Schedule 1. No WADP or reduction day is determined for these listed brands.
Paragraph 99ADH(1)(c) – unadjusted price reduction for listed brand must be at least 10% or no price reduction for listed brand on reduction day
Paragraph 99ADH(1)(c) of the Act (read with paragraph 99ADH(3)) provides that a price reduction for a listed brand will not occur unless the ‘unadjusted price reduction’ for a listed brand is at least 10%. The ‘unadjusted price reduction’ for a listed brand is defined in subsection 99ADB(1).
Listed brands where the unadjusted price reduction is calculated to be at least 10% appear in Schedule 1 to this instrument. Listed brands where the unadjusted price reduction is calculated as less than 10% appear in Schedule 2 to this instrument. Listed brands in Schedule 2 will not have a price disclosure related reduction on 1 April 2016.
Subsection 99ADB(4) – determining an ‘adjusted approved ex-manufacturer price’ for a listed brand in Schedule 1
Subsection 99ADB(7) provides that a subsection 99ADB(4) determination for a listed brand may include the ‘adjusted approved ex-manufacturer price’ for the listed brand.
It is the ‘adjusted approved ex-manufacturer price’ that is compared to what would otherwise be the current ‘approved ex-manufacturer price’ of a listed brand on reduction day: subsections 99ADH(3) and (4) of the Act. The Explanatory Memorandum for the 1 December 2010 amendments to the Act explain that it is included in the subsection 99ADB(4) determination ‘for the assistance of companies and in the interests of transparency’.
In this instrument, where a WADP is determined for listed brands in Schedule 1, the ‘adjusted approved ex-manufacturer price’ is equal to the amount of the WADP. Since
listed brands in Schedule 2 will not have a reduction on 1 April 2016, the ‘adjusted approved ex-manufacturer price’ is not included in Schedule 2.
Paragraph 99ADH(1)(aa) – determining a reduction day
A price disclosure reduction day must be 1 April, 1 October, or another day prescribed under subsection 99ADH(2) of the Act. Regulation 37A provides that 1 August and
1 December are prescribed days.
In order for a price reduction to occur for a listed brand, one of the reduction days in the Act or prescribed in the Regulations must be determined for the listed brand under paragraph 99ADH(1)(aa), or, the reduction must flow-on to the listed brand to match the reduction on the same date for another listed brand with the same pharmaceutical item, due to section 99ADHA of the Act.
This instrument determines 1 April 2016 as the reduction day for the relevant brands for the 2016 April Cycle.
Revocation
This instrument revokes the previous determination made under subsection 99ADB(4) and paragraph 99ADH(1)(aa) of the Act for the 2015 October Cycle (PB 53 of 2015) because listed brands in this cycle have had their reduction from this cycle.
Consultation
This instrument affects certain pharmaceutical companies with medicines listed on the PBS. Pharmaceutical companies were consulted in relation to the introduction of price disclosure requirements during the policy development for introduction of price disclosure in 2007, during implementation phases, and during the development and implementation of the further PBS reforms of 2010, pricing changes in 2012, simplified price disclosure amendments in 2014 and measures announced in the 2015 PBS Access and Sustainability Package. Consultation occurred through meetings with peak industry bodies. Further information on price disclosure was also disseminated through peak industry bodies, during meetings with the Price Disclosure Working Group and directly to companies through information sessions conducted in March 2011 and June 2012, and distribution of associated educational material at the time of amendments.
Pharmaceutical companies with a listed or delisted brand subject to the price disclosure requirements for the 2016 April Cycle disclosed information relevant to this determination directly to Australian Healthcare Associates Pty Ltd (AHA), known as the Price Disclosure Data Administrator (PDDA). AHA is prescribed in sub-regulation 37T(6) as the person to whom, in accordance with paragraph 99ADC(1)(a), a responsible person is to provide price disclosure information. The PDDA provided responsible persons with an opportunity to check that the information disclosed to the PDDA was translated correctly to PDDA data files. This was done prior to that data being used to apply the method set out in the Regulations to arrive at the WADP for listed brands.
This instrument commences on the day after it is registered on the Federal Register of Legislative Instruments.
This instrument is a legislative instrument for the purposes of the Legislative Instruments Act 2003.