EXPLANATORY STATEMENT
INSTRUMENT NUMBER PB 81 OF 2011
NATIONAL HEALTH ACT 1953
National Health (Weighted Average Disclosed Price – first transitional disclosure cycle) Determination 2011
Purpose and operation
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 in the first transitional disclosure cycle with a data collection period ending 30 September 2011 (first transitional cycle).
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 price to pharmacists’ 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 ‘brand of a pharmaceutical item’ (listed brand) is a pharmaceutical benefit which has a subsection 85(2) listed drug, subsection 85(3) form, subsection 85(5) manner of administration, and subsection 85(6) brand. The ‘approved price to pharmacists’ is the section 85AD agreed price or subsection 85B(2) determined price for a listed brand.
Since 1 December 2010 price disclosure requirements have applied to all non-exempt listed brands with a drug on the F2 formulary: sections 99ADD and 99ADA of the Act.
The determinations made by this legislative instrument for listed brands in the first transitional cycle under subsection 99ADB(4) of the Act where applicable are:
- ‘weighted average disclosed price’ (WADP);
- ‘adjusted approved ex-manufacturer price’ (Schedule 1 only); and
- ‘adjusted approved price to pharmacists’ (Schedule 1 only).
A reduction day of 1 April 2012 is determined under paragraph 99ADH(1)(aa) for all listed brands in the first transitional cycle. A reduction day is determined for all brands, even if they will not have a price reduction on 1 April 2012, to bring the first transitional cycle to an end for each listed brand.
Only a responsible person for a listed brand in Schedule 1 of this instrument, provided that the ‘approved price to pharmacists’ for the listed brand on 1 April 2012 is more than the ‘adjusted approved price to pharmacists’ as calculated in this instrument, will receive a price reduction for the listed brand on and from 1 April 2012: subsections 99ADH(3) and (4).
Subsection 99ADB(4) – ‘weighted average disclosed price’
Subsection 99ADB(4) provides that the Minister may, by legislative instrument, determine the WADP of a listed brand in accordance with the Regulations.
Subsection 99ADB(6) 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 brands of the same pharmaceutical item, and all listed brands of all pharmaceutical items that have the same drug and manner of administration as the pharmaceutical item.
Regulation 37G provides that the WADP is to be determined for a listed brand, and every other listed brand having the same subsection 85(2) listed drug and subsection 85(5) manner of administration, for the ‘data collection period’ for the listed brands in a ‘disclosure cycle’. ‘Data collection period’ and ‘disclosure cycle’ are defined in regulations 37EB and 37EC.
A listed brand of an exempt item (section 84AH) is excluded from price disclosure and is not allocated to a price disclosure cycle: section 99ADA.
A listed brand is in the first transitional cycle if:
- the price disclosure requirements applied for any listed brand having the same drug and manner of administration before 1 December 2010; and
- the annual reporting period under the Regulations (prior to amendment on 1 December 2010) for at least one of the above listed brands began on 1 January 2010 and did not end before 1 December 2010.
[Transitional subregulations 6(1) and (2)]
A listed brand is also in the first transitional cycle if the price disclosure requirements first apply on a day, and another listed brand with the same drug and manner of administration is in the first transitional cycle: subregulation 37F(2) and (3).
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 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 reduction on 1 April 2012.
Subsection 99ADB(4) – determining an ‘adjusted approved ex-manufacturer price’ and ‘adjusted approved price to pharmacists’ 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’ and ‘adjusted approved price to pharmacists’ for the listed brand.
The Explanatory Memorandum for the 1 December 2010 amendments to the Act explain that these two prices relate to the price reductions that will apply to the listed brand on reduction day, and that it is proposed that these prices be included in the subsection 99ADB(4) determination ‘for the assistance of companies and in the interests of transparency’.
This instrument contains these two prices for listed brands in Schedule 1. Since listed brands in Schedule 2 will not have a reduction on 1 April 2012, these two prices are not included in Schedule 2.
Paragraph 99ADH(1)(aa) – determining a reduction day for each listed brand in the first transitional cycle
A price disclosure reduction day must be one of the three reduction days prescribed in the Regulations, that is, either 1 April, 1 August or 1 December: subsection 99ADH(2) and Regulation 37K.
In order for a price reduction to occur for a listed brand, one of the prescribed reduction days must be determined for the listed brand under paragraph 99ADH(1)(aa). In addition, determining a reduction day for a listed brand, even if the brand will not have a reduction on a reduction day, is necessary to bring a particular disclosure cycle to an end for the listed brand.
This instrument is expressed to commence on the day after it is registered on the Federal Register of Legislative Instruments.
Consultation
This instrument affects pharmaceutical companies with medicines listed on the PBS. Pharmaceutical companies have been consulted in relation to the introduction of price disclosure requirements during both the policy development and implementation phases, and also during the development and implementation of the further PBS reforms of 2010. This has occurred through meetings with both peak body organisations and individual companies. Information on this measure has been disseminated through peak industry bodies, during regular meetings with the Price Disclosure Working Group and direct to responsible persons through information sessions and educational workshops.
Pharmaceutical companies with a listed brand subject to the price disclosure requirements were provided further information on the requirements and have 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 Regulation 37HA as the person to whom, in accordance with paragraph 99ADC(1)(a), a responsible person is to provide price disclosure information. The PDDA has provided responsible persons with an opportunity to check that the information disclosed to the PDDA has been translated correctly to PDDA data files. This was done prior to that data being used to apply the method set out in the Regulations required to arrive at the WADP.