2019-2020-2021

 

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

 

 

 

 

 

 

 

 

NATIONAL HEALTH AMENDMENT (ENHANCING THE PHARMACEUTICAL BENEFITS SCHEME) BILL 2021

 

 

 

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

 

 

 

 

 

 

 

 

(Circulated by authority of the Minister for Health and Aged Care, the Hon Greg Hunt MP)

 

National Health Amendment (Enhancing the Pharmaceutical Benefits Scheme) Bill 2021

 

OUTLINE

The Pharmaceutical Benefits Scheme (PBS) operates under Part VII of the  National Health Act 1953  (Act) and provides Australians with timely, reliable and affordable access to necessary and cost-effective medicines.

 

The National Health Amendment (Enhancing the Pharmaceutical Benefits Scheme) Bill 2021 (Bill) amends Part VII of the Act to implement a range of measures agreed with Medicines Australia and the Generic and Biosimilar Medicines Association, on behalf of the medicines industry in Australia. These agreements will operate from         1 July 2022 to 30 June 2027.

 

The measures agreed with the medicines industry achieve significant savings while ensuring that PBS subsidy supports reliable medicines supply to Australia, and provide certainty to the medicines sector about PBS pricing policy for the next five years. The savings associated with these measures of around $1.9 billion over the terms of the agreements will be reinvested in the PBS, to support anticipated listing of more than $5 billion in new drugs and expanded patient access over the same period.

 

These outcomes are to be delivered through amendments to improve the operation of Statutory Price Reductions (SPRs) and to better guarantee supply of PBS listed medicines through improved price disclosure arrangements and a new stockholding requirement for certain medicines that are more susceptible to global medicines shortages.

 

1.       Improved statutory price reductions

The amendments to SPRs under Division 3A of the Act provide for a 5% price reduction on the fifth and tenth anniversary of a drug listing on the PBS and a 26.1% price reduction on the fifteenth anniversary of a drug listing on the PBS, which will increase to 30% in 2027. The first new brand price reduction will remain at 25%. The five, ten and fifteen-year anniversary price reductions will not apply if a first new brand price reduction has applied and a first new brand price reduction will not apply if the fifteen-year anniversary price reduction has applied. For brands of drugs that have been listed for fifteen years or more and have not been subject to a price disclosure reduction under Division 3B of the Act, catch-up price reductions will apply on 1 April 2023 such that the cumulative impact of SPRs, applied successively, will equal 36.82%. If a brand that has been subject to a first new brand price reduction reaches its fifteen-year anniversary prior to taking a price disclosure reduction, a 1.48% statutory price reduction will apply.

 

The amendments to SPRs also provide for an increase in the SPR cap (which is currently 40%) to 60%. The SPR cap will mean that the price of a brand of pharmaceutical item will not be reduced by a SPR under Division 3A of the Act to any lower than 60% off the price for the brand on 1 January 2016 or the date of listing on the PBS if after 1 January 2016.

 

The amendments to SPRs will ensure that new price agreements under section 85AD of the Act will not be required to give effect to the price reductions intended under Division 3A, such as flow-on reductions under section 99ACC. These price reductions will instead occur automatically. For first new brand price reductions, the approved ex-manufacturer price (AEMP) of an existing brand that has the same pharmaceutical item as the new brand will be automatically reduced to be equal to that of the new brand, and related brands that have the same drug and administration as the new brand will have their AEMPs reduced by the same percentage by which the agreed price of the new brand was reduced.

 

The amendments retain Ministerial discretions to ensure that there is the ability to intervene where a SPR for a brand would not be appropriate in the circumstances - such as where a SPR would result in the AEMP being below an amount needed to secure supply of an important drug or where the responsible person for the existing brand inadvertently triggers a first new brand price reduction by listing a new presentation in the first ten years of the drug being a listed drug. The Act currently provides in subsections 99ACB(3A) and (3B) and 99ACD(3) for a new presentation of an existing pharmaceutical item to be exempted from a first new brand SPR in certain circumstances. Those provisions will continue and will not be repealed with effect from 1 July 2022 by the operation of Schedule 4, Part 2 of the National Health Amendment (Pharmaceutical Benefits—Budget and Other Measures) Act 2018 .

 

2.       More reliable supply - improved pricing arrangements for older and low-cost medicines

Increasingly, global shortages are interrupting supply of medicines that are the mainstay of treatment for some of the most prevalent health conditions in the Australian community. Recently, global shortages have interrupted the supply of medicines for cardiovascular diseases like high blood pressure and diabetes, and medicines for mental health conditions such as depression, bipolar disorder and schizophrenia. In 2019 and 2020, brands of over 500 PBS items were affected by medium to critical impact shortages with medicines supplied by manufacturers for $4 or less per pack the most susceptible.   

 

PBS listed brands with an AEMP of $4.00 or less have been found to be among the most susceptible to global medicines shortages. The amendments made by the Bill will therefore establish a price reduction floor for:

·          PBS brands that have an AEMP of $4.00 or less;

·          brands that have been both subject to price disclosure for more than 2.5 years after their first price disclosure reduction and more than 3.5 years after the drug in the brand became subject to price disclosure requirements; and

·          brands that have both had their AEMP increased either under the one-off prices increases on 1 October 2022 or through a new price agreement, and in respect of which the Minister has determined that a price reduction floor should apply.

For brands with an AEMP of $4.00 or less, there will be no further price reductions under the Act. For brands subject to the price reduction floor with an AEMP that is greater than $4.00, there will be no further price reductions under the Act unless, over a period of three consecutive data collection periods (1.5 years), the brand is discounted on average by 12.5% or more without taking a price reduction, or if the brand is discounted by more than 30% in any one price disclosure cycle.

 

The amendments also provide for one-off increases in the AEMP of brands that have an AEMP of less than $3.50. Brands with an AEMP of $2.00 or less will be increased to $2.50. Brands with an AEMP of more than $2.00 but less than $3.50 will be increased by $0.50 to a maximum of $3.50. These increases will take effect on 1 October 2022.

 

This additional support for low cost medicines will help to ensure that responsible persons are better placed to compete for supply in a global medicine market and support investment in supply chain resilience including through the stockholding requirements that form part of the amendments in the Bill.

 

3.       More reliable supply - stockholding requirement and Minister’s powers where responsible persons offer discounts or incentives for low-cost medicines

Where a PBS listed brand is protected by the price reduction floor, it will be subject to a condition that minimum stocks of the brand are held in Australia. The default amount of stock to be held will be at least four months stock based on usual demand for brands that have had not an increase to their AEMP and six months of stock based on usual demand for any brand where the AEMP has been increased to ensure continued reliable supply. From the commencement of this condition on 1 July 2023, additional stocks will be held for over 600 PBS items, including most brands that have an approved ex-manufacturer price of $4 or less. Different amounts of stockholding by reference to usual demand may be determined by the Minister if the default amount is inappropriate - such as where the default amount is unfeasible due to the shelf life of the brand.

 

It is intended that the additional Commonwealth investment through the improved pricing arrangements for older and low-cost medicines is used by responsible persons to manage supply chain risk. In the new strategic agreements with Medicines Australia and the Generic and Biosimilar Medicines Association, it was agreed that the PBS should, in future, only subsidise brands supplied by manufacturers that maintain the required stockholdings and employ business models that support long-term reliable supply of medicines listed on the PBS. The amendments therefore provide the Minister with power to delist or refuse to list brands on the PBS supplied by responsible persons who fail to maintain stockholdings or who offer discounts or incentives for brands that have an AEMP below $4, in competition with other responsible persons that are using that additional investment to manage supply chain risk for those products.

 

In exercising these powers in relation to the stockholding requirements the Minister will need to take into account a number of factors, aimed at ensuring that the powers will be exercised for the purpose of limiting the extent to which the PBS relies on responsible persons that do not have business models that support long term reliable supply, and that takes into account whether a responsible person is otherwise a reliable supplier and whether the responsible person was unable to supply a brand in a particular instance for reasons outside of their control.

 

The matters that must be considered if the Minister is to exercise a power on the basis that the stockholding requirement was breached will include whether the Minister considers the responsible person’s reasons for not holding the applicable quantity of stock were reasonable, whether they will consistently maintain the stock in the future, whether they have offered discounts or incentives in relation to sales of the brand, whether the responsible person has breached the stockholding requirements previously, and whether other responsible persons are also breaching the requirement for their brands of the same pharmaceutical item.

 

The matters that may be considered if the Minister is to exercise a power on the basis that a responsible person has discounted a brand with an AEMP that is less than $4 include the extent to which the discount or incentive will compromise the responsible person, or any other responsible person’s, capacity to continue to supply the brand and maintain adequate stocks.

 

Stockholding disclosure requirements will apply to responsible persons for brands with minimum stockholding requirements, who must also notify the Minister of actual or likely breaches. Discounting and incentives will be monitored using information provided by responsible persons through existing price disclosure requirements.

 

Financial Impact Statement

The new Strategic Agreements, including the measures in the Bill, are estimated to deliver  savings of $713.7 million over four years and around $1.9 billion over the five year terms of the agreements.

 

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

NATIONAL HEALTH AMENDMENT (ENHANCING THE PHARMACEUTICAL BENEFITS SCHEME) BILL 2021

This Bill 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 Bill

This Bill amends the National Health Act 1953 to implement measures negotiated in new Strategic Agreements with Medicines Australia and the Generic and Biosimilar Medicines Association acting on behalf of the medicines industry in Australia. These measures relate to supply of medicines listed on the Pharmaceutical Benefits Scheme (PBS) and arrangements for statutory price reductions to the PBS price (the AEMP) of PBS listed brands. The measures are intended to:

a.        generate savings to be reinvested in the PBS to support subsidy of the continuously growing treatment options for patients; and

b.       mitigate the impact of global medicines shortages on the ability for patients to access PBS listed medicines in Australia.

 

The measures do this by improving statutory price reductions for PBS medicines and, at the same time, preventing the prices of PBS medicines from being reduced below what is needed to support reliable supply, and introducing a requirement that pharmaceutical companies that supply older and low cost medicines that are more susceptible to global supply disruptions hold greater stocks of those medicines in Australia.

 

Human rights implications

This Bill engages Articles 9 and 12(1) of the International Covenant on Economic, Social and Cultural Rights (ICESCR), specifically the rights to health and social security.

 

Article 9 of the ICESCR recognises the right to social security. It requires that a country must, within its maximum available resources, ensure access to a social security scheme that provides a minimum essential level of benefits to all individuals and families that will enable them to acquire at least essential health care. Article 12(1) of ICESCR promotes the right of all individuals to enjoy the highest standard of physical and mental health. The PBS assists with advancement of these human rights by providing subsidised access to medicines for Australians.

 

The Bill assists with the progressive realisation by all appropriate means of the right of everyone to essential healthcare and the enjoyment of the highest attainable standard of physical and mental health because the savings to the Government gained will help to ensure that access to the best available treatments continues as new treatments are discovered and brought to market by the pharmaceutical industry. This Bill also assists with the advancement of these human rights by improving supply on the PBS of a large number of medicines that have become increasingly susceptible to global medicines shortages. This will help to ensure the continuity of access to subsidised medicines necessary for the proper treatment and management of common medical conditions.

 

Conclusion

This Bill is compatible with human rights as it does not raise any human rights issues. The amendments made by this Bill will have a beneficial impact on human rights by helping to ensure Austrians can access the best available medicines through more reliable supply and continued subsidy of new treatments as they emerge.

 

NATIONAL HEALTH AMENDMENT (ENHANCING THE PHARMACEUTICAL BENEFITS SCHEME) BILL 2021

 

Clause 1 - Short Title

Clause 1 provides for the short title of the Act to be the National Health Amendment (Enhancing the Pharmaceutical Benefits Scheme) Act 2021 .

 

Clause 2 - Commencement

This clause sets out when the Bill commences.

 

Sections 1 to 3 of the Bill and Part 1 of Schedule 1 commence on the day after the Royal Assent. Part 1 of Schedule 1 repeals various uncommenced provisions of the National Health Amendment (Pharmaceutical Benefits - Budget and Other Measures) Act 2018 . Part 2 of Schedule 1 (statutory price reductions) commences 1 July 2022. Part 3 of Schedule 1 (discounts and incentives) commences 1 October 2022. Part 4 of Schedule 1 (stockholding requirements) commences on 1 July 2023. Part 5 of Schedule 1 (repeals of various provisions) commences on 1 July 2027.

 

Clause 3 - Schedule(s)

This clause provides that each Act that is specified in a Schedule to this Bill is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item has effect according to its terms. This is a technical provision which gives operational effect to the amendments contained in the Schedules.

 

Part 1 - Amendments commencing on the day after Royal Assent

 

National Health Amendment (Pharmaceutical Benefits-Budget and other Measures) Act 2018

 

Items 1, 2, 3, and 3A repeal Part 2 of Schedules 1, 2, 3 and 4.

 

Part 2 of Schedules 1, 2, 3 and 4 to the National Health Amendment (Pharmaceutical Benefits-Budget and other Measures) Act 2018 are each due to take effect on 1 July 2022. They would repeal various provisions of the Act that were introduced to implement various measures in the 2018 - 2022 strategic a greement with Medicines Australia, with the effect that arrangements for statutory price reductions (SPRs) and price disclosure in the Act would revert to arrangements in place in 2018.

 

Following the agreement of new measures with the medicines industry in Australia, to be given effect by Parts 2 to 5 of the Bill, Part 2 of Schedules 1, 2, 3 and 4 to the National Health Amendment (Pharmaceutical Benefits-Budget and other Measures) Act 2018 is redundant.

 

Part 2 Amendments commencing 1 July 2022

 

National Health Act 1953

 

Item 4 inserts a new note at the end of the definition of AEMP in subsection 84(1). Item 5 inserts new section 85BA after section 85B.

 

The AEMP (AEMP) of a listed brand of pharmaceutical benefit is a price in force under a ‘price agreement’ under section 85AD of the Act between the Minister and responsible person for the brand, or in force under a ‘price determination’ made by the Minister under section 85B of the Act.

 

New section 85BA provides that where the AEMP of a brand of pharmaceutical item is, or is taken to be, reduced or increased by an amount or percentage under a provision of Part VII of the Act, the amount under the price agreement or price determination is taken to be reduced or increased accordingly. Where a provision states that the AEMP is taken to be reduced by a certain amount, or to an amount, this means that the AEMP is deemed to be a new amount worked out using the method specified in the provision.  

 

The new note to the definition of AEMP directs readers to section 85BA.

 

Items 6 to 8 amend section 99AC of the Act, which provides a simplified outline to Division 3A of the Act. Division 3A establishes a range of SPRs applying to listed brands of pharmaceutical items. The SPRs in Division 3A are of two general types - reductions related to the listing of the first new brand of a pharmaceutical item and reductions relating to particular anniversaries of the drug in a listed brand of pharmaceutical item being listed on the PBS.

 

Item 6 repeals and replaces the paragraph beginning with “Subdivision B” in section 99AC to provide that Subdivision B of Division 3A requires there to be a price reduction for the first new brand of a pharmaceutical item (other than a combination item) when the brand lists on the PBS.

 

The new paragraph also specifies that listing of the new brand of the pharmaceutical item also provides an automatic trigger for price reductions to occur under new Subdivision E (see item 76).

 

Item 7 repeals and replaces the paragraph beginning with “Subdivision C” in section 99AC to provide that Subdivision C requires there to be a price reduction for the first new brand of a pharmaceutical item that is a combination item when the brand lists.

 

The new paragraph also specifies that listing of the new brand of the pharmaceutical item also provides an automatic trigger for price reductions to occur under Subdivision E.

 

Item 8 repeals and replaces the paragraph beginning with “Subdivision D” in section 99AC to state that Subdivision D provides for other price reductions for pharmaceutical items. These price reductions include reductions that occur on a certain anniversary of the drug in the pharmaceutical item being a listed drug.

 

The new paragraph also states that Subdivision E provides for price reductions that are automatically triggered when Subdivision B or C applies to require a first new brand price reduction for a brand of a pharmaceutical item.

 

Item 9 inserts new subsection 99ACA(4) at the end of section 99ACA. Section 99ACA provides a number of definitions for the purposes of Division 3A of the Act. New subsection 99ACA(4) will provide that a reference in Division 3A to the AEMP of a brand of a pharmaceutical item being reduced under subsection 99ACF(2) is to be read as a reference to subsection 99ACF(2) applying to the brand of the pharmaceutical item. Subsection 99ACF(2) of the Act has the effect that where a brand of pharmaceutical item is due to take a SPR under section 99ACF on a particular day, if the brand has otherwise taken a price reduction on that day at least equal to the SPR, the brand is not required to also take the SPR under section 99ACF.

 

Item 10 amends the heading to Subdivision B of Division 3A by replacing the existing reference to 25% price reductions for new brands of pharmaceutical items that are not combination items with reference to first new brand price reductions for such items. This reflects that, depending on historical reductions to the AEMP of a brand, the first new brand reductions in Subdivision B will not necessarily be 25%.

 

Items 11 to 28 amend section 99ACB . Section 99ACB currently provides that, when a new brand of a pharmaceutical item (the trigger item) is listed on the PBS, and that new brand is bioequivalent or biosimilar to another listed brand (the existing brand) of a pharmaceutical item (the existing item), and the new and existing pharmaceutical items have the same drug and manner of administration, the AEMP of the new brand must be at least 25% lower than the AEMP of the existing brand of the existing item on the day before the new brand lists.

 

Currently, paragraph 99ACB(2)(d) provides that section 99ACB does not apply where the AEMP of a brand of the existing item has already been reduced by 40% or more since 1 January 2016 or, if there was no listed brand of the existing item at that time, the later date of listing of the first brand of the existing item (the historical pricing comparison date).

 

Item 12 will amend paragraph 99ACB(2)(d) to substitute a new SPR cap of 60% of the AEMP of the existing item on the historical pricing comparison date. Item 13 will insert new subsection 99ACB(2A) which will ensure that where changes to the pricing quantity of the existing brand have occurred between the historical pricing comparison date and the day before the day the new brand lists, the AEMP of the existing brand on 1 January 2016 or later date of listing is to be calculated as if the pricing quantity was the pricing quantity on the day before the new brand lists. The AEMP of a brand of pharmaceutical item must be calculated by reference to the pricing quantity for the item, so new subsection 99ACB(2A) ensures that historical changes to the AEMP of a brand of the trigger pharmaceutical item that are the result of a pricing quantity change, rather than a true increase or decrease to the PBS price of the item, do not distort the application of paragraph 99ACB(2)(d).

 

Subsections 99ACB(4A) to (5A) set the maximum AEMP that the Minister is permitted to agree for the newly listing brand of pharmaceutical item, depending on the amount of previous reductions to the AEMP of the existing brand of pharmaceutical item calculated on the day before the new brand lists. Items 21 to 27 amend subsections 99ACB(4A) and (5A) , and insert new subsections 99ACB(4B) and (5B) . Together, these have effect that:

·          where previous reductions to the AEMP of the existing brand of a pharmaceutical item since the historical pricing comparison date are 35% or less, the agreed price of the newly listing brand must not exceed the AEMP of the existing brand on the day before the new brand lists, reduced by 25%; and

·          where previous reductions are more than 35% but less than 60%, the agreed price of the newly listing brand must not be more than 40% of the AEMP of a listed brand of the existing item on the historical pricing comparison date. This amendment reflects the increase in the statutory price reduction cap to 60% of the AEMP on the historical pricing comparison date; and

·          where there have been changes to the pricing quantity of the existing brand of the existing pharmaceutical item between the historical pricing comparison date and the day before the new brand of trigger item lists, there is appropriate apportioning of AEMPs so that only true historical reductions to the PBS price of the existing item are taken into account.

 

Subsection 99ACB(3) currently provides that section 99ACB does not apply where a number of provisions in Division 3A have already applied to certain brands of pharmaceutical item (relevant brands), being:

·          the newly listing brand of the trigger pharmaceutical item, or another listed brand of the item; or

·          a listed brand of a different pharmaceutical item that has the same drug and manner of administration as the trigger item; or

·          if the drug in the pharmaceutical item of the newly listing brand is in a therapeutic group, any listed brand of a pharmaceutical item that has another drug in the therapeutic group and has the same drug and manner of administration as the trigger item.

 

The provisions currently referred to in subsection 99ACB(3) are subsection 99ACB(1), and subsections of section 99ACF that flow on first new brand SPRs applying to the first new brand of a pharmaceutical item to any existing brands of the items and other ‘related brands’.

 

Amendments to subsection 99ACB(3) made by items 14 to 19 will:

·          update references to section 99ACB and 99ACF consequential on amendments to the drafting of those provisions;

·          include reference to new section 99ACQ and subsections 99ACR(3) and (4) which will, from 1 July 2022, replace section 99ACH and section 99ACF in flowing on first new brand SPRs to any existing brands and other ‘related brands’ (see item 76) ;

·          give effect to new exemptions from the operation of section 99ACB for newly listing brands of a pharmaceutical item where the new 26.1%, 30% and catch-up reductions for brands with drugs that have been listed for fifteen years or more mentioned in items 4A, 4B and 8 of the table in section 99ACF (see items 59 and 60) have applied to a relevant brand; and

·          insert reference to a determination made in the exercise of Ministerial discretion under paragraph 99ACB(6)(b) (see Item 28 ).

 

Items 18 and 19 amends the note under subsection 99ACB(3) to clarify that for the purposes of subparagraph 99ACB(3)(a)(i), subsections 99ACB(5) and (5A) may be taken not to have applied in relation to a brand of a pharmaceutical item because of the operation of section 99AEI or subsection 99ACB(6B).

 

Item 28 repeals and replaces subsections 99ACB(6A) and (6B) to amend the Ministerial discretion not to apply, or to reduce, a SPR under section 99ACB. This change will provide that the Minister may determine, by notifiable instrument that:

(a)    the agreed price of the new brand of the trigger item that comes into force on the determination day for the new brand is to be equal to the AEMP, on the day before the determination day, of the existing brand of the existing item. If the Minister makes a determination under these circumstances, subsections 99ACB(5) and (5A) will be taken not to have applied to the trigger item; or

(b)    the agreed price of the new brand of the trigger item that comes into force on the determination day must not exceed the AEMP, on the day before the determination day, of the existing brand of the existing item, reduced by a lower percentage than would otherwise result from the operation of subsection 99ACB(5) or (5A) in relation to the determination day.

 

This amendment will give effect to the intention that the Minister should be able to intervene to prevent or reduce a required first new brand SPR under section 99ACB if it is not appropriate in the circumstances. Where Ministerial discretion is exercised under paragraph 99ACB(6A)(a) such that the new brand of the trigger item can list with an AEMP equal to the existing brand, subsections 99ACB(5) and (5A) are taken not to apply to the new brand and, as a result, the flow on first new brand SPRs in new sections 99ACQ will not apply to the existing brand or related brands of the pharmaceutical item (see item 76).

 

Consideration of requests to exercise Ministerial discretion can involve consideration of the impact on government expenditure on the PBS, and on broad issues of the sustainability of supply of PBS listed medicines and potential impacts on access to medicines by the public. In particular cases advice on the exercise of the discretion may be referred for expert advice from the Pharmaceutical Benefits Advisory Committee due to the highly technical nature of the subject matter.

 

For this reason, Ministerial discretion decisions in section 99ACB (and those made under sections 99ACD, 99ACR and 99ADHB) are not considered suitable for merits review. However, the Minister’s use of the discretion power will continue to be subject to oversight of a Joint Oversight Committee created pursuant to the new strategic agreements between the Government and Medicines Australia and the Generic and Biosimilar Medicines Association.

 

Item 29 amends subsection 99ACB(6C) to remove reference to subsection 99ACB(6B) to provide that this section only applies in making a determination under subsection 99ACB(6A). Item 30 repeals subsection 99ACB(6D). These are both consequential amendments that reflect the revised drafting of the section, with the Ministerial discretion powers consolidated in subsection 99ACB(6A).

 

 

Items 31 to 35 amend section 99ACC, which applies a flow on SPR to single brand combination items, ie combination items with only one listed brand, where:

·          there are no other brands of combination item that have the same drug and are bioequivalent or biosimilar to the combination item; and

·          one or more listed component drugs in the combination item has been subject to a SPR on a particular day (the reduction day).

 

Combination items are pharmaceutical items with a drug that contains at least two other drugs, at least one of which is listed on the PBS.

 

Item 31 amends paragraph 99ACC(1)(c) to substitute “an agreed price (the existing agreed price ) is in force” with “there is an AEMP”. This amendment reflects that section 99ACC will now apply to listed brands of pharmaceutical items that are subject to a price determination under section 85B of the Act, as well as listed brands subject to a price agreement under section 85AD.

 

Item 32 amends paragraph 99ACC(1)(d) to substitute “after the day on which the existing agreed price came into force for the single brand of the combination item:” with “any of the following apply:”. This is a minor technical change that will not alter the substantive effect of the section.

 

Item 33 repeals and replaces subsections 99ACC(2) to (5) to streamline the operation of SPRs under section 99ACC. Currently, where section 99ACC applies to a listed brand of combination item, the existing price agreement for the listed brand ceases and the responsible person for the listed brand and Minister must enter into a new price agreement.

 

New subsections 99ACC(2) and (3) provide that, subject to subsections 99ACC(5A), (5C) and (5E), on the day that the drug or drugs in the single brand of combination item are subject to a SPR, the AEMP of the single brand of combination item is taken to be reduced by a method prescribed by regulation. The regulations may prescribe different methods for different classes of combination items. New subsection 99ACC(4) clarifies that subsection 99ACC(3) does not limit subsection 33(3A) of the Acts Interpretation Act 1901 , which deals with the construction of provisions enabling the specification of matters in legislative or administrative instruments .

 

New subsection 99ACC(5) provides that if an AEMP of a single brand of combination item is reduced under subsection 99ACC(2), if the brand has a claimed price it will be taken to be reduced by a percentage equal to the percentage by which the AEMP is reduced. Claimed prices apply where the AEMP of a listed brand of pharmaceutical item is set by price determination under section 85B of the Act.

 

Subsections 99ACC(5A) caps the maximum SPR that can apply under section 99ACC to 60% of the AEMP of the brand in force on the historical pricing comparison date, ie the AEMP on 1 January 2016 or, if the brand was not listed on 1 January 2016, the original AEMP at date of first listing. Subsection 99ACC(5C) creates power for the Minister to make a determination to not to apply, or to reduce, a combination flow-on reduction.

 

Subsection 99ACC(5B) will ensure that where changes to the pricing quantity of the single brand of combination item have occurred between the historical pricing comparison date and the reduction date, the AEMP on the historical pricing comparison date is to be calculated as if the pricing quantity was the pricing quantity on the reduction day.

 

Subsections 99ACC(5C) to (5E) deal with the exercise of Ministerial discretion in relation to SPRs under section 99ACC. Section 99ACC(5C) enables the Minister to determine, by notifiable instrument, that the AEMP and claimed price (if appliable) is not be reduced in relation to a particular reduction day, or is to be reduced by a lower percentage than would otherwise apply. Subsection 99ACC(5D) provides that in making a determination the Minister must take into account what the AEMP, and claimed price (if applicable) would otherwise be if a determination were not made, and may take into account any advice given to the Minister under subsection 101(4AC) of the Act in relation to single brand of combination item and any other matter the Minister thinks is relevant. Subsection 99ACC(5E) provides that if Ministerial discretion is exercised, the AEMP is not to be further reduced under section 99ACC on any later reduction day.

 

Subsection 99ACC(5F) clarifies that section 99ACC does not limit the Minister’s powers on or after the reduction day to make further price agreements or price determinations for the single brand of combination item.

 

Item 34 amends paragraph 99ACC(6)(a) , which deals with when a listed component drug in a combination item becomes subject to a SPR for the purposes of section 99ACC. The paragraph currently refers to section 99ADH, which deals with reductions under the price disclosure regime in Division 3B of the Act. It also refers to section 99ACB, subsections 99ACF(1) or (2) (because of section 99ACH) and subsections 99ACF(2AB) and (2AC), all of which relate to first new brand SPRs. The amendments to paragraph 99ACC(6)(a) are to update to reference to section 99ACB and 99ADH, and new section 99ACQ and subsections 99ACR(3) and (4), which will replace section 99ACF (with section 99ACH) flowing on first new brand SPRs.

 

Item 35 amends paragraph 99ACC(6)(c) to substitute reference to “item  2, 3, 4, 5 or 6 ” of the table in section 99ACF with “an item” in the table. This is a technical change to reflect the changes made to the table in section 99ACF under Items 57 to 60 and ensures that the application of one of the new anniversary SPRs added to the table in section 99ACF to a listed component drug in a single brand combination item will flow on price reductions to the combination item.

 

Items 36 to 53 amend section 99ACD of the Act. Section 99ACD deals with first new brand SPRs for bands of combination items, ie pharmaceutical items with a drug that contains at least two other drugs, at least one of which is listed on the PBS. Section 99ACD applies where a new brand of a pharmaceutical item that is a combination item (the trigger combination item) is listed on the PBS on a particular day (the determination day) and, on the day before the determination day:

·          there is an existing listed brand of a pharmaceutical item (the existing combination item); and

·          the new brand is bioequivalent or biosimilar to the existing brand of the existing combination item; and

·          the drug in the trigger combination item and the existing combination item contain the same component drugs and the trigger combination item and existing combination item have the same manner of administration.

 

The amendments to section 99ACD for first new brand SPRs for combination pharmaceutical items largely mirror those made to section 99ACB for first new brand SPRs for pharmaceutical items that are not combination items.

 

Item 36 amends the heading of section 99ACD to substitute “ 25% price reduction for new ” with “ First new brand price reductions for ”. This reflects that reductions applying under section 99ACD will not always be equal to 25% of the AEMP of the existing brand of combination item.

 

Currently, paragraph 99ACD(2A)(d) provides that section 99ACD does not apply where the AEMP of a brand of the existing combination item has already been reduced by 40% or more since 1 January 2016 or, if there was no listed brand of the existing combination item at that time, the later date of listing of the first brand of the existing combination item (the historical pricing comparison date).

 

Item 37 will amend paragraph 99ACD(2A)(d) to substitute the new increased SPR cap of 60% of the AEMP of the existing combination item on the historical pricing comparison date. Item 38 will insert new subsection 99ACD(1B) which will ensure that where changes to the pricing quantity of the existing brand of combination item have occurred between the historical pricing comparison date and the day before the day the new brand lists, the AEMP of the existing brand on the historical pricing comparison date is to be calculated as if the pricing quantity was the pricing quantity on the day before the new brand of combination item lists. This will ensure that the price reduction cap will only reflect historical changes to an AEMP that are not simply the result of changes to the pricing quantity of the existing combination item.

 

Subsection 99ACD(2) currently provides that the section does not apply where subsection 99ACD(1) or section 99ACE have already applied to certain brands (relevant brands) of pharmaceutical items that are combination item, being:

·          the newly listing brand of the trigger combination item, or another listed brand of the trigger combination item; or

·          a listed brand of a different combination item that has the same drug and manner of administration as the new brand of the trigger item; or

·          if the drug in the trigger combination item of the newly listing brand is in a therapeutic group, any listed brand of a combination item that has another drug in the therapeutic group and has the same drug and manner of administration as the trigger combination item.

 

Amendments to subsection 99ACD(2) made by items 39 and 42 will:

·          substitute reference to “subsection (1) or section 99ACE” with reference to “a listed provision (see subsection (2A))” and insert new subsection 99ACE(2A) that specifies the following sections for the purposes of subsection 99ACD(2):

·          subsections 99ACD(5) or (5A), which apply first new brand SPRs under section 99ACD;

·          subsections 99ACF(1) or (2) because of items 4A, 4B, or 8 in the table to section 99ACF, which gives effect to new exemptions from the operation of section 99ACD for newly listing brands of a combination item if the new 26.1%, 30 percent and catch-up reductions for brands with drugs that have been listed for fifteen years or more have applied to a relevant brand;

·          insert reference to new section 99ACQ and new subsections 99ACR(3) or (4), which apply flow on first new brand SPRs to existing brands of trigger pharmaceutical items (including combination items) and certain ‘related brands’;

·          change reference to section 99ACE to reference to repealed section 99ACE, reflecting that with the inclusion of new sections 99ACQ and 99ACR, section 99ACE is being repealed from the Act.

 

Items 40 and 41 amend the note in subsection 99ACD(2) to specify that for the purposes of subsection 99ACD(2), subsections 99ACD(5) and (5A) are taken not to have applied in relation to a brand of a pharmaceutical item in some cases, referring readers to section 99AEI and subsection 99ACD(7B).

 

Item 43 amends the heading of subsection 99ACD(4) to substitute “ 25% ” with “First new brand” .

 

Subsections 99ACD(4A) to (5A) set the maximum AEMP that the Minister is permitted to agree for the newly listing brand of combination item, depending on the amount of previous reductions to the AEMP of the existing brand of combination item, calculated on the day before the new brand lists. Items 44 to 50 amend subsections 99ACD(4A) and (5A), and insert new subsections 99ACD(4B) and (5B). Together, these have effect that:

·          where previous reductions to the AEMP of the existing brand of combination item since the historical pricing comparison date are 35% or less, the agreed price of the newly listing brand must not exceed the AEMP of the existing brand of the trigger combination item on the day before the new brand lists, reduced by 25%; and

·          where previous reductions are more than 35% but less than 60%, the agreed price of the newly listing brand must not be more than 40% of the AEMP of a listed brand of the existing combination item on the historical pricing comparison date. This amendment reflects the increase in the statutory price reduction cap to 60% of the AEMP on the historical pricing comparison date; and

·          where there have been changes to the pricing quantity of the existing brand of the existing combination item between the historical pricing comparison date and the day before the new brand of trigger combination item lists, there is appropriate apportioning of AEMPs so that only true historical reductions to the PBS price of the existing combination item are taken into account.

 

Item 51 repeals and replaces subsections 99ACD(7A) and (7B) to amend the Ministerial discretion not to apply, or to reduce, the first new brand SPR under the section. This change will provide that the Minister may, by notifiable instrument, determine that:

(a)                the agreed price of the new brand of the trigger combination item that comes into force on the determination day for listing of the new brand of combination item is to be equal to the AEMP, on the day before the determination day, of the existing brand of the existing item. If the Minister makes a determination under these circumstances, subsections 99ACD(5) and (5A) will be taken to have applied to the trigger item; or

(b)                the agreed price of the new brand of the trigger combination item that comes into force on the determination day must not exceed the AEMP, on the day before the determination day, of the existing brand of the existing item, reduced by a lower percentage than would otherwise result from the operation of subsection 99ACD(5) or (5A) in relation to the determination day.

 

This amendment will give effect to the intention that the Minister should be able to intervene to prevent or reduce a required price reduction if it is not appropriate in the circumstances. Where Ministerial discretion is exercised under paragraph 99ACD(7A)(a) such that the new brand of the trigger item can list with an AEMP equal to the existing brand, subsections 99ACD(5) and (5A) are taken not to apply to the new brand and, as a result, the flow on first new brand SPRs in new sections 99ACQ will not apply to the existing brand or related brands of the combination item (see item 76).

 

Item 52 amends s ubsection 99ACD(7C) to omit “or (7B)” to provide that this section only applies to making a determination under subsection 99ACD(7A). Item 53 repeals subsection 99ACD(7D). These are both technical amendments consequential on the revised drafting of new subsections 99ACD(7A) and (7B).

 

 

 

Item 54 repeals section 99ACE. Section 99ACE currently flows on first new brand SPRs for combination items to related brands of related combination items. With the insertion of new sections 99ACQ and 99ACR by item 75, section 99ACE will be redundant.

 

Items 55 to 68 amend section 99ACF of the Act. Section 99ACF currently provides for a number of SPRs, including each of the anniversary SPRs triggered by the application of sections 99ACHA to 99ACL to a brand of pharmaceutical item and the flow on first new brand SPRs applying to pharmaceutical items triggered by the application of section 99ACH to a brand.

 

Items 55 and 56 amend subsection 99ACF(1). Subsection 99ACF(1) provides that where a subsection of the Act mentioned in an item in the table applies to a listed brand of pharmaceutical item on the day specified in the subsection of the Act, the AEMP and claimed price (if any) of a brand of pharmaceutical item is reduced in accordance with the method or by the percentage set out in the table on that day. Subsection 99ACF(1) is currently subject to section 99ACG and subsections 99ACF(2A) and (3).

 

The changes in item 55 and 56 will provide that subsection 99ACF(1) is also subject to new section 99ADHC, which establishes a PBS ‘floor price’ for certain brands of pharmaceutical items (refer to Item 82 ) and new subsection 99ACF(1A) (refer to item 61).

 

Items 57 to 60 amend the table in subsection 99ACF(1) to insert new sections of the Act that will trigger a SPR under section 99ACF and provide the percentage reduction or method of calculating the reduction:

·          5% for section 99ACHB (new item 2A of the table)

·          5% for section 99ACJA (new item 3A of the table)

·          26.1% for section 99ACKA (new item 4A of the table)

·          30% for section 99ACKB (new item 4B of the table)

·          5% for section 99ACM (new item 7 of the table)

·          The percentage referred to in paragraph 99ACN(1)(c) for section 99ACN (new item 8 of the table)

·          1.48% for section 99ACP (new item 9 of the table).

 

These will give effect to the new price reductions to apply on the fifth, tenth and fifteenth anniversary of a drug being listed on the PBS, the catch-up price reductions that will apply on 1 April 2023 and the 1.48% catch up price reduction to apply on the fifteenth anniversary of a drug being listed on the PBS for brands that have taken a first new brand price reduction but not a price disclosure reduction.

 

Item 61 inserts new subsection 99ACF(1A) after subsection 99ACF(1) to provide for the 60% reduction cap in relation to SPRs under section 99ACF.

 

The new subsection will provide that if the AEMP of a listed brand of a pharmaceutical item is to be reduced under subsection 99ACF(1) because of an item in the table to the subsection and, apart from subsection 99ACF(1A) the reduced AEMP would be less than the amount (the capped price ) equal to:

·          40% of the AEMP of the listed brand of the pharmaceutical item on 1 January 2016; or

·          if there was no listed brand of the item on 1 January 2016, 40% of the original AEMP of the first listed brand of the pharmaceutical item;

then the AEMP of the listed brand of the pharmaceutical item is taken to be reduced under subsection (1) because of that item to an amount equal to the capped price.

 

New subsection 99ACF(1B) deals with the situation where the pricing quantity of items has changed between the time mentioned in subparagraph 99ACF(1A)(b)(i) or (ii), i.e. 1 January 2016 or the later date of listing of the first brand of the pharmaceutical item (the historical pricing comparison date) and the reduction day. Where this occurs, the AEMP on the historical pricing comparison date is to be determined as if the pricing quantity on that date pricing quantity on the reduction day. This will ensure the SPR cap in subsection 99ACF(1A) will not be affected by changes to the AEMP that have occurred only because of changes to the pricing quantity of a pharmaceutical item.

 

Item 62 repeals and replaces paragraph 99ACF(2)(b). Subsection 99ACF(2) deals with situations where a brand of pharmaceutical item that is due to take a SPR under subsection 99ACF(1) on a particular reduction will, apart from that subsection, already take a reduction to its AEMP and claimed price (if any) on the day to provide that subject to subsection 99ACF(2A), on the reduction day for a brand of that is greater than the reduction that would be required under subsection 99ACF(1). This might occur where, for example, the responsible person has agreed to take an administrative reduction on the reduction day. Where subsection 99ACF(2) applies to a brand of pharmaceutical item, the brand is not also required to take the SPR in subsection 99ACF(1).

 

Paragraph 99ACF(2)(b) has been amended to deal with situations where the reduction cap under subsection 99ACF(1A) would apply to a brand pharmaceutical item due to take a reduction under subsection 99ACF(1). New subparagraph 99ACF(2)(b)(ii) will have the effect that if subsection 99ACF(1A) would have applied to the brand of the pharmaceutical item due to take a reduction under subsection 99ACF(1), ie the reduction would have been capped at 40% of the AEMP on the historical pricing comparison date, the threshold reduction for determining whether subsection 99ACF(2) should apply is the capped AEMP of the brand of the pharmaceutical item that would be worked under subsection 99ACF(1A) if paragraph 99ACF(1)(b) were disregarded (and subsection 99ACF(1) therefore applied).

 

Item 63 repeals subsections 99ACF(2AA) to (2AC). This will repeal the subsections pertaining to the reduction by dollar amounts affecting listed brands where section 99ACH applies to the brand. This is because section 99ACH is being repealed by Item 71 and the mechanism for flow-on of first new brand price reductions will now be given effect through new sections 99ACQ and 99ACR (see Item 76 ).

 

Item 64 and items 66 to 68 make a number of consequential amendments resulting from the repeal of subsections 99ACF(2AA) to (2AC):

·          Item 64 amends subsection 99ACF(2A) to remove references to subsections 99ACF(2AB) and (2AC);

·          Item 66 repeals subsections 99ACF(3AA) and (3AB) . Subsections 99ACF(3AA) and (3AB) provided for the exercise on Ministerial discretion in relation to subsections 99ACF(2AB) and (2AC);

·          Item 67 amends subsection 99ACF(3A) removes reference to subsection 99ACF(2AB) and paragraphs 99AACF(2AC)(a) and (b);

·          Item 68 amends subsection 99ACF(3B) to remove references to subsections 99ACF(3AA) and (3AB).

 

Item 65 amends paragraphs 99ACF(3)(a) and (b) to substitute “items 2 to 6” with “an item”. This is a consequential change to reflect the changes made to the table in section 99ACF under Items 57 to 60 .

 

Item 69 amends subparagraph 99ACG(b)(ii) to reflect the change made by Item 54, by removing reference to subsection 99ACE which has been repealed.

 

Item 70 amends subparagraphs 99ACG(b)(iii) and (iv). Section 99ACG provides that if a price disclosure reduction under section 99ADHB or section 99ADH has applied to a listed brand of pharmaceutical item and certain other specified SPRs would apply to a listed brand of any pharmaceutical item with the same drug and manner of administration, then those other SPRs are not to apply to the listed brand of pharmaceutical item or a listed brand of the other item with the same drug and manner of administration. The amendments to subparagraphs 99ACG(b)(iii) and (iv) update references to section 99ACF to reflect its revised drafting and include references to new sections 99ACQ and 99ACR, inserted by Item 76.

 

Item 71 repeals section 99ACH because the 25% SPR flow-on to related brands of pharmaceutical items that are not combination items will now be given effect through new sections 99ACQ and 99ACR (see Item 76 ).

 

Item 72 amends paragraph 99ACHA(1)(c) to insert “repealed” before “section 99ACH” to reflect the change made in Item 71 .

 

Item 73 inserts new section 99ACHB after section 99ACHA to allow for a 5% SPR for brands of pharmaceutical item with a drug on F1 on their fifth anniversary, from 1 April 2023 to 1 April 2027.

 

The section will apply to a brand of pharmaceutical item where:

·          the drug in the item is on F1 on the ‘5% price reduction day’, which for section 99ACHB means each 1 April from 2023 to 2027; and

·          the 5% reduction day falls on or after the fifth anniversary of the drug in the item being listed on the PBS; and

·          new subsection 99ACR(4) of the Act has not applied to the brand of pharmaceutical item, i.e. if the brand was not exempt from having to take a flow on first new brand SPR under section 99ACR because it was otherwise taking a larger reduction to its AEMP on the reduction day for section 99ACR; and

·          the AEMP of the brand of pharmaceutical item has not been reduced under subsections 99ACF(1) or (2), or because of repealed sections 99ACE or 99ACH, or under section 99ACQ or subsection 99ACR(3).

 

Item 74 inserts new section 99ACJA after section 99ACJ to allow for a 5% SPR for brands of pharmaceutical item with a drug on F1 on their 10th anniversary, from 1 April 2023 to 1 April 2027.

 

The section will apply to a brand of pharmaceutical item where:

·          the drug in the item is on F1 on the ‘5% price reduction day’, which for section 99ACJA means each 1 April from 2023 to 2027; and

·          the 5% reduction day falls on or after the tenth anniversary of the drug in the item being listed on the PBS; and

·          new subsection 99ACR(4) of the Act has not applied to the brand of pharmaceutical item, i.e. if the brand was not exempt from having to take a flow on first new brand SPR under section 99ACR because it was otherwise taking a larger reduction to its AEMP on the reduction day for section 99ACR; and

·          the AEMP of the brand of pharmaceutical item has not previously been reduced under subsection 99ACF(1) or (2) because of items 3, 3A, 5 or 7 in the table in section 99ACF, which relate to various tenth anniversary SPRs; and

·          the AEMP of the brand of pharmaceutical item has not been reduced because of repealed sections 99ACE or 99ACH, or under section 99ACQ or under subsection 99ACR(3), each of which relate to first new brand SPRs.

 

Item 75 inserts new sections 99ACKA and 99ACKB after section 99ACK.

 

New section 99ACKA will allow for a 26.1% SPR for certain drugs on their 15 ^th anniversary from April 1 2023 to 1 April 2026.

 

The section will apply to a brand of pharmaceutical item where:

·          the ’26.1% price reduction day’, which for section 99ACJA means each 1 April from 2023 to 2026, is on or after the 15th anniversary of the drug in the pharmaceutical item becoming a listed drug on the PBS; and

·          new subsection 99ACR(4) of the Act has not applied to the brand of pharmaceutical item on or before the 26.1 price reduction day; and

·          the AEMP of the brand of pharmaceutical item has not previously been reduced under subsection 99ACF(1) or (2) because of items 4, 4A, 6 or 8 in the table in section 99ACF, which relate to various fifteenth anniversary SPRs; and

·          the AEMP of the brand of pharmaceutical item has not been reduced on or before the 26.1% price reduction day because of sections 99ACB or 99ACD, repealed sections 99ACE or 99ACH, under section 99ACQ or under subsection 99ACR(3), each of which relate to first new brand SPRs; and

·          the pharmaceutical item is not an exempt item determined under section 84AH of the Act.

 

New section 99ACKB will allow for a 30% SPR for certain drugs on their 15 ^th anniversary on 1 April 2027.

 

The section will apply to a brand of pharmaceutical item on 1 April 2027 where:

·          the 15th anniversary of the drug in the pharmaceutical item being listed on the PBS is before that date; and

·          new subsection 99ACR(4) of the Act has not applied to the brand of pharmaceutical item on or before 1 April 2027; and

·          the AEMP of the brand of pharmaceutical item has not previously been reduced under subsection 99ACF(1) or (2) because of items 4, 4A, 6 or 8 in the table in section 99ACF, which relate to various fifteenth anniversary SPRs; and

·          the AEMP of the brand of pharmaceutical item has not been reduced on or before 1 April 2027 because of sections 99ACB or 99ACD, repealed sections 99ACE or 99ACH, under section 99ACQ or under subsection 99ACR(3), each of which relate to first new brand SPRs; and

·          the pharmaceutical item is not an exempt item determined under section 84AH of the Act.

 

A note to both section 99ACKA and 99ACKB directs readers to section 99ACG, which exempts a brand of pharmaceutical item from taking a SPR in certain circumstances where a price disclosure reduction has applied to the brand.

 

Item 76 inserts new sections 99ACM, 99ACN, 99ACP, Subdivision E and sections 99ACQ and 99ACR at the end of Division 3A of Part VII.

 

Section 99ACM provides for a one off SPR on 1 April 2023 for brands of pharmaceutical item where the drug in the item is on F1 and has reached its 10 year anniversary of listing on the PBS between 1 May 2021 and 1 April 2022. A note to section 99ACM directs readers to section 99ACG.

 

Section 99ACN provides for a one off catch-up SPR that will apply on 1 April 2023 to a brand of pharmaceutical item where:

·          the drug in the pharmaceutical item has reached its 15th anniversary of listing on the PBS on or before 1 April 2022; and

·          the item is not an exempt item; and

·          on 1 April 2023, the formula in subsection 99ACN(2) results in a percentage greater than zero.

 

Where section 99ACN applies, the SPR that applies on 1 April 2023 will be a reduction such that the cumulative impact of previous price reductions under Division 3A of the Act, and the SPR applying under this section will be equal to 36.82%.

 

The formula in for subsection 99ACN(2) is:

 

The percentage worked out using the formula is to be calculated to 2 decimal places.

 

The effect of the formula is that, following the application of the price reduction which applies as a result of this section and item 8 of the table in section 99ACF(1), the cumulative impact of price reductions under this Division, applied successively, will be 36.82%. For example, if the brand of the pharmaceutical item has been subject to a 5% previous price reduction under this Division followed by a 16% previous price reduction under this Division, the product of the differential percentages will be (100% - 5%) x (100% - 16%) = 79.80%, and the percentage worked out using the formula will be 100% - 63.18%/79.80% = 20.83%.

 

The product of differential percentages for a brand of pharmaceutical item is:

·          where the brand has not previously been subject to a price reduction under Division 3A - 100 percent;

·          where the brand has had only one previous price reduction under Division 3A - 100% minus that reduction, expressed as a percentage; and

·          where the brand has had more than one previous price reduction under Division 3A - the product of the differential percentages those previous reductions, with a differential percentage for a previous price reduction being the difference between 100% and the previous price reduction under Division 3A (see subsection 99ACN(4)).

 

99ACNA provides the meaning of previous price reduction under this division . Division 3A means either:

·          a reduction, on or before 1 April 2023, to the AEMP of a brand of the pharmaceutical time under the Division, expressed as a percentage, but not including a reduction under section 99ACN; or

·          in the case of a reduction on or before 1 April 2023 in the AEMP of a brand of pharmaceutical item under subsection 99ACF(2), ie where the application of subsection 99ACF(2) to a brand of pharmaceutical item prevented a price reduction under subsection 99ACF(1) occurring because the brand had otherwise taken a reduction larger than that required by subsection 99ACF(1), the reduction in the AEMP that would have occurred under subsection 99ACF(1) if that reduction had occurred, expressed as a percentage. In other words, if a brand of pharmaceutical was due to take a 5% reduction under subsection 99ACF(1) but, because on the reduction day the brand had already taken a 7% reduction, the previous price reduction counted for the purposes of section 99ACN would be 5%; or

·          in the case of a reduction on or before 1 April 2023 in the AEMP of a brand of pharmaceutical item under subsection 99ACF(2), ie where the application of subsection 99ACF(2) to a brand of pharmaceutical item prevented a price reduction under subsection 99ACF(1) occurring because the brand had otherwise taken a reduction larger than that required by subsection 99ACF(1), the reduction in the AEMP that would have occurred under subsection 99ACF(1) if that reduction had occurred, expressed as a percentage. In other words, if a brand of pharmaceutical was due to take a 5% reduction under subsection 99ACF(1) but, because on the reduction day the brand had already taken a 7% reduction, the previous price reduction counted for the purposes of section 99ACN would be 5%; or

·          a 12.5% administrative price reduction that applied prior to the introduction of statutory price reductions in 2007 as determined under subsection 99ACA(3), to the relevant brand or another brand of pharmaceutical item.

 

Subsection 99ACNA(2) makes clear that reductions to agreed prices, determined prices, and approved price to pharmacists (prior to 1 October 2012) are captured as previous price reductions to the AEMP.

 

Subsection 99ACNA(4) makes clear that a reference in section 99ACN to Division 3A includes reference to Division 3A as in force at any time before the commencement of section 99ACN, so that changes to the drafting of the Division since it commenced do not affect the inclusion of historical price reductions under the Division .

 

Section 99ACP provides for a 1.48% reduction to the AEMP of any brand of a pharmaceutical item that has been subject to a first new brand price reduction, but not a price disclosure reduction under Division 3B, on the 15 ^th anniversary of the drug in the pharmaceutical item being a listed drug.

 

Section 99ACP applies to a brand of pharmaceutical item on the 15th anniversary of the drug in the pharmaceutical item being listed as a listed drug if:

·          subsections 99ACB(5) or (5A), or 99ACD(5) or (5A), or section 99ACQ or subsection 99ACR(3) all of which relate to first new brand SPRs, has applied to the brand of the item; and

·          the AEMP of the brand has not previously been reduced under subsection 99ACF(1) or (2) because of item 4, 4A, 8 or 9 in the table in section 99ACF; and

·          the pharmaceutical item is not an exempt item determined under section 84AH of the Act.

 

A note to section 99ACP directs readers to section 99ACG, which exempts a brand of pharmaceutical item from taking a SPR in certain circumstances where a price disclosure reduction has applied to the brand.

 

Subdivision E provides for SPRs that automatically flow on to existing brands of a pharmaceutical item, through new section 99ACQ, and related brands of a related pharmaceutical item, through section 99ACR, when triggered by a first new brand SPR applying to another brand of pharmaceutical item under subsection 99ACB(5) or (5A) or subsection 99ACD(5) or (5A).

 

Subsection 99ACQ(1) provides that section 99ACQ applies to a brand (the existing brand) of pharmaceutical item where:

·          any of subsections 99ACB(5) or (5A), or 99ACD(5) or (5A), has applied to the agreed price of a new brand of pharmaceutical item, i.e. the new brand of pharmaceutical item was required to list on the PBS with an AEMP that is lower than the AEMP of the existing brand of existing item on the day before the new brand lists. Section 99ACB applies to pharmaceutical items that are not combination items, and section 99ACD applies to pharmaceutical items that are combination items; and

·          the agreed price for the new brand comes into force on a day (the reduction day) and, on the previous day, the existing brand was a listed brand.

 

A note to subsection 99ACQ(1) directs readers to section 99ACG, which exempts a brand of pharmaceutical item from taking a SPR in certain circumstances where a price disclosure reduction has applied to the brand.

 

Under subsection 99ACQ(2), the AEMP of the existing brand is taken to be reduced to an amount equal to the AEMP for the new brand. Any claimed price for the existing brand is also taken to be reduced by the same percentage under subsection 99ACQ(3). Claimed prices apply to brands that have a price determined under section 85B of the Act.

 

Subsection 99ACQ(4) makes clear that the section does not limit the Minister’s powers to make further price agreements, or price determinations and claimed price determinations under section 85B, for the existing brand on or after the reduction day.

 

Subsection 99ACR(1) provides that section 99ACQ applies to a brand (the related brand) of pharmaceutical item where:

·          any of subsections 99ACB(5) or (5A), or 99ACD(5) or (5A), has applied to the agreed price of a new brand of a pharmaceutical item (the new item); and

·          the agreed price for the new brand comes into force on a day (the reduction day); and

·          on the day before the reduction day, the related brand was a listed brand of the related item; and

·          the related item is not an exempt item.

 

A note to subsection 99ACR(1) directs readers to section 99ACG, which exempts a brand of pharmaceutical item from taking a SPR in certain circumstances where a price disclosure reduction has applied to the brand.

 

Subsection 99ACR(2) provides that a related brand of a related item is:

·          any listed brand of another pharmaceutical item that has the same drug and manner of administration as the new item; or

·          where the drug in the new item is in a therapeutic group, any listed brand of a pharmaceutical item that has another drug in the same group with the same manner of administration as the new brand.

 

Under subsection 99ACR(3), the AEMP of the related brand of the related brand is taken to be reduced by the same percentage as the that by which the agreed price of the new brand was reduced as a result of subsections 99ACB(5) or (5A), or 99ACD(5) or (5A), as applicable. Any claimed price for the related brand is also taken to be reduced by the same percentage. Subsection 99ACR(3) is subject to subsections 99ACR(4) and (6).

 

Subsection 99ACR(4) provides that the reduction in subsection 99ACR(3) does not apply if the AEMP of the related brand of the related item, and any claimed price, has already been reduced on the reduction day by more than the percentage required under 99ACR(3). The intention of this provision is to prevent the related brand of the related item taking a flow-on first new brand reduction if it is already taking another larger reduction to its AEMP on the reduction day.

 

Subsection 99ACR(5) provides for apportioning of the reduction if the pricing quantity of the related brand of the related item is different on the reduction day than on the day before the reduction day.

 

Subsection 99ACR(6) provides discretion for the Minister to determine, by notifiable instrument, that:

·          the AEMP and (if applicable) the claimed price of the related brand is not to be reduced under subsection 99ACR(3) in relation to a particular reduction day; or

·          the AEMP and (if applicable) the claimed price is to be reduced by a lower percentage than would otherwise apply under subsection 99ACR(3) in relation to a particular reduction day.

 

This provision gives effect to the intention that the Minister should have discretion to intervene to prevent or reduce a required price reduction if it is not appropriate in the circumstances. In exercising Ministerial discretion, the Minister must take into account what the AEMP, and any claimed price, of the related brand of the related item would otherwise be on the particular reduction day if a determination were not made, and any other matter the Minister thinks is relevant (see subsection 99ACR(8)).

 

If Ministerial discretion is exercised under paragraph 99ACR(6)(a) not to apply any price reduction, subsection 99ACR(3) is taken not to have applied to the related brand of the related item (see subsection 99ACR(7)).

 

Subsection 99ACR(9) makes clear that the section does not limit the Minister’s powers to make further price agreements, or price determinations and claimed price determinations under section 85B, for the related brand on or after the reduction day.

 

Item 77 repeals and replaces paragraph 99ADH(1)(c) . Section 99ADHC provides for the main price disclosure reduction under Division 3B of the Act. The price disclosure provisions adjust the AEMPs of brands in line with reductions in the prices at which those brands are supplied to a responsible persons’ customers (such as pharmacists, wholesalers and hospitals).

 

Subsection 99ADH(1) sets out when the section will apply to a brand of pharmaceutical item. The requirements in subsection 99ADH(1) include, among other things, that:

·          the Minister has determined a weighted average disclosed price (WADP) for the brand of a pharmaceutical item in respect of particular data collection period for the brand (see paragraph 99ADH(1)(a)). The WADP is calculated in accordance with regulations and the data collection period is determined under section 99ADBA of the Act, but is typically rolling a six-month period running 1 April to 30 September and 1 October to 31 March; and

·          the unadjusted price reduction for the brand of item is at least the amount determined in accordance with paragraph 99ADH(1)(d). The unadjusted price reduction for a brand is the difference between the applicable AEMP of the brand and the WADP of the brand, expressed as a percentage of the applicable AEMP (see subsection 99ADB(1)).

 

New paragraph 99ADH(1)(d) will provide unadjusted price reduction thresholds of:

·          if new subsection 99ADHC (see item 82) does not apply to the brand, i.e. the brand is not subject to the PBS floor price protections - at least 10%;

·          if section 99ADHC applies to the brand and the AEMP of the brand is more than $4.00 - at least 30%;

·          if section 99ADHC applies to the brand, the AEMP of the brand is more than $4.00 and the brand has passed the 12.5% average unadjusted price reduction test in new subsection 99ADH(6) - at least 10% (see item 79).

 

The effect of these amendments will be that brands subject to the floor price that have an AEMP that is more than $4 will not be reduced unless there remains significant discounting of more than 30% in any one cycle or more than 12.5% on average over three successive cycles of price disclosure.

 

Item 78 repeals subsection 99ADH(2A) , which is redundant following the repeal and replacement of paragraph 99ADH(1)(d) by item 77 .

 

Item 79 inserts a new subsections 99ADH(6) and (7) at the end of section 99ADH which sets out the 12.5% average unadjusted price reduction test.

 

New subsection 99ADH(6) will provide that a brand of pharmaceutical item will pass the test if there have been three consecutive data collection periods (including the data collection period referred to in paragraph 99ADH(1)(a)) for which a WADP was determined for any brand of the pharmaceutical item and:

·          the percentage resulting from dividing the total of the unadjusted price reductions for the three data collection periods by 3 is at least 12.5%; and

·          section 99ADH did not apply to the brand of pharmaceutical item (ie the brand was not subject to a price disclosure reduction) in respect of any of the three data collection periods.

 

New subsection 99ADH(7) will provide that for the purposes of the calculation in subsection 99ADH(6), the unadjusted price reduction for a brand is the unadjusted price reduction on the day the relevant determination of a WADP for the brand comes into force.

 

A note to subsection 99ADH(7) directs readers to subsection 99ADB(4), under which WADP determinations are made.

 

Item 80 amends subsections 99ADHB(2) to (6) . Section 99ADHB provides for flow on price disclosure reductions to the PBS price of certain brands of pharmaceutical item that are combination items where;

·          there is an existing listed brand of pharmaceutical item that is a combination item (the existing combination brand); and

·          a brand of item that is not a combination item (the non-combination item) has a drug that is in the combination item (the common drug) and the combination item and the non-combination item have the same manner of administration; and

·          the brand of non-combination item has taken a price disclosure reduction under section 99ADH.

 

New subsection 99ADHB(2) will have the effect that, subject to subsections 99ADHB(6) and (6B), where section 99ADHB applies to a brand of combination item the AEMP of the existing combination brand will be taken to be reduced in accordance with a method prescribed by the regulations. Subsection 99ADHB(3) will provide that the regulations may prescribe different methods for different classes of combination items and subsection 99ADHB(4) will make clear that this does not limit subsection 33(3A) of the Acts Interpretation Act 1901 , which deals with the construction of provisions enabling the specification of matters in legislative or administrative instruments.

 

New subsection 99ADHB(5) will provide that if the AEMP of a brand of combination item is reduced under subsection 99ADHB(2), any claimed price of the brand will also be reduced by the same percentage.

 

Subsections 99ADHB(6) and (6B) provide for the Minister to exercise discretion, by notifiable instrument, to determine that:

·          the AEMP and any claimed price is not to be reduced under subsection 99ACHB(2) or (5) (as applicable) in relation to a particular reduction day; or

·          the AEMP and any claimed price is to be reduced by a lower percentage than would otherwise apply, in relation to a particular reduction day.

 

In making a determination, the Minister is required to consider what the AEMP and any claimed price of the existing brand of combination item would be if a determination of Ministerial discretion is not made. The Minister may also take into account any advice given to the Minister under subsection 101(4AC) of the Act in relation to the combination item and any other matter the Minister considers relevant. Subsection 101(4AC) of the Act enables the Pharmaceutical Benefits Advisory Committee to give advice to the Minister if the Committee is satisfied that therapy involving a combination item provides, for some patients, a significant improvement in patient compliance with the therapy or in efficacy or reduction in toxicity.

 

Subsection 99ADHB(6B) provides that if the Minister exercises Ministerial discretion by making a determination under subsection 99ADHB(6), the AEMP of the existing brand of combination item is not to be further reduced under section 99ADHB on any further reduction days.

 

Subsection 99ADHB(7) makes clear that nothing in the section limits the Minister’s powers, on or after the reduction day, to make further price agreements under section 85AD of the Act or price determinations under section 85B of the Act for the existing brand of combination item.

 

Item 81 repeals subsections 99ADHB(8) to (12) , which dealt with reductions to claimed prices and provided for a one-off ‘back-capture’ reduction under section 99ADHB in 2016. These provisions are now redundant.  

 

Floor Price

 

Item 82 inserts new Division 3BA after Division 3B of Part VII to establish a price reduction floor for certain brands of pharmaceutical items.

 

Subsection 99ADHC(1) (together with subsections 99ADHC(2), (3), (6) and (7)) provides that section 99ADHC applies to a brand of a pharmaceutical item (a designated item) if:

·          the item has an AEMP of $4.00 or less; or

·          at the end of the previous data collection period the drug and manner of administration of the pharmaceutical item has both:

o    been on F2 (and therefore subject to price disclosure) for at least 42 months, and

o    at least 30 months has passed since the first price disclosure reduction has applied to any listed brand of a pharmaceutical item with the same drug and manner of administration; or

·          the AEMP of the brand of pharmaceutical item has been increased under the one-off prices increases on 1 October 2022 (see new section 104B - item 85), or

·          the AEMP of any brand of pharmaceutical item has been increased on or after 1 July 2022 through a new price agreement made under section 85AD of the Act and the Minister determines by notifiable instrument under subsection 99ADHC(2) that paragraph 99ADHC(1)(c) applied to the brand.

 

However, in accordance with subsection 99ADHC(3), section 99ADHC does not apply to a brand of a pharmaceutical item if the drug in the item is included in Schedule 2 to the current Poisons Standard (within the meaning of the Therapeutic Goods Act 1989 and as in force from time to time) in a quantity or amount equal or greater to the quantity or amount of the drug in any pack quantity of the brand of the pharmaceutical item. Medicines included in Schedule 2 of the Poisons Standard are able to be kept on the floor of pharmacies.

 

Subsections 99ADHC(4) and (5) implement the ‘floor price’ protections for a brand of pharmaceutical item to which section 99ADHC applies. Under these subsections, the AEMP of a designated item with a floor price is not to be reduced under Part VII of the Act, unless the reduction results from either the making of a price agreement or a price disclosure reduction applies because of subparagraphs 99ADH(1)(c)(ii) or (iii) (for section 99ADH(1)(c) - see item 77). Subsection (5) provides that items to that do not yet have a floor price are not to be reduced below $4.

 

Subsection 99ADHC(6) clarifies when the drug and manner of administration of a pharmaceutical item is taken to have been on F2 for at least 42 months for the purposes of paragraph 99ADHC(1)(a), specifically if:

·          At the end of the last price disclosure data collection period, the drug in the designated brand of pharmaceutical item has been on F2 for at least 42 months; and

·          On a day at least 42 months before the end of the previous data collection period, there was either a related brand of the designated brand of item that had the same pharmaceutical item as, or was bioequivalent or biosimilar to, the designated brand of item, or there were at least 2 related brands of the designated brand with the same pharmaceutical item as, or was bioequivalent or biosimilar to, the designated brand.

 

Consequential amendments - guarantee of supply

 

Item 83 repeals paragraphs 99AEI(3)(a) and (b) and replaces with new paragraphs 99AEI(a) to (d) . Section 99AEI of the Act deals with consequences where, as the result of a responsible person for a ‘guaranteed brand’ of pharmaceutical item failing to meet their obligations under Division 3C of the Act to maintain a supply of the brand, the Minister has revoked or varied a determination of a brand of pharmaceutical item and thereby de-listed the brand from the PBS.

 

Under subsection 99AEI(2), the Minister may take various actions to increase the AEMP and claimed price (if any) of a brand of pharmaceutical item where those prices had been affected by a first new brand SPR under section 99ACB or 99ACD that had applied to the de-listed brand. Subsection 99AEI(3) currently provides that if the Minister takes an action in subsection 99AEI(2), the Minister may also determine that those sections should not be taken to have applied to the de-listed brand for certain purposes.

 

New paragraphs 99AEI(3)(a) to (e) provide that in relation to the Minister’s powers to make or vary a price agreement or determination under subsection 99AEI(2), the Minister may, by legislative instrument, determine that:

·          if subsection 99ACB(5) applied to the delisted brand of the existing item—for the purposes of subsection 99ACB(3), subsection 99ACB(5) is taken not to have applied to the delisted brand of the existing item; or

·          if subsection 99ACB(5A) applied to the delisted brand of the existing item—for the purposes of subsection 99ACB(3), subsection 99ACB(5A) is taken not to have applied to the delisted brand of the existing item; or

·          if subsection 99ACD(5) applied to the delisted brand of the existing item—for the purposes of subsection 99ACD(2), subsection 99ACD(5) is taken not to have applied to the delisted brand of the existing item; or

·          if subsection 99ACD(5A) applied to the delisted brand of the existing item—for the purposes of subsection 99ACD(2), subsection 99ACD(5A) is taken not to have applied to the delisted brand of the existing item

 

These amendments are consequential to the revised drafting of subparagraph 99ACB(3)(a)(i) made by items 14 and 18 and of subsection 99ACD(2) made by items 39, 40 and 42. The amendments are not intended to make any substantive change to the operation of section 99AEI.

 

Part 3 - Amendments commencing on 1 October 2022

 

Discounts and incentives

 

Item 84 inserts new Division 3CA after Division 3C of Part VII of the Act.

 

New section 99AEL provides power for the Minister to take certain actions in relation to the PBS-listing of pharmaceutical benefits supplied by a responsible person if the responsible person offers discounts or incentives for certain brands of pharmaceutical items.

 

Subsection 99AEL(1) provides that the sections applies if:

·          a brand of pharmaceutical item has an AEMP of $4.00 or less; and

·          section 99ADHC applies to the brand (ie the brand is subject to the PBS floor price arrangements); and

·          the responsible person offers a discount or incentive in relation to sales of the brand on one or more occasions.

 

Subsection 99AEL(2) provides that, without limiting any power the Minister may otherwise have under Part VII of the Act, the Minister may do any or all of the following:

·          revoke or vary a determination under subsection 85(6) in relation to the brand of the pharmaceutical item, or any brand of any pharmaceutical item of the responsible person;

·          refuse to make a determination under subsection 85(6) in relation to any brand of any pharmaceutical item of the responsible person;

·          if the only brand of a pharmaceutical item listed on the PBS would be a brand supplied by the responsible person, refuse to make:

o    a declaration under subsection 85(2) in relation to the drug in the pharmaceutical item; or

o    a determination under subsection 85(3) in relation to the form of the pharmaceutical item; or

o    a determination under subsection 85(5) in relation to the manner of administration of the pharmaceutical item.

 

A note to subsection 99AEL(2) makes clear that a brand or a pharmaceutical item mentioned in subparagraphs 99AEL(2)(b), (c) or (d) may be the brand or the pharmaceutical item that is referred to in subsection 99AEL(1).

 

Subsection 99AEL(5) provides that a refusal to make a determination under subsections 85(2), (3), (5) or (6) is not a legislative instrument.

 

In accordance with subsections 99AEL(3) and (4), in exercising a power under subsection 99AEL(2) the Minister:

·          must have regard to any relevant information that relates to the discounts or incentives and that was disclosed in compliance with the price disclosure requirements in Division 3B of the Act; and

·          may regard the following:

o    the extent to which the discount or incentive will compromise the responsible person’s capacity to continue to supply the brand of the pharmaceutical item;

o    whether the responsible person will consistently maintain adequate stock levels of the brand of the pharmaceutical item in the future;

o    the extent to which the discount or incentive will compromise another person’s capacity to continue to supply another brand of the pharmaceutical item;

o    any other matter the Minister thinks is relevant.

 

Following the amendments commencing 1 July 2023, in exercising this power, the Minister may also have regard to whether the responsible person has breached the minimum stockholding requirement under section 99AEKB (see item 87).

 

A decision under subsection 99AEL(2) will affect whether a brand of item is, or continues to be, subsidised under the PBS. As such, the decision may involve consideration of issues of broad public policy, including the underlying purpose of section 99AEL in ensuring the security of supply of PBS subsidised medicines, and consideration of any implications of the decision on access to affordable medicines. It is therefore considered that these decisions are not suitable for external merits review.

 

Reforms to provide the Minister with the powers specified under 99AEL(2) were agreed through the strategic agreements with Medicines Australia and the Generic and Biosimilar Medicines Association and will be subject to oversight of a Joint Oversight Committee created pursuant to those agreements.

 

Subsections 99AEL(6) to (8) provide the meaning of discount or incentive under new

Division 3CA.

 

Subsection 99AEL(6) provides that discount or incentive in relation to sales of a brand of a pharmaceutical item, means:

(a)    anything that results in the net revenue for the brand of the pharmaceutical item for a data collection period, for the brand falling below the amount that would have been the net revenue for the data collection period, if the price charged for the brand of the pharmaceutical item had been equal to the AEMP of the brand of the pharmaceutical item; or

(b)    an incentive given in relation to sales of the brand of the pharmaceutical item.

 

Subsection 99AEL(7) provides that the meaning of incentive and net revenue have the same meaning when used in regulations made for the purpose subsection 99ADB(6) of the Act. Under subsection 99ADB(6), regulations may prescribe a method or formula for determining the weighted average disclosed price of a brand of a pharmaceutical item for the purposes of the price disclosure provisions in Division 3B of the Act.

 

The National Health (Pharmaceutical Benefits) Regulations 2017 currently provide that an incentive, for a brand of pharmaceutical item, includes anything given as an incentive to take supply of the brand. This includes, without limitation, incentives given before the supply but on condition of taking a supply, incentives given at or after the time of supply, and direct or indirect incentives. Responsible persons for a brand of pharmaceutical item are already required to include information on incentives as part of their price disclosure reporting obligations under section 99ADC of the Act.

 

Subsection 99AEL(8) provides that for the purposes of subsection 99AEL(6), the meaning of data collection period has the same meaning as for the price disclosure provisions in Division 3B . The meaning of data collection period under Division 3B is set out in section 99ADBA of the Act .

 

One-off price increases on 1 October 2022

 

Item 85 inserts new section 104B , which is a transitional provision providing for one-off price increases for certain brands of pharmaceutical items on 1 October 2022.

 

Subsection 104B(1) provides that the section applies to a brand of a pharmaceutical item if, immediately before the start of 1 October 2022, the drug in the brand of the item was on F2 and the brand of the pharmaceutical item had an AEMP of less than $3.50.

 

However, the section will not apply to a brand of pharmaceutical item if:

(a)    under subsection 104B(2), the Minister has determined in writing that the section does not apply in relation to all brands of the pharmaceutical item; or

(b)    the drug in the pharmaceutical item is included in Schedule 2 to the current Poisons Standard (within the meaning of the Therapeutic Goods Act 1989 and as in force from time to time) by reference to a quantity or amount of the drug and the quantity or amount is equal to or greater than the total quantity or amount of the drug contained in the quantity or number of units of the brand of the pharmaceutical item in any PBS pack quantity of the brand of the pharmaceutical item (subsection 104B(3)).

 

Subsections 104B(4) to (6) provide for one-off price increases, subject to subsection 104B(7), which provides for apportioning if there have been pricing quantity changes. These increases will operate as follows:

·          if, on the day before 1 October 2022, the brand of the pharmaceutical item had an AEMP of $2 or less, the AEMP is taken to be increased to $2.50 at the start of 1 October 2022;

·          if, on the day before 1 October 2022, the brand of the pharmaceutical item had an AEMP of more than $2 but not more than $3, the AEMP is taken to be increased by 50 cents at the start of 1 October 2022;

·          if, on the day before 1 October 2022, the brand of the pharmaceutical item had an AEMP of more than $3 but less than $3.50, the AEMP is taken to be increased to $3.50 at the start of 1 October 2022.

 

Subsection 104B(7) provides that if the pricing quantity of the brand of the pharmaceutical item on the day before 1 October 2022 is more than the pricing quantity of the brand of the pharmaceutical item on 1 October 2022, then the AEMP of the brand of the pharmaceutical item on 1 October 2022 is taken to be the amount worked out using the formula that is specified in the subsection.

 

Subsection 104B(8) provides that the Minister’s powers are not limited by section 104B, on or after 1 October 2022, to make price agreements under section 85AD or price determinations under section 85B in relation to the brand of the pharmaceutical item.

 

Part 4—Amendments commencing on 1 July 2023

 

Minimum stockholding requirement

 

Item 86 inserts new Division 3CAA after Division 3C of Part VII. New Division 3CAA contains provisions requiring the responsible person for a brand of a pharmaceutical item to which section 99ADHC applies, i.e. a brand subject to the PBS floor price arrangements, to keep a minimum level of stock in Australia.

 

New section 99AEKA specifies that the brands subject to the minimum stockholding requirement are those brands to which section 99ADHC applies.

 

Section 99AEKB provides that where the minimum stockholding requirement applies, the responsible person for the brand of pharmaceutical item must keep at least the applicable quantity of stock in Australia. The section also provides that a brand of pharmaceutical item is taken not be kept in stock if it is not available for sale in Australia.

 

The applicable quantity of stock is set out in new section 99AEKC . Subsection 99AEKC(1) provides that for a brand which has not had an increase to its AEMP on or after 1 July 2022, the default amount is four months stock by reference to usual demand for the brand of the pharmaceutical item. Where a brand has had an increase to its AEMP on or after 1 July 2022, the default applicable quantity for stockholding purposes is six months stock by reference to usual demand.

 

However, under subsection 99AEKC(2) the Minister may also determine, by legislative instrument, a different applicable quantity for a brand of pharmaceutical item. This power may be used where, for example, the shelf life of a benefit makes the default minimum stockholding requirements inappropriate.

 

The usual demand for a brand of pharmaceutical item will be ascertained in accordance with the regulations (subsection 99AEKC(5)).

 

Monitoring and compliance of the new minimum stockholding requirement is addressed by new sections 99AEKD, 99AEKE and 99AEKF .

 

New subsections 99AEKD(1) and (2) respectively require a responsible person for a brand of a pharmaceutical item that is subject to the minimum stockholding requirement to notify the Minister in writing if they form the belief that they are likely to breach the minimum stockholding requirement in section 99AEKB, or if they have breached those requirements. The notice must include the person’s reasons for believing that have or are likely to have breached the requirement (as applicable), and must be provided as soon as practicable after the responsible person has formed that belief.  

 

Subsection 99AEKD(3) provides that a person will commit an offence if they are subject to a requirement under subsection 99AEKD(1) or (2), and omit to do an act, and that omission breaches the requirement. A penalty of 60 penalty applies. The offence is not subject to subsection 4K(2) of the Crimes Act 1914. This means that a responsible person will not be guilty of a separate offence for each day that they fail to notify of a likely or actual breach under section 99AEKD.

 

Under new section 99AEKF , a responsible person for a brand of a pharmaceutical item that is subject to the minimum stockholding requirement must also comply with the stockholding disclosure requirements that will be prescribed in the regulations. These requirements are to provide information in relation to the quantity of the brand kept in Australia by the responsible person, in the manner and form and at the times prescribed.

 

Failing to comply with the stockholding disclosure requirements is a criminal offence punishable by up to 60 penalty units but also is not a daily or continuing offence for subsection 4K(2) of the Crimes Act 1914 .

 

New section 99AEKE provides that if a responsible person breaches the minimum stockholding requirement, without limiting any power the Minister may otherwise have under Part VII of the Act, the Minister may do any or all of the following (see subsection 99AEKE(2)):

(a)        by legislative instrument, revoke or vary a determination under subsection 85(6) in relation to the brand of the pharmaceutical item;

(b)        by legislative instrument, revoke or vary a determination under subsection 85(6) in relation to any brand of any pharmaceutical item of the responsible person;

(c)        refuse to make a determination under subsection 85(6) in relation to any brand of any pharmaceutical item of the responsible person;

(d)       if the only PBS listed brand of a pharmaceutical item would be a brand of the responsible person—refuse to make:

(i)         a declaration under subsection 85(2) in relation to the drug in the pharmaceutical item; or

(ii)        a determination under subsection 85(3) in relation to the form of the pharmaceutical item; or

(iii)       a determination under subsection 85(5) in relation to the manner of administration of the pharmaceutical item.

 

A note to subsection 99AEKE(2) provides that a brand or a pharmaceutical mentioned in paragraphs (b), (c) or (d) may be the brand or the pharmaceutical item referred to in subsection 99AEKE(1).

 

A decision under subsection 99AEKE(2) will effect whether a brand of item is, or continues to be, subsidised under the PBS. As such, the decision may involve consideration of issues of broad public policy, including the underlying purpose of section 99AEKE in ensuring the security of supply of PBS subsidised medicines, and consideration of any implications of the decision on access to affordable medicines. It is therefore considered that these decisions are not suitable for external merits review.

 

Reforms to provide the Minister with the powers specified under 99AEK(2) were agreed through the strategic agreements with Medicines Australia and the Generic and Biosimilar Medicines Association and will be subject to oversight of a Joint Oversight Committee created pursuant to those agreements.

 

Subsection 99AEKE(5) provides that a refusal to make a determination referred to in paragraphs 99AEKE(5)(c) and (d) is not a legislative instrument.

 

Subsection 99AEKE(3) provides that in exercising the power under subsection 99AEKE(2), the Minister must have regard to the following:

·          the responsible person’s reasons for the current and any previous breach, and whether those reasons are, in the Minister’s opinion, reasonable;

·          whether, in the Minister’s opinion, the responsible person will consistently maintain adequate stock levels of the brand of the pharmaceutical item in the future;

·          whether the responsible person has offered discounts or incentives in relation to sales of the brand of the pharmaceutical item. Discounts or incentives have the same meaning as in new section 99AEL (see subsection 99AEKE(5), together with new subsection 99AEL(6) which is inserted by item 84);

·          whether the responsible persons for other brands of the pharmaceutical item have breached section 99AEKB in relation to those other brands of the pharmaceutical item;

·          any other matter the Minister thinks is relevant.

 

Item 87 inserts new subparagraph (ba) after paragraph 99AEL(4)(b). New section 99AEL of the Act, inserted by item 84 with effect from 1 October 2022, establishes a new regime aimed at improving the security of supply of certain PBS medicines by discouraging the offering of incentives and discounts.

 

New subparagraph 99AEL(4)(b) will have the effect that, in exercising a power under subsection 99AEL(2), the Minister may have regard to whether the responsible person has breached the minimum stockholding requirement under section 99AEKB.

 

Part 5—Amendments commencing on 1 July 2027

 

Part 5 of Schedule 1 to the Bill, which commences on 1 July 2027, repeals certain amendments to the Act made by Part 1 of Schedule 1 so the operation of the first new brand SPRs in Division 3A of the Act revert to an uncapped 16% at the end of the term of the agreements made with the pharmaceuticals industry as represented by Medicines Australia and the Generics and Biosimilar Medicines Association.

 

Items 87A to 100 will amend sections 85AB and 99ACB of the Act, which deal with when first new brands that are not combination items list on the PBS, to:

·          amend subsection 99ACB(5) , so that the agreed price of the new brand of the pharmaceutical item listing on the PBS must not exceed the AEMP, on the determination day, of the existing brand of the existing item reduced by 16%, rather than the current 25% (item 96) .

·          repeal subsection 99ACB(4A) and subsection 99ACB(5A) , which operated to allow for a lower first new brand SPR under section 99ACB to apply where the existing brand of pharmaceutical item had taken a historical reductions to its AEMP between 1 January 2016 or, if there was no existing brand at that time, the original AEMP on the brand’s later listing (the historical pricing comparison date), of more than 35% but less than 60%. As a result, 16% will be the only reduction percentage applying under 99ACB (items 95 and 97). Item 95 and 97 also repeal related subsection 99ACB(4B) and subsection 99ACB(5B) respectively, which provide for apportionment if there have been changes in the pricing quantity of the listed brand of the existing item between the historical pricing comparison date and the day before the new brand of pharmaceutical item lists on the PBS.

·          repeal the 60% reduction cap under paragraph 99ACB(2)(d) for historical AEMP reductions to the existing brand of pharmaceutical item since its historical pricing comparison date, and repeal related subsection 99ACB(2A) , which provides for apportionment if there have been changes in the pricing quantity of the listed brand of the existing item (items 90 and 91).

·          repeal the ‘new presentation’ provisions under subsections 87AB(4A), 99ACB(3A), 99ACB(3B), and 101(4AD) and sections 9ACBA (items 87A, 94, 100A and 126).

·          make consequential amendments related to the above repeals to remove references to repealed provisions (items 88, 89, 92, 93, 98, 99 and 100).

 

Items 101, 102 and 103 amend section 99ACC , which deals with flow on SPRs for single branded combination items where a component drug in the combination item is subject to an SPR, to repeal the cap on price reductions under the section to 60% of the AEMP of the single brand combination item on 1 January 2016 or, if there was no existing brand of the combination item listed at that time, the original AEMP on the brand’s later listing, under subsection 99ACC(5A) and related apportionment for changes in pricing quantity since the historical pricing comparison date under subsection 99ACC(5B) (item 103). Items 101 and 102 make consequential amendments to remove references to the repealed provisions.

 

Item 104 to 116 amend section 99ACD , which deals with first new brand SPRs applying to pharmaceutical items that are combination items, to:

·          amend subsection 99ACD(5) , so that the agreed price of the new brand of the combination item listing on the PBS must not exceed the AEMP, on the determination day, of the existing brand of the existing combination item reduced by 16%, rather than the current 25% (item 112) .

·          repeal subsection 99ACD(4A) and subsection 99ACD(5A) , which operated to allow for a lower first new brand SPR under section 99ACB to apply where the existing brand of combination item had taken a historical reductions to its AEMP between 1 January 2016 or, if there was no existing brand at that time, the original AEMP on the brand’s later listing (the historical pricing comparison date), of more than 35% but less than 60%. As a result, 16% will be the only reduction percentage applying under 99ACD (items 111 and 113). Item 111 and 113 also repeal related subsection 99ACD(4B) and subsection 99ACD(5B) respectively, which provide for apportionment if there have been changes in the pricing quantity of the listed brand of the existing item between the historical pricing comparison date and the day before the new brand of pharmaceutical item lists on the PBS.

·          repeal the 60% reduction cap under paragraph 99ACD(1A)(d) for historical AEMP reductions to the existing brand of combination item since its historical pricing comparison date, and repeal related subsection 99ACD(1B) , which provides for apportionment if there have been changes in the pricing quantity of the listed brand of the existing combination item (items 106 and 107).

·          repeal the ‘new presentation’ provisions under subsections 99ACD(3), and 101(4AD) and section 99ACEA (items 110, and 116A).

·          make consequential amendments related to the above repeals to remove references to repealed provisions (items 104, 105, 108, 109, 114, 115 and 116).

Item 119 repeals subsections 99ACF(1A) and (1B), which repeals the reduction cap that prevents a brand of pharmaceutical item having its AEMP reduced under section 99ACF to an amount that would be less than 40% of its AEMP at 1 January 2016 or, if the brand was not listed at that time, its original AEMP on its later date of listing, and related apportionment to account for any changes in pricing quantity since that time. Item 117 makes a consequential amendment to remove the reference to subsection 99ACF(1A) from subsection 99ACF(1) .

 

Item 120 repeals section 99ACP which provides for a 1.48% SPR to the AEMP of brands of pharmaceutical items that have been subject to a first new brand SPR on the 15 ^th anniversary of the drug in the pharmaceutical item being listed as a listed drug. Item 118 makes a consequential amendment to remove related item 9 from the table at subsection 99ACF(1) .

 

Items 121 to 125 make consequential amendments to paragraph 99ACQ(1)(a) , paragraph 99ACR(1)(a) and subsection 99AEI(3) resulting from the repeal of subsection 99ACB(5A) by item 97 and subsection 99ACD(5A) by item 113.