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National Health Amendment (Pharmaceutical Benefits—Budget and Other Measures) Bill 2017

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National Health Amendment (Pharmaceutical Benefits - Budget and Other Measures) Bill 2017















This addendum responds to concerns raised by the Senate Standing Committee for the Scrutiny of Bills in Scrutiny Digest No. 13 of 2017, dated 15 November 2017 and the request made by the Committee in Scrutiny Digest No. 15 of 2017, dated 6 December 2017.








(Circulated by authority of the Minister for Health, the Honourable Greg Hunt MP)







1.    Paragraph 2, after Strategic Agreement with Medicines Australia Limited - insert:

(the Agreement)

2.    Before the paragraph heading Extend 5 per cent statutory price reduction for single brand drugs on F1 - five years - insert:

5, 10, and 15 year anniversary price reductions

The Agreement provides that in applying anniversary price reductions the total of previous reductions since 1 January 2016 must be considered. Because the current five year anniversary price reduction has applied since April 2016, most F1 drugs to which the new anniversary reductions apply would have already had a five year anniversary five per cent reduction.

3.    Under the heading Increasing the first new brand statutory price reduction from 16 per cent to 25 per cent, after the last dot point of paragraph 3 - add the following paragraph:

These provisions would protect brands already subject to price reductions of more than 40 per cent from a further reduction associated with a first new brand SPR, and other reductions are capped so that the total reduction, including previous reductions since 1 January 2016, ranges between 25 and 40 per cent.

4.    At the end of the last paragraph (paragraph 2) under the heading Ministerial discretion regarding the application of SPRs - add:

Under the Agreement, the Minister’s discretion to reduce, or not apply, a statutory price reduction is not intended to be limited or subject to additional mandatory criteria. However, ministerial discretion is intended to be exercised only where genuinely justified based on pricing or other history.

The pricing changes in the Bill are extensions to, or adjustments of, existing pricing policies. Current requirements for statutory price reductions mean that price reductions are mandatory regardless of the nature of a medicine, the supply history, or supply volume for a product. Many PBS medicines will have been subject to previous price reductions.

The proposed new price reductions will result in additional reductions and reductions of a greater magnitude than current statutory reductions. The Agreement provides for relevant information, such as the recent pricing history for a pharmaceutical item, to be considered before applying one of the new statutory price reductions. The Agreement allows certain previous price reductions to be taken into account directly and provides for ministerial discretion to reduce the amount of a price reduction. The intention is to avoid situations where it might otherwise be unreasonable or unworkable to apply the full statutory reduction such as where a significant price reduction has recently occurred.

Ministerial discretion regarding new presentations

The provisions for determinations relating to new presentations include that the Minister may take into account any advice given by the Pharmaceutical Benefits Advisory Committee ( PBAC), any information provided by the responsible person for the new brand, and any other matter the Minister considers relevant. Specific criteria for determining whether a new brand is a new presentation are not included in order not to limit the PBAC’s consideration or advice, nor limit the other matters that could be relevant in a particular case.

Oversight of implementation of the Agreement and ministerial discretion

The Agreement provides for the establishment by the Commonwealth (represented by the Department of Health) and Medicines Australia of a new Joint Oversight Committee. It is expected that its main functions will be to consider the effectiveness of measures relating to the application of statutory price reductions; consider and agree details intended to guide companies in making applications regarding statutory price reductions; and identify unintended consequences arising from the measures in the Agreement, including in relation to the extent of exemptions from statutory price reductions agreed by the Commonwealth.

The role of the Joint Oversight Committee in considering the effectiveness of provisions and procedures for ministerial discretion will ensure that there will be oversight of the circumstances in which ministerial discretion is applied. 

Inclusion of instruments on the Federal Register of Legislation

The amendments propose that the Minister may determine by written instrument that a first new brand or anniversary statutory price reduction should be reduced or not applied; and by notifiable instrument that a brand is a new presentation.

It is not proposed that a determination to reduce, or not apply, a statutory price reduction be subject to Parliamentary scrutiny as the Minister would have access to expert advice from the PBAC in making such decisions.

The highly technical nature of the subject matter, as evidenced by the role of the PBAC in advising the Minister on matters relating to PBS medicines, means that if expert advice is required the matter should be referred before the decision is made. Companies affected by a decision would be consulted or receive information regarding the likely outcome prior to the decision being finalised.

The Joint Oversight Committee, which will include members with particular expertise regarding the PBS, will monitor the manner in which ministerial discretion is exercised. One of the main functions of the Joint Oversight Committee is to oversee the extent of reductions to statutory price reductions.

To ensure that determinations will be available publicly, the instruments made for these purposes will be included on the PBS website ( and registered on the Federal Register of Legislation.

Limited duration of pricing amendments

The Agreement and the pricing amendments in the Bill are effective until 30 June 2022, after which time the pricing amendments are reversed. Limiting the duration of the changes means that experience from the implementation of the Agreement and advice from the Joint Oversight Committee will be able to inform any future pricing arrangements.