NATIONAL HEALTH AMENDMENT (PHARMACEUTICAL BENEFITS-BUDGET AND OTHER MEASURES) BILL 2017 Explanatory Memorandum

Commonwealth of Australia Explanatory Memoranda

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NATIONAL HEALTH AMENDMENT (PHARMACEUTICAL BENEFITS-BUDGET AND OTHER MEASURES) BILL 2017

2016-2017 THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA HOUSE OF REPRESENTATIVES NATIONAL HEALTH AMENDMENT (PHARMACEUTICAL BENEFITS - BUDGET AND OTHER MEASURES) BILL 2017 EXPLANATORY MEMORANDUM (Circulated by authority of the Minister for Health and Minister for Sport, the Honourable Greg Hunt MP)

NATIONAL HEALTH AMENDMENT (PHARMACEUTICAL BENEFITS - BUDGET AND OTHER MEASURES) BILL 2017 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 (Pharmaceutical Benefits - Budget and Other Measures) Bill 2017 (Bill) amends Part VII of the Act to implement a range of measures included in the PBS Medicines Package (Package), and announced by the Australian Government as part of the 2017-18 Budget. The Package includes measures contained in a five-year Strategic Agreement with Medicines Australia Limited, which operates from 1 July 2017 to 30 June 2022. The measures achieve significant savings while providing five years of clarity and stability for the medicines supply sector regarding PBS pricing policy. The elements of the Package which require amendment to the Act are to:  extend by two years, to 2022, the current five per cent statutory price reduction (SPR) for F1 drugs that applies on the first 1 April on or after being listed on the PBS for five years (otherwise due to cease in 2020);  introduce a one-off ten per cent SPR that applies on 1 June 2018 for F1 drugs listed on the PBS for ten years or more but less than 15 years on that date, and a ten per cent SPR for F1 drugs with their ten year anniversary of listing after 1 June 2018 that applies on the first 1 April in any year from 2019 to 2021 on or after the tenth anniversary;  introduce a one-off SPR of ten per cent followed by five per cent that applies on 1 June 2018 for F1 drugs listed on the PBS for 15 years or more on that date, and a five per cent SPR for F1 drugs with their 15 year anniversary of listing after 1 June 2018 that applies on the first 1 April in any year from 2019 to 2021 on or after the 15th anniversary. (The two-step ten per cent and five per cent SPRs that applies for F1 drugs that have been listed for 15 years or more on 1 June 2018 means that the effective price reduction on that day will be 14.5 per cent.);  increase the SPR that applies on the listing of the first new brand of a pharmaceutical item from 16 per cent to 25 per cent. (The increased percentage applies from 1 October 2018 and to 30 June 2022.);  introduce Ministerial discretion regarding the application of SPRs in certain circumstances;  provide new circumstances whereby a new presentation of a brand of pharmaceutical item may be listed, without triggering first new brand SPRs under sections 99ACB or 99ACD;  remove provisions that would otherwise cease the operation of the Australian Community Pharmacy Authority and the pharmacy location rules on 30 June 2020 (that is, removing the sunset clauses); and  make minor amendments to price disclosure arrangements. In addition, a number of minor drafting improvements and technical amendments to support the intended operation of the Act are included in the Bill. 1

Extend 5 per cent statutory price reduction for single brand drugs on F1 - five years Currently, a five per cent reduction for F1 drugs applies for all brands of pharmaceutical items that have the drug (that is, all forms and strengths); on the first 1 April that occurs on or after the day the drug has been listed on F1 for five years. Price reduction for single brand drugs on F1 - tenth anniversary On 1 June 2018 - 10 per cent The proposed one-off ten per cent SPR for F1 drugs will apply for all brands of pharmaceutical items that have a drug, where the drug has been on the PBS for ten or more but less than 15 years on 1 June 2018. This is a special reduction day to apply the reduction to all F1 drugs that have been listed for more than 10 years but less than 15 years on that date. On 1 April 2019, 2020, 2021 - 10 per cent A ten per cent SPR for F1 drugs will apply for all brands of pharmaceutical items that have a drug, where the drug has its ten year anniversary of listing after 1 June 2018. The reduction day is the first 1 April, that occurs from 2019 to 2021, on or after the day the drug has been listed on the PBS for ten years. These reduction days apply the reduction to each new cohort of F1 drugs that have their ten year anniversary of listing fall by 1 April in each of those years. Price reduction for single brand drugs on F1 - fifteenth anniversary On 1 June 2018 - 10 per cent then 5 per cent The proposed one-off ten per cent followed by five per cent SPR for F1 drugs will apply for all brands of pharmaceutical items that have a drug, where the drug has been listed on the PBS for 15 years or more on 1 June 2018. This is a special reduction day to apply the reduction to all F1 drugs that have been listed 15 years or more on that date. These F1 drugs would qualify not only for the 15 year anniversary five per cent reduction, but also the ten year anniversary ten per cent reduction. The combined effect of the one-off ten per cent and five per cent reduction calculation is an overall reduction of 14.5 per cent. On 1 April 2019, 2020, 2021 - 5 per cent A five per cent SPR for F1 drugs will apply for all brands of pharmaceutical items that have a drug, where the drug has its 15 year anniversary of listing after 1 June 2018. The reduction day is the first 1 April, that occurs from 2019 to 2021, on or after the day a drug has been listed on the PBS for 15 years. These reduction days apply the reduction to each new cohort of F1 drugs that have their 15 year anniversary of listing fall by 1 April in each of those years. Increasing the first new brand statutory price reduction from 16 per cent to 25 per cent Currently, a 16 per cent SPR applies when the first new brand of an already-listed pharmaceutical item lists on the PBS. From 1 October 2018, this SPR will be increased to 25 per cent. Related brands and combination items which take "flow-on" reductions will also be subject to a 25 per cent reduction. However, where an existing brand or related brand of a pharmaceutical item to which a 25% price reduction is applied has already taken price reductions since 1 January 2016 (or, if the drug were not yet listed at that time - price reductions since the drug was listed), those previous reductions can be taken into account to decrease the applicable reduction to less than 25 per cent as set out below. 2

If previous price reductions to the 1 January 2016 price (or, if applicable, the original price) of a listed brand or related brand equate to:  40 per cent or more - the reduction would be zero;  greater than 15 per cent and less than 40 per cent - the reduction would reduce the price to 60 per cent of the price on 1 January 2016, or, if there were no listed brand on 1 January 2016 - 60 per cent of the original price of the first- listed brand;  less than 15 per cent - the reduction would be 25 per cent of the price on the day before the reduction. The 25 per cent first new brand SPR will revert to 16 per cent from 1 July 2022. Ministerial discretion regarding the application of SPRs The proposed measure would introduce Ministerial discretion not to apply, or to reduce, an SPR where a medicine has already been subject to price reductions since 1 January 2016. In these cases, the Minister could exercise his or her discretion to reduce the SPR applicable to the related brand, including reducing the SPR to nil. In deciding whether to exercise his or her discretion, the Minister would be required, without limitation, to take into account previous price reductions to the medicine. In the case of first new brand SPRs, discretions would be available in relation to both the new brand and brands affected by a flow-on reduction. Ministerial discretion would also be available in respect of anniversary SPRs. Removing the cessation provisions for the ACPA and the pharmacy location rules These proposed amendments would implement undertakings in the compact with the Pharmacy Guild of Australia, which forms part of the Package. The amendments would repeal sections of the Act that would, if not repealed, cease the provisions of the Act supporting the establishment, functions and operation of the Australian Community Pharmacy Authority and pharmacy location rules on 30 June 2020. Minor amendments to price disclosure arrangements Minor amendments to current price disclosure calculation methods would provide for an increased price disclosure price reduction threshold to apply in certain circumstances. Minor drafting improvements and technical changes Technical changes included in the Bill would improve the operation of existing provisions in the Act. These changes include that the Minister could determine that, for the purposes of Part VII of the Act, more than one name is recognised for a drug, or more than one description is recognised for the form of a medicine or a manner of administration. A determination may be made where, for example, there have been changes to the name of a medicine resulting from international or Australian naming conventions or standardised terminology. Other amendments to provisions in Part VII would enable a listing for a pharmaceutical benefit to be retained on the PBS for a limited period for supply only, but not for prescribing. This would allow existing prescriptions for the medicine to be dispensed and supplied as pharmaceutical benefits, but no new prescriptions for that listing to be prescribed. 3

Amendments included as drafting improvements would simplify complex provisions, address inconsistencies, remove obsolete terms, and update terms for currency. These would improve existing provisions by:  clarifying which charges are included when working out the maximum patient charge for a supply of a pharmaceutical benefit, repatriation pharmaceutical benefit or outpatient medication to count to the safety net;  clarifying arrangements for tallying general and concessional payments to the safety net and determining when reduced safety net charges apply;  updating an obsolete reference to 'manufacturers' in the privacy exemption relating to publication of PBS brand level statistics to refer also to 'responsible persons';  replacing the term 'medical practitioner' with 'PBS prescriber' for the purposes of supply of pharmaceutical benefits in certain institutional settings;  providing consistency for data collection for under co-payment prescriptions by referring also to concessional under co-payment prescriptions; and  correcting a minor typographical punctuation error resulting from a previous amendment. Financial Impact Statement The amendments in Schedules 1 to 4 of the Bill are required to implement measures announced by the Australian Government as part of the 2017-18 Budget, under the 'Improving Access to Medicines' initiatives. These measures have estimated savings of $1.292 billion over four years, and $1.8 billion over the five year term of the pharmaceutical industry agreements. 2017-18 2018-19 2019-20 2020-21 4 Year Total Expense $m -24.7 -364.5 -427.1 -476.0 -1,292.3 4

Statement of Compatibility with Human Rights Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 NATIONAL HEALTH AMENDMENT (PHARMACEUTICAL BENEFITS - BUDGET AND OTHER MEASURES) BILL 2017 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 The National Health Amendment (Pharmaceutical Benefits - Budget and Other Measures) Bill 2017 (Bill) amends the National Health Act 1953 (Act) to implement a series of measures announced by the Australian Government as part of the 2017-18 Budget. These measures will achieve significant savings through changes to pricing arrangements for pharmaceutical benefits negotiated via agreements with key industry stakeholders. The agreements also provide policy stability and certainty for the originator medicines sector over the term of the agreements until mid-2022. The Bill will repeal provisions that would automatically cease the establishment of the Australian Community Pharmacy Authority, and the role of the Authority in the approval of pharmacists for the purposes of the Act, on 30 June 2020. The Bill also contains minor and technical amendments. These will enable the Minister to determine that more than one name of a drug, or description of a form or manner of administration of a drug, is recognised for PBS purposes. Such a determination may be made, for example, where the name a drug is marketed under has been changed solely to reflect international or Australian naming conventions and standardised terminology. Other changes will provide for pharmaceutical benefits to be listed on the Pharmaceutical Benefits Scheme (PBS) for supply only, but not for prescribing. This will be achieved by extending the Minister's power to authorise, by legislative instrument, the pharmaceutical benefits that may be prescribed by classes of PBS prescriber such as optometrists and dental practitioners, to medical practitioners. It is intended that the power may be used where, for example, a pharmaceutical benefit (the previous pharmaceutical benefit) is replaced by a very similar product, such as the same product with a different name. As a result, the previous pharmaceutical benefit can be retained on the PBS, with no active prescriber groups authorised to write new prescriptions for it, but pharmaceutical benefits can continue to be dispensed under the PBS using existing prescriptions. A number of drafting improvements will clarify and support the existing operation of the Act. Human rights implications This Bill is compatible with Articles 2 and 12 of the International Covenant on Economic, Social and Cultural Rights by assisting with the progressive realisation by all appropriate means of the right of everyone to the enjoyment of the highest 5

attainable standard of physical and mental health. The PBS assists with advancement of this human right by providing subsidised access to medicines for Australians. The measures in the Bill are part of the PBS Medicines Package (Package), a balanced package designed to build and maintain capacity to provide timely affordable access to new technologies and increasingly expensive, medicines. The changes to PBS pricing arrangements will see a reduction in the cost to the Australian Government for providing medicines to the community via the PBS. This will assist in maintaining PBS spending at sustainable levels into the future, ensuring the Australian Government can continue to support access to subsidised health care for all Australians. The proposed pricing arrangements will also see a reduction in the out-of-pocket cost to consumers for accessing some PBS medicines which cost less than the full patient co-payment amount. The proposed changes to PBS pricing will reduce prices for medicines for producers, wholesalers and suppliers of PBS medicines. However, the Package also includes a Government commitment to fund the listing of all new pharmaceutical benefits recommended by the Pharmaceutical Benefits Advisory Committee. As such, the Australian Government is able to reassure the public and the pharmaceutical industry that future Government spending on the PBS is maintained and guaranteed. The measures implemented through the Bill will also enable pharmaceutical companies to list a new presentation of a pharmaceutical benefit with a single brand on the F1 formulary without triggering an automatic first additional new brand statutory price reduction. This supports innovation for new medicines which will benefit consumers and preserves prices for newer medicines which benefits originator companies. Amendments relating to the PBS Safety Net are largely intended to clarify and simplify drafting, rather than affect the practical application of the provisions to consumers. The changes in the Bill will provide for regulations to specify the amount that can be counted towards the PBS patient safety net. This enables the legislation to clearly describe the handling of certain fees and charges such as an additional patient charge negotiated as part of the Sixth Community Pharmacy Agreement (6CPA), by the Australian Government and the Pharmacy Guild of Australia. The Act is currently silent on the handling of such fees and charges. The capacity to specify how these fees and charges will contribute to a patient's PBS safety net in regulations enables future changes to these fees and charges, for example under a new agreement negotiated with the Pharmacy Guild of Australia, to be made without needing to amend the Act. Finally, the Bill will allow the Minister to restrict the types of pharmaceutical benefits that may be prescribed by medical practitioners. This will bring medical practitioners in line with all other classes of PBS prescribers. This power is only intended to be used in limited circumstances, for example where a pharmaceutical benefit is replaced by a very similar product. This would ordinarily result in the first benefit being 6

immediately delisted, rendering prescriptions already written for that benefit invalid. The amendments made by the Bill will enable the Minister to prevent new prescriptions being written for the first benefit, while retaining the listing of the first benefit so that the benefit can still be dispensed based on existing prescriptions. The Minister would also be required to consider any advice of the Pharmaceutical Benefits Advisory Committee (PBAC) in relation to any pharmaceutical benefit in authorising prescribing access to any particular pharmaceutical benefit. These safeguards ensure that these changes would, on balance, positively impact patient access to pharmaceutical benefits rather than restricting it. 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 though reduced out of pocket costs and improved access to medicines. The Honourable Greg Hunt MP, the Minister for Health and Minister for Sport 7

NATIONAL HEALTH AMENDMENT (PHARMACEUTICAL BENEFITS - BUDGET AND OTHER MEASURES) BILL 2017 NOTES ON CLAUSES Clause 1 - Short Title Clause 1 provides for the short title of the Act to be the National Health Amendment (Pharmaceutical Benefits--Budget and Other Measures) Act 2017. Clause 2 - Commencement This clause provides that sections 1 to 3 of the Bill will commence on Royal Assent. Other parts of the Bill commence as follows:  Part 1 of Schedule 1 will commence on 1 October 2018;  Part 1 of Schedules 2, 3 and 4 will commence on the day after Royal Assent;  Part 2 of Schedules 1, 2, 3 and 4 will commence on 1 July 2022;  Schedules 5 to 9 will commence on the day after Royal Assent. Clause 3 - Schedule(s) This clause provides that legislation that is specified in a Schedule to the Bill is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule has effect according to its terms. Each of the Schedules to the Bill amends the National Health Act 1953 (Act). 8

SCHEDULE 1 -- PRICE REDUCTIONS FOR NEW BRANDS OF PHARMACEUTICAL ITEMS Part 1 - 25% price reduction The proposed amendments in Part 1 of Schedule 1 increase the current statutory price reduction (SPR) that applies when the first additional new brand of an existing pharmaceutical item is listed on the Pharmaceutical Benefit Scheme (PBS). Amendments made by Part 1 of Schedule 1 also provide that where the first new brand of an existing item is listed or a related brand of the pharmaceutical item is subject to a flow-on SPR due to that listing, any previous price reductions that have applied to the existing item or related brand since 1 January 2016 may result in the first new brand and related brand SPRs being applied at a different rate than would otherwise apply, or may not be applied at all. The amendments further provide that where a listed brand of the existing item has been subject to previous price reductions, the Minister may also determine not to apply a SPR, or to apply a lower SPR. Part 1 of Schedule 1 commences on 1 October 2018. Items 1 and 2 - subsection 84(1) Item 1 repeals the definitions of "subject to a 12.5% price reduction" and "subject to a 16% price reduction" as they are no longer used. Item 2 inserts new definitions for "12.5% price reduction", "16% price reduction" and "25% price reduction", which refer readers to new subsections 99ACA(2), (2A) and (2B), respectively. Refer to Item 4 for details. Item 3 - Section 99AC Item 3 of Schedule 1 omits the term "16% price reduction" wherever occurring and substitutes the term "25% price reduction", to increase the amount of the first new brand SPR applied by section 99AC from 16 per cent to 25 per cent. Item 4 - Subsections 99ACA(2) and (2A) Subsection 99ACA of the Act provides definitions applying in Division 3A. Item 4 of Schedule 1 substitutes new subsections 99ACA(2) and (2A) and inserts a new subsection 99ACA(2B). These subsections define the circumstances where a listed component drug in a combination item has been "subject to a 12.5 per cent price reduction", "subject to a 16 per cent price reduction" or "subject to a 25 per cent price reduction". These terms are used in sections 99ACD and 99ACE of the Act for the purposes of exempting a brand of pharmaceutical benefit from an SPR, or adjusting the amount of the SPR, where the brand of combination item has a component drug that has already been subject to a 12.5 per cent, 16 per cent or 25 per cent administrative price reduction. 9

A component drug in a combination item will not be considered to have been subject to a 12.5 per cent, 16 per cent or 25 per cent price reduction under new subsections 99ACA(2), (2A) and (2B) of the Act where it has been subject to a previous SPR under section 99ACB (first new brand) or section 99ACF because of section 99ACH (flow-ons from a first new brand). Under the proposed amendments, previous reductions to a component drug in a combination item may be taken into account by the Minister when considering whether to exercise his or her discretion not to apply a SPR, or to apply a lower SPR than would otherwise apply to the brand of the combination item. Item 5 - Subdivision B of Division 3A of Part VII (heading) Item 6 - Section 99ACB (heading) Items 5 and 6 of Schedule 1 amend the heading to Subdivision B of Part 3A of the Act and the heading to section 99ACB of the Act, respectively. These amendments reflect the increase to the new brand SPR from 16 per cent to 25 per cent . Item 7 - Paragraphs 99ACB(2)(a), (b) and (c) Section 99ACB of the Act currently provides that, when a new brand of a pharmaceutical item is listed on the PBS, and that brand is bioequivalent or biosimilar to another listed brand of the same item and has the same drug and manner of administration as the already listed brand, the price of the new brand agreed to by the Minister and the responsible person for the brand (the agreed price) must be at least 16 per cent lower than the price of the existing brand on the day before the new brand lists (see subsections 99ACB(1) and (5)). Item 7 of Schedule 1 omits "16%" and substitutes "16% or 25%" in paragraphs 99ACB(2)(a), (b) and (c) to reflect the new, increased first new brand SPRs under Subdivision B of Division 3A. Item 8 - At the end of subsection 99ACB(2) Section 99ACB of the Act currently includes a number of exceptions to the 16 per cent price reduction applying to the new brand. These include where a 12.5 per cent or 16 per cent administrative price reduction has already applied to the existing pharmaceutical item, or another item that has the same drug and manner of administration as the existing item or, if the drug is in a therapeutic group, to another item having another drug in that group with the same manner of administration. Item 8 of Schedule 1 adds new paragraph 99ACB(2)(d). The new paragraph will provide that the first new brand SPR in section 99ACB will not apply to the new brand of the existing item where, on the day before the new brand is listed on the PBS, a price reduction of 40 per cent or more has applied to:  the approved ex-manufacturer price (AEMP) of a listed brand of the existing item on 1 January 2016; or  if there was no listed brand of the item on 1 January 2016, the original AEMP of the first listed brand of the item. This amendment aims to limit the total percentage reduction associated with a new brand SPR. This provision would protect brands which have already been subject to 10

price reductions of 40 per cent or more from a 25 per cent new brand SPR. Section 99ACB would not apply. Item 9 - Subparagraph 99ACB(3)(a)(ii) Item 10 - At the end of paragraph 99ACB(3)(a) Subsection 99ACB(3) of the Act sets out a number of circumstances in which the previous application of certain SPRs will mean that the section does not apply to the newly listing brand. It currently provides that a first new brand SPR will not apply under section 99ACB where the new brand of the pharmaceutical item or a listed brand of the item has previously been subject to:  a first new brand SPR under subsection 99ACB(1); or  a first new brand flow-on SPR under subsection 99ACF(1) or 99ACF(2) because of item 1 in the table in section 99ACF. Item 9 replaces reference to reductions under section 99ACF(1) or (2) because of item 1 of the table in section 99ACF with reference to reductions under section 99ACF(1) or (2) because of section 99ACH. This amendment is a technical change consequential on amendments to section 99ACF of the Act made by items 35 and 36 of Schedule 1. Item 10 adds new subparagraph 99ACB(3)(a)(iii) to the Act, which would provide that a first new brand SPR will also not apply under section 99ACB where the new brand or a listed brand of the existing pharmaceutical item has previously been subject to a first new brand flow-on SPR by virtue of new subsections 99ACF(2AB) or (2AC). New subsections 99ACF(2AB) and (2AC), inserted by item 36 of Schedule 1, sets out the first new brand SPR flow-on reductions that apply where there have been previous price reductions of less than 40% (refer to item 36). Item 11 - Subsection 99ACB(4) (heading) This item repeals the heading "16% price reduction" and substitutes the heading "25% price reduction" in line with the increased first new brand SPRs under Division 3A of Part VII of the Act. Item 12 - Subsection 99ACB(5) Item 12 of Schedule 1 repeals subsection 99ACB(5) of the Act and substitutes new subsections 99ACB(4A), (5) and (5A). Subsection 99ACB(5) currently provides that the agreed price of a first new brand of an existing pharmaceutical item on the F1 formulary must not exceed the AEMP of the listed brand of the item on the day before the new brand lists, reduced by 16 per cent. New subsections 99ACB(4A), (5) and (5A) will together provide that if, on the day before the new brand lists on the PBS:  a reduction of 15 per cent or less has applied to the AEMP of a listed brand of the existing pharmaceutical item on 1 January 2016 or, where there was no listed brand on 1 January 2016, to the AEMP at the date of listing of the first listed brand (the comparison time), the agreed price of the new brand must not be more than the AEMP of a listed brand of the existing item on the day 11

before the new brand lists, less 25 per cent (new subsections 99ACB(4A) and (5));  a reduction of more than 15 per cent but less than 40 per cent has applied to the AEMP of a listed brand of the existing item since the comparison time, the agreed price of the new brand must not be more than 60 per cent of the AEMP of a listed brand of the existing item at the comparison time (new subsections 99ACB(4A) and (5A)). This effectively applies a proportion of the 25 per cent first new brand SPR to the price of the new brand, adjusted to take into account any previous reductions applied to the listed brand of the pharmaceutical item since 1 January 2016, or first listing. The application of these SPRs is subject to the exercise of Ministerial discretion not to apply, or to apply a lower, SPR than would otherwise be the case (see item 14 of Schedule 1). Item 13 - Subsection 99ACB(6) Subsection 99ACB(6) of the Act provides for the AEMP of the existing brand to be adjusted proportionally if the pricing quantity or number of units of the existing brand and the new brand differ. Item 13 of Schedule 1 makes a consequential amendment to subsection 99ACB(6) to ensure that adjustments to the AEMP may be made for the purposes of both subsections 99ACB(5) and (5A) of the Act. Item 14 - After subsection 99ACB(6) Item 14 inserts new subsections 99ACB(6A), (6B), (6C) and (6D) into the Act. New subsections 99ACB(6A) and (6B) create a power for the Minister to determine, by written instrument, that for the purposes of applying the new brand SPR to the agreed price for the first new brand in subsections 99ACB(5) or 99ACB(5A), the AEMP of the existing brand on the day before the new brand lists may be worked out using:  for subsection 99ACB(5), a lower amount or percentage than would otherwise apply (and may be a 0 per cent reduction) - in practice this would enable the calculation of the AEMP of the existing brand as reduced by the SPR, which sets a maximum for the agreed price of the new brand, to be the AEMP reduced by (for example) 20 per cent rather than 25 per cent; or  for subsection 99ACB(5A), a higher percentage than would otherwise apply - in practice this would enable the maximum agreed price for the new brand to be, for example, 65 per cent of the AEMP of the existing brand at the comparison time, rather than 60 per cent of the AEMP. Subsection 99ACB(6C) will provide that in making a determination the Minister must take into account what the agreed price of the new brand of the item would otherwise be in relation to the day the new brand lists on the PBS if no determination were made. The Minister may also take anything else he or she considers relevant into account. Subsection 99ACB(6D) will provide that, if the Minister makes a determination under subsection 99ACB(6A) or (6B), the agreed price of the new brand of the item cannot 12

be further reduced under section 99ACB of the Act if, at a later time, another new brand of the item lists on the PBS. Item 15 - At the end of subsection 99ACC(4A) Section 99ACC of the Act provides for flow-on SPRs for single brand combination items where a component drug in the item has been subject to certain SPRs. A combination item is a pharmaceutical item that has a drug that contains at least two other drugs, at least one of which is listed on the PBS. Subsection 99ACC(4) of the Act enables the Minister to take into account certain advice from the Pharmaceutical Benefits Advisory Committee (PBAC) when working out the new price of a single brand of combination item under section 99ACC. Where subsection 99ACC(4) applies, subsection 99ACC(4A) sets out other criteria the Minister may or must take into account. Item 15 inserts new paragraph 99ACC(4A)(e), which provides that to the extent the combination item contains non-listed component drugs, the Minister must also take into account the price and quantity of each non-listed component drug as if the non- listed component had been listed on the PBS and had been subject to the applicable SPR on the same day as the listed component. Example: A combination drug on the F1 formulary subject to a statutory price reduction An F1-listed drug becomes subject to a first new brand SPR under section 99ACB, a flow-on first new brand SPR under section 99ACF, or an anniversary SPR under subsection 99ACF. If that F1-listed drug is a component of a single brand combination item, section 99ACC is triggered and any single brand combination item which contains that listed drug must become subject to a new agreed price. Where the single brand combination item contains only listed component drugs, section 99ACC will continue to apply as it did previously. The AEMP of any brands of the listed component drugs will be taken into consideration by the Minister, along with the quantity of the listed component in the combination item and any relevant PBAC advice. The Minister will then use this information in agreeing a new price for the single brand combination item. Where the single brand combination item contains one or more non-listed component drugs, for the purposes of section 99ACC(4A) the non-listed component drugs will now be taken to have become subject to the same SPR that is applicable to the listed component drug. Where the single brand combination item contains more than one listed component drug, the non-listed component drugs can only become simultaneously subject the same SPR that is applicable to the listed component drug where the non-listed component has not been subject to that type of SPR previously. In this way, flow-on first new brand SPRs would apply to non-listed components on the first listed component's reduction day only, and anniversary SPRs would apply to non-listed components on each applicable anniversary of the first listed component only. 13

Item 16 - Subsection 99ACC(4B) Item 16 of Schedule 1 substitutes a new subsection 99ACC(4B). The new subsection sets out criteria the Minister must take into account in agreeing to a new price for the single brand combination item where subsection 99ACC(4) does not apply. These criteria reflect those in existing paragraph 99ACC(4A)(d) and new paragraph 99ACC(4A)(e). Item 17 - Subsection 99ACC(6) This item substitutes a new subsection 99ACC(6) of the Act. Subsection 99ACC(6) describes when a listed component drug in a combination item has been subject to a SPR. The subsection currently provides that a listed component drug in a combination item will have been subject to an SPR if any of the following has applied to a listed brand of an item that has the component drug:  a first new brand SPR under section 99ACB; or  a flow-on first new brand SPR under subsections 99ACF(1) or (2); or  a price disclosure reduction under section 99ADH. New paragraph 99ACC(6)(a) includes reference to new subsections 99ACF(2AB) and (2AC), to be inserted by item 36 of Schedule 1, into the list of SPRs to be flowed on by section 99ACC to a single brand combination item. It also makes technical changes to the reference to section 99ACF to reflect amendments to that section made by items 35 and 36 of Schedule 1. A first new brand SPR which has not been applied in-full because the existing brand of the listed component has previously been subject to price reductions of more than 15 per cent but less than 40 per cent since the comparison day would still trigger section 99ACC, and would still flow through to a single brand combination item which contains that drug in the same way as if the SPR had applied to the component at the full reduction percentage. New paragraph 99ACC(6)(b) further provides that whichever provision mentioned in paragraph 99ACC(6)(a) applies to the listed component, applies in the same way as it applies to the listed brand of the pharmaceutical item which triggered the flow-on. New paragraph 99ACC(6)(c) enables the flow-on SPR for single brand combination items to be triggered in relation to a 5 per cent anniversary SPR under the current section 99ACHA, as well as a number of new SPRs created by the Bill. These new SPRs are created by new sections 99ACJ, 99ACK and 99ACL, in combination with section 99ACF (see item 8 of Schedule 2). New paragraph 99ACC(6)(d) provides that whichever of the provisions mentioned in paragraph 99ACD(6)(c) applies to the listed component, applies in the same way as it applies to the listed brand that triggered the flow-on. Items 18 to 24 - Section 99ACD Section 99ACD of the Act deals with the new brand SPR applying when a new brand of a combination item is listed on the PBS, that new brand is bioequivalent or 14

biosimilar to another listed brand of the same item, the drug in the new item and the existing item contain the same component drugs and the new and existing items have the same manner of administration. Currently, where section 99ACD applies, the price of the new brand of the combination item agreed to by the Minister and the responsible person for the brand (the agreed price) must be at least 16 per cent lower than the price of the existing brand on the day before the new brand lists (see current subsections 99ACD(1) and (5)). Items 18 to 24 make corresponding amendments to section 99ACD in relation to the first new brand SPR for combination items as were made to section 99ACB of the Act by items 6 to 14 of Schedule 1 for pharmaceutical items that are not combination items. These amendments are:  the headings to the section and to subsection 99ACD(4) will be amended to reflect the higher 25 per cent SPR (items 18 and 21);  paragraphs 99ACD(1A)(a), (b) and (c) will be amended to include reference to "16% or 25%" administrative price reduction (item 19);  a new circumstance in which the SPR in section 99ACD will not apply will be added to subsection 99ACD(1A), being where, on the day before the new brand of the brand of the combination item is listed on the PBS, a price reduction of 40 per cent of more has already applied to the AEMP of a listed brand of the item (item 20);  current subsections 99ACD(5), (6), (6A) and (6B) will be repealed and replaced by 99ACD(4A), (5) and (5A) which will apply the SPR depending on the amount by which the AEMP of a listed brand of the existing item has been reduced since 1 January 2016 or, if there was no listed brand at that time, since a brand first listed. The operation of these provisions will mirror the operation of new subsections 99ACB(4A), (5) and (5A), added by item 12 of Schedule 1 (item 22);  a consequential amendment to subsection 99ACD(7), which deals with apportioning of price where the pricing quantity on the day before the new brand lists on the PBS is different to the pricing quantity on the listing day, to add reference to new subsection 99ACD(5A) (item 23);  the creation of a Ministerial discretion not to apply the new brand SPR in section 99ACD to the new brand of the combination item, or to apply a lower SPR than would otherwise apply. The discretion will operate in the same way as the discretion created by item 14 of Schedule 1 for section 99ACB (item 24). Provisions dealing with adjustments for prior price reductions to component drugs in the new brand currently provided for in subsections 99ACD(6), (6A) and (6B) will be repealed, however the Minister could choose to exercise his or her discretion under new subsection 99ACD(7A) or (7B) not to apply, or to apply a reduced, flow-on SPR, if the component drugs in a combination item have taken significant previous price reductions. 15

Item 25 - Section 99ACE (heading) This item repeals the heading "Flow-on of 16% price reduction to related brands of combination items" and substitutes the heading "Flow-on of 25% price reduction to related brands of combination items" in line with the new, increased percentage SPRs under Subdivision 3A of the Act. Item 26 - After subsection 99ACE(1) This item inserts new subsection 99ACE(1A) and (1B) into the Act. New subsection 99ACE(1A) sets out how the section will apply where new paragraph 99ACD(1A)(d) applies in relation to a new brand of a combination item (see item 20 of Schedule 1). Where paragraph 99ACD(1A)(d) applies, section 99ACD is not triggered in relation to the new brand of combination item, meaning the brand will not be subject to the first new brand SPR. Subsection 99ACE(1A) provides that section 99ACE will operate as if section 99ACD had applied to the new brand, enabling the 25 per cent first new brand flow-on SPR to apply to related brands of combination items. New subsection 99ACE(1B) provides that a 25 per cent flow-on of a first new brand price reduction will not apply to a related brand of a related item under section 99ACE where the AEMP of the related brand of the related item on 1 January 2016 or, if there was no listed brand at that time, since a brand first listed, has, by virtue of previous price reductions, been reduced by 40 per cent or more. This provision would protect brands which have already been subject to price reductions of 40 per cent or more from a flow-on 25 per cent SPR. Item 27 - Subsection 99ACE(2) (heading) This item would repeal the heading "16% price reduction" and substitute the heading "25% price reduction" in line with the new, increased percentage SPRs under Subdivision 3A. Item 28 - After subsection 99ACE(2) This item inserts new subsections 99ACE(2A) and (2B). These new subsections set out which of the new paragraphs of subsection 99ACE(3) or (4) will apply to work out the new agreed, determined or claimed price, as applicable, of a related brand of a combination item following the cessation of an existing agreed, determined or claimed price brought about by subsection 99ACE(2). Under new subsections 99ACE(2A) and (2B), the applicable paragraphs of subsection 99ACE(3) or (4) will depend on the percentage of previous price reductions that have applied to the AEMP of the related brand of the related item or the particular pack quantity of the related brand of the related item since 1 January 2016 or, where the related brand listed on the PBS after that date, from the time the brand first listed. Where the reduction is 15 per cent or less, paragraphs 99ACE(3)(a),99ACE(3)(c), 99ACE(4)(a) or 99ACE(4)(c) (in the case of an agreed or determined price) or paragraph 99ACA(4A)(a) (in the case of a claimed price) will apply. Where the reduction is more than 15 per cent, but less than 40 per cent, paragraphs 99ACE(3)(b), 16

99ACE(3)(d), 99ACE(4)(b) or 99ACE(4)(d) (in the case of an agreed or determined price) or paragraph 99ACE(4A)(b) (in the case of a claimed price) will apply. Item 29 - Paragraphs 99ACE(3)(a) and (b) Item 29 repeals paragraphs 99ACE(3)(a) and (b) and replaces them with paragraphs 99ACE(3)(a) to (d). Paragraphs 99ACE(3)(a) to (d) apply where a price agreement was in force on the day before the new brand listed on the PBS and set out the maximum amount that may apply under a new price agreement or price determination. These amounts are:  the AEMP of the existing brand on the day before the new brand lists, reduced by 25 per cent; or  60 per cent of the AEMP for the brand on 1 January 2016, or the first listed brand. Paragraphs 99ACE(3)(a) to (d) are subject to subsections 99ACE(5) and (5A), which allow the Minister to determine not to apply, or to apply a reduced, flow-on SPR (see item 34 of Schedule 1). Item 30 - 99ACE(4)(a) and (b) This item replaces 99ACE(4)(a) and (b) with new paragraphs 99ACE(4)(a) to (d). It makes corresponding provision in relation to the new agreed or determined price of a related brand of a combination item affected by the flow-on SPR in section 99ACE, where a price determination was in force on the day before the new brand listed on the PBS. These paragraphs are also subject to subsections 99ACE(5) and (5A) (see item 34 of Schedule 1). Item 31 - Subsection 99ACE(4A) Item 32 - Paragraphs 99ACE(4A)(a) and (b) Subsection 99ACE(4A) deals with the new claimed price (if any) to apply following a brand of a combination item taking a flow-on SPR under section 99ACE. Items 31 and 32 together provide for the new claimed price determined under subsection 85B(3) of the Act to be:  the claimed price for the pack quantity of the related brand of the related item on the day before the new brand lists, reduced by 25 per cent (where the claimed price has already taken a reduction of 15 per cent or less); or  60 per cent of the claimed price for the pack quantity at the comparison time (where the claimed price has already taken a reduction of 15 per cent or more, but less than 40 per cent). Item 33 - Subsection 99ACE(4B) Item 33 makes consequential changes to subsection 99ACE(4B) regarding claimed prices to reflect the revised drafting of subsection 99ACE(3) and (4). Item 34 - Subsections 99ACE(5), (5A) and (5B) This item would repeal the current subsections 99ACE(5), (5A) and (5B) of the Act, which exempt component drugs from further SPRs where they have been subject to previous price reduction of 12.5 per cent or 16 per cent, which resulted in a reduced 17

AEMP for the related brand of the related item. Under the proposed amendments, components which had previously been exempt from further reductions, will now have the previous reductions taken into consideration and may be used as a basis for not applying, or lowering the SPR applicable to the brand. Item 34 replaces the repealed subsections with new subsections 99ACE(5) and (5A) to (5G). These subsections will give the Minister the power to determine by written instrument that:  where the maximum new agreed or determined price for the brand of the combination item subject to section 99ACE is to be calculated with reference to the AEMP of the related brand of the related item on the day before the new brand lists of the PBS, reduced by 25 per cent, that AEMP is to be worked out using a lower percentage (including 0 per cent) (subsection 99ACE(5)); or  where the maximum new agreed or determined price is ordinarily 60 per cent of the AEMP of the related brand on the comparison time, that AEMP is to be worked out using a higher percentage (99ACE(5A)). Similarly, the Minister may determine by written instrument that the new claimed price for a particular pack quantity of a combination item is to worked out using a higher or lower percentage, as appropriate (subsection 99ACE(5D and (5E)). In making a determination under subsection 99ACE(5) or (5A), (5D) or (5E) the Minister is required to take into account (as appropriate) what the AEMP or claimed price for the pack quantity of the related brand of the related item would otherwise have been if a determination were not made, and may take into account any other matters the Minister considers relevant (subsections 99ACE(5B) and (5F)). If the Minister makes a determination under subsection 99ACE(5) or (5A), (5D) or (5E), the agreed or determined price, or claimed price for the pack quantity, cannot be further reduced under section 99ACE on any reduction day that occurs after the reduction day specified in the determination (subsections 99ACE(5C) and 5G)). Item 35 - Subsection 99ACF(1) (table item 1) This item repeals item 1 of the table to subsection 99ACF(1), consequential on the insertion of new subsections 99ACF(2AA) to (2AC) (see item 36). Item 36 - After subsection 99ACF(2) This item inserts new subsections 99ACF(2AA), (2AB) and (2AC) into the Act. These new subsections deal with the application of the flow-on of a first new brand SPR to related brands of related items that are not combination items, triggered by the application of section 99ACH. This SPR is currently flowed on by means of item 1 of the table to subsection 99ACF(1). New subsection 99ACF(2AA) would direct the reader to new subsection 99ACF(2AB) or 99ACF(2AC) to work out how to calculate the new AEMP and (if applicable) the new claimed price of the brand to which section 99ACH applied. New subsection 99ACF(2AB) will apply where, on the day before the new brand lists on the PBS, the AEMP and the claimed price (if any) of the related brand has been 18

reduced by 15 per cent or less since 1 January 2016 or, where there was no listed brand on 1 January 2016, to the AEMP on the date listing of the first listed brand (the comparison time). New subsection 99ACF(2AC) will apply where previous reductions have been more than 15 per cent but less than 40 per cent. New subsection 99ACF(2AB) provides that the new AEMP or claimed price (if any) for the related brand will be its current AEMP or claimed price, as appropriate, reduced by 25 per cent. New subsection 99ACF(2AC) provides that the new AEMP or claimed price (if any) will be 60 per cent of the AEMP or claimed price, as appropriate, on the comparison time. This effectively applies a portion of the 25 per cent SPR to the price of the related brand, adjusted to take into account any previous reductions applied to the related brand of the related item since the comparison time, capping the new price at 60 per cent of the price at that time. Item 37 - Subsection 99ACF(2A) Item 37 makes a technical change to subsection 99ACF(2A) to provide that, where applicable, the method for apportioning if pricing quantity changes will apply for the purposes of new subsections 99ACF(2AB) and(2AC) made by item 36. Item 38 - After subsection 99ACF(3) Item 38 inserts new subsections 99ACF(3AA) and (3AB), which provide for a Ministerial discretion not to apply, or to apply a lower, flow-on first new brand SPR under subsection 99ACF(2AB) or (2AC). Item 39 - Subsection 99ACF(3A) Item 40 - At the end of subsection 99ACF(3B) These items make amendments to section 99ACF, consequential on the flow-on first new brand SPR applying where section 99ACH applies being applied through subsections 99ACF(2AB) and (2AC) rather than through item 1 of the table to subsection 99ACF(1). These amendments will ensure that in exercising his or her discretion under new subsections 99ACF(3AA) or (3AB), the Minister is required to take into account the same considerations as for the exercise of discretions in subsections 99ACF(3), (3A) and (3B) (see item 11 of Schedule 2). Item 41 - Subparagraph 99ACG(b)(iii) Item 42 - At the end of paragraph 99ACG(b) Section 99ACG of the Act currently provides that once a brand of a pharmaceutical item has been subject to price disclosure requirements, no SPRs other than those relating to price disclosure, apply to the brand. Paragraph 99ACG(b) specifically provides the SPR provisions which cannot be applied to an F2 formulary drug which has already become subject to price disclosure requirements. This list includes first new brand SPRs under sections 99ACB or 99ACD, flow-on first new brand SPRs under section 99ACE or subsections 99ACF(1) or (2), or a five year anniversary price reduction under subsection 99ACF(1). 19

Items 41 and 42 make a consequential change to paragraph 99ACG(b) to reflect that the flow-on first new brand SPR arising where section 99ACH is triggered will now be implemented through subsections 99ACF(2AB) and (2AC) rather than through an item in the table to subsection 99ACF(1). Item 43 - Section 99ACH (heading) This item repeals the heading "16% statutory price reduction flow-on to related brands" and substitutes the heading "25% statutory price reduction flow-on to related brands" in line with the new, increased percentage SPRs under Subdivision 3A. Item 44 - Paragraph 99ACH(1)(a) Subsection 99ACH(1) of the Act currently provides the circumstances where a first new brand SPR under section 99ACB is to flow-on to related brands by virtue of section 99ACF. This item would replace reference to section 99ACB in paragraph 99ACH(1)(a) with reference to subsections 99ACB(5) or (5A). This change is consequential on the revised drafting of section 99ACB to include two levels of SPR dependent of on the previous level of price reduction to which an existing brand of pharmaceutical item has been subject. Item 45 - After subsection 99ACH(1) Item 45 inserts a new subsection 99ACH(1A) that sets out how the section will apply where new paragraph 99ACB(2)(d) applies in relation to a new brand of a pharmaceutical item which is not a combination item (see item 8 of Schedule 1). Where paragraph 99ACB(2)(d) applies, section 99ACB is not triggered in relation to the new brand, meaning the brand will not be subject to the first new brand SPR. Subsection 99ACH(1A) provides that section 99ACH will operate as if section 99ACB had applied to the new brand, enabling the 25 per cent first new brand flow-on SPR to apply to related brands. Item 46 - Subsection 99ACH(2) This item makes a consequential change to subsection 99ACH(2), so that the definition of a 'related brand' for the purposes of section 99ACH applies to new paragraph 99ACH(1A)(b) as well as existing paragraph 99ACH(1)(c). Item 46 - Paragraph 99ACHA(1)(c) This item makes a consequential change to section 99ACHA, which deals with the 5 per cent anniversary SPR for drugs that have been in the F1 formulary for five years on the relevant reduction day. This amendment ensures that the changes made by item 36 of Schedule 1 to where the 16 per cent flow-on first new brand SPR appears in section 99ACF is reflected in paragraph 99ACHA(1)(c). This will maintain the current arrangement that where the AEMP of a brand of pharmaceutical item has been reduced because of a flow-on first new brand SPR on a previous reduction day for section 99ACHA, the brand is not subject to the 5 per cent anniversary SPR under section 99ACHA. 20

Part 2 - 16% price reduction The Strategic Agreement with Medicines Australia made on 27 April 2017 expires on 30 June 2022. The Strategic Agreement provides that the changes to the operation of the SPRs in Division 3A of the Act made by Part 1 of Schedule 1 of the Bill will apply only until the expiry of the Agreement. Part 2 of Schedule 1 will take effect on 1 July 2022. It repeals amendments made to Division 3A of Part VII of the Act by Part 1 of Schedule 1 on 1 October 2018, and provides for the first new brand SPRs to revert to their operation before that date, with some minor exceptions. The main results of the operation of Part 2 of Schedule 1 are that:  the 25 per cent first new brand SPRs, including flow-on first new brand SPRs, will revert to 16 per cent;  the Minister will no longer have the capacity to exercise discretion not to apply a first new brand SPR, or to apply a lower SPR than would otherwise apply;  the first new brand SPRs will no longer apply in differential amounts by reference to the amount by which the AEMP of existing listed brands of pharmaceutical item have been reduced since 1 January 2016 or, if no brand was listed on the PBS at that time, since the brand was first listed. Additionally, the amendments made to section 99ACC of the Act by items 15 and 16 of Schedule 1 will not be repealed. Those amendments require the Minister, for the purposes of agreeing a new price for the first new brand of single brand combination item, to consider the quantity of any non-listed component drug in the combination item, and the AEMP of each brand of a pharmaceutical item that has the non-listed drug, as if the drugs were listed on the PBS. Item 48 - Section 99AC Item 47 repeals the amendments to section 99AC of the Act made by item 3 of Schedule 1 and replaces reference to 16 per cent SPRs. Item 49 - Subsections 99ACA(2), (2A) and (2B) Item 48 repeals the amendments to section 99ACA of the Act made by item 4 of Schedule 1 and replaces with subsections 99ACA(2) and (2A) as they were in force before Part 1 of Schedule 1 took effect. However, the item also adds a new definition setting out when a listed component drug in a combination item will have been "subject to a 25 per cent price reduction". This new definition ensures that the amounts of a new brand SPR applying to a brand of a combination item under sections 99ACD and 99ACE can be adjusted for prior price reductions to listed component drugs at the higher 25 per cent level operating between 1 October 2018 and 30 June 2022, in the same way as for prior 12.5 per cent and 16 per cent price reductions. 21

Items 50 to 59 - Subdivision B of Division 3A of Part VII (heading) and Section 99ACB Items 50 to 59 repeal amendments to section 99ACB of the Act made by items 6 to 14 of Schedule 1 and provide for the section to revert to its operation prior to those amendments taking effect. Amendments to the heading of Subdivision B of Division 3A are also repealed, and the heading reverts to referring to a 16 per cent price reduction. Item 60 - Subsection 99ACC(6)(a) Item 60 amends paragraph 99ACC(6)(a) of the Act to remove references to repealed provisions of section 99ACF (see item 78 of Schedule 1) and reflect the revised drafting of that section resultant from the cessation of a number of anniversary SPRs on 1 July 2022. Items 61 to 67 - Section 99ACD Items 61 to 67 repeal amendments to section 99ACD of the Act made by items 18 to 24 of Schedule 1 and provide for the section to revert to its operation prior to those amendments taking effect. However, subsection 99ACD(6) will also provide for prior price reductions to listed component drugs at the higher 25 per cent level operating between 1 October 2018 and 30 June 2022 to be taken into account in calculating the first new brand SPR for a brand of a combination item. Items 68 to 76 - Section 99ACE Items 68 to 76 repeal amendments to section 99ACE made by items 25 to 34 of Schedule 1 and provide for the section to revert to its operation prior to those amendments taking effect. However, subsection 99ACE(5) will also provide for prior price reductions to listed component drugs at the higher 25 per cent level operating between 1 October 2018 and 30 June 2022 to be taken into account in calculating the flow-on first new brand SPR for a related brand of a combination item. Item 77 - Subsection 99ACF(1) (before table item 2) Item 77 reinserts item 1 of the table into the table to subsection 99ACF(1). Table item 1 refers to the 16 per cent flow-on first new brand SPR, triggered by the application of section 99ACH of the Act. Table item 1 was repealed by item 35 of Schedule 1. Item 78 - Subsections 99ACF(2AA), (2AB) and (2AC) Item 78 repeals subsections 99ACF(2AA), (2AB) and (2AC)of the Act, which were inserted by item 36 of Schedule 1. Item 79 - Subsection 99ACF(2A) Item 79 repeals cross references to subsections 99ACF(2AB) and (2AC) of the Act made by item 37 of Schedule 1. These references are redundant upon repeal of those subsections by item 78 of Schedule 1. 22

Item 80 - Subsections 99ACF(3AA) and (3AB) Item 80 repeals subsections 99ACF(3AA) and (3AB)of the Act, which were inserted by item 38 of Schedule 1. Item 81 - Subparagraph 99ACG(b)(iii) Item 81 repeals amendments to subparagraph 99ACG(b)(iii) made by item 41 of Schedule 1, and provides for the paragraph to revert to its operation before Part 1 of Schedule 1 took effect. Item 82 - Subparagraph 99ACG(b)(iv) Item 82 repeals 99ACG(b)(iv), which was inserted by item 42 of Schedule 1. The subparagraph cross refers to subsection 99ACF(2AA) and is redundant on the repeal of that subsection. Items 83 to 87 - Section 99ACH Items 83 to 87 repeal amendments made to section 99ACH of the Act made by items 43 to 47 of Schedule 1 and provide for the section to revert to its operation prior to those amendments taking effect. 23

SCHEDULE 2 -- STATUTORY PRICE REDUCTIONS Part 1 of Schedule 2 commences on the day after the Royal Assent. Part 1 - Amendments commencing on day after Royal Assent Item 1 - Section 99AC Item 1 amends the provisions outlining the operation of Division 3A of the Act, to reflect the changes made by Part 1 of Schedule 2 to add new SPRs applying on the anniversary of an F1 formulary drug being on the PBS (an anniversary SPR) and to the creation of a Ministerial discretion not to apply an anniversary SPR, or to apply a lower SPR than would otherwise apply. Item 2 - Subsection 99ACF(1) (heading) Item 2 repeals and replaces the heading to section 99ACF to reflect that the reductions applied by the section will no longer always be a specified percentage, but may also be a method of calculating a percentage. Items 3 to 7 - Subsection 99ACF(1) Items 3 to 7 of Schedule 2 make a number of technical changes to subsection 99ACF(1) consequential on amendments to the section to be made by item 8 of Schedule 2. These include that the reduction to the AEMP or claimed price of the affected brand of pharmaceutical item is to be reduced by the percentage or method specified in column 3 of the table to subsection 99ACF(1). Item 8 - Subsection 99ACF(1) (at the end of the table) Section 99ACF provides a mechanism for implementing a number of SPRs - currently the 16 per cent related brand flow-on SPR triggered by section 99ACH and the 5 year anniversary SPR for drugs on the F1 formulary, triggered by section 99ACHA (together, the SPR trigger sections). Section 99ACF currently provides that where an SPR trigger section applies to a listed brand of pharmaceutical item on a particular day (the reduction day), and none of the exceptions in section 99ACF apply, the AEMP or any claimed price of the brand in force on the day before the reduction day is taken to be reduced by the percentage specified in the relevant item in the table to subsection 99ACF(1) for the relevant SPR trigger section. Item 8 amends the table to add four new SPR trigger sections, being new sections 99ACJ or 99ACK or new subsections 99ACL(1) or (2) (see item 18 of Schedule 2). These new SPR trigger sections relate to anniversary SPRs for F1 formulary drugs that have been on the PBS for at least 10 years or at least 15 years (new sections 99ACJ and 99ACK) and a one off anniversary SPR for F1 drugs that have been on the PBS for at least 10 years or 15 years, as applicable, that will apply on 1 June 2018 (new subsection 99ACL) . 24

Item 9 - Paragraph 99ACF(2)(a) Item 10 - Paragraphs 99ACF(2)(b) and (c) Items 9 and 10 of Schedule 2 make a number of technical changes to subsection 99ACF(2) consequential on amendments to the section to be made to the table in 99ACF(1) by item 8 of Schedule 2. Item 11 - before subsection 99ACF(4) Item 11 inserts new subsections 99ACF(3), (3A) and (3B). New subsection 99ACF(3) creates a power for the Minister to determine, by written instrument, that the AEMP or claimed price (if any) of a listed brand of a pharmaceutical item:  is not to be reduced by the relevant flow-on or anniversary SPR under a provision mentioned in the table to subsection 99ACF(1) in relation to a particular reduction day; or  is to be reduced by a lower percentage than would otherwise apply. So, for example, the Minister may determine that the AEMP of a brand of an item that would otherwise be reduced by 10 per cent because of the reduction applying under new section 99ACJ may only be reduced by 7 per cent (or any other percentage less than 10 per cent) on a particular reduction day. Subsection 99ACF(3A) provides that, in making a determination in relation to the application of an item of the table in subsection 99ACF(1), the Minister must take into account what the AEMP, and if applicable any claimed price, of the listed brand of the item would otherwise be under section 99ACF on the particular reduction day if no determination were made. The Minister may also take anything else he or she considers relevant into account. Subsection 99ACF(3B) provides that, if the Minister makes a determination in relation to a specific trigger provision mentioned in the table to subsection 99ACF(1), the AEMP and (if applicable) each of the claimed prices of the brand of the item cannot be further reduced under that trigger provision on any reduction day after the reduction day specified in the determination. In other words, if the Minister determined that the brand of an item should only be reduced by 7 per cent in relation to section 99ACJ on the reduction day of 1 April 2019, that brand cannot be reduced because of section 99ACJ under the later reductions days for that section of 1 April 2020 or 1 April 2021 (see item 18 of Schedule 2). Item 12 - Subsection 99ACF(4) This item amends subsection 99ACF(4) to enable the Minister, on the day on which a listed brand of pharmaceutical item takes a price reduction under section 99ACF, to make a further price agreement under section 85AD of the Act, or make a price determination under subsection 85B of the Act, for the brand. Currently, the earliest the Minister may make a further price agreement or determination is the day after the relevant reduction day. 25

Item 13 - Paragraph 99ACG(b) This item makes a technical change to paragraph 99ACG(b), replacing the incorrect reference to 'this subsection' with a reference to 'this section'. Section 99ACG does not have subsections. Items 14 to 17 - Section 99ACHA Section 99ACHA deals with the 5 per cent anniversary SPR for brands of pharmaceutical items with drugs on the F1 formulary for at least 5 years. The section currently provides for annual reduction days on each 1 April from 2016 up to and including 2020. Items 14 to 17 of Schedule 2 amend section 99ACHA to:  add two new reduction days on 1 April 2021 and 1 April 2022 (item 17);  improve drafting of subsection 99ACHA(1)(b) (item 15);  make technical changes intended to clarify the operation of the section with respect to the additional anniversary SPRs being added to Subdivision 3A of the Act (items 14 and 16). Item 18 - At the end of Division 3A of Part VII Item 18 inserts new sections 99ACJ, 99ACK and 99ACL into the Act. Where any of the sections apply to a brand of pharmaceutical item, subject to any exceptions in section 99ACF the brand will be subject to an anniversary SPR by operation of section 99ACF. New section 99ACJ applies a 10 per cent SPR to a brand of pharmaceutical item where:  the medicine in the item is in the F1 formulary on a 10 per cent reduction day (each 1 April in 2019, 2020 and 2021); and  that 10 per cent reduction day is on or after the 10th anniversary of the medicine being listed on the PBS. However, section 99ACJ will not apply to a brand where the AEMP of a brand of the pharmaceutical item that has the medicine, on the day before the 10 per cent reduction day, has previously been reduced under subsection 99ACF(1) or (2) because of the application of section 99ACJ on a previous 10 per cent reduction day, or because of the application of the 10 year anniversary SPR in subsection 99ACL(1). New section 99ACK applies a 5 per cent SPR to a brand of pharmaceutical item where:  the medicine in the item is in the F1 formulary on a 5 per cent reduction day (each 1 April in 2019, 2020 and 2021); and  that 5 per cent reduction day is on or after the 15th anniversary of the medicine being listed on the PBS. However, section 99ACK will not apply to a brand where the AEMP of a brand of the pharmaceutical item that has the medicine, on the day before the 5 per cent reduction day, has previously been reduced under subsection 99ACF(1) or (2) because of the application of section 99ACK on a previous 5 per cent reduction day, or because of the application of the 15 year anniversary SPR in subsection 99ACL(2). 26

New section 99ACL triggers a once-off anniversary SPRs for a brand of pharmaceutical item with an F1 drug that has been listed on the PBS for either 10 years or 15 years. These once-off reductions will occur on 1 June 2018. Subsection 99ACL(1) applies to a brand where the drug in the pharmaceutical item is in the F1 formulary on 1 June 2018 and the drug has been on the PBS for at least 10 years at that time. However, paragraph 99ACL(1)(c) will prevent the one-off 10 year anniversary SPR in subsection 99ACL(1) applying if the one-off 15 year SPR in subsection 99ACL(2) would also apply. This prevents a drug that has been on the F1 formulary for at least 15 years on 1 June 2018 from taking both the 15 year and 10 year one-off anniversary SPRs. Subsection 99ACL(2) applies to a brand where the drug in the pharmaceutical item is in the F1 formulary on 1 June 2018, but where the drug has been on the PBS for at least 15 years. 27

Part 2 - Amendments commencing on 1 July 2022 Part 2 of Schedule 2, which takes effect on 1 July 2022, repeals certain amendments to the Act made by Part 1 of Schedule 2. Item 19 - Section 99AC This item amends section 99AC of the Act, which provides an outline of the operation of the price reduction provisions in Division 3A of the Act, to remove reference to the capacity for the Minister to make determinations not to apply an SPR, or to apply a lower SPR than would otherwise apply. Item 20 - Subsections 99ACF(3) to (3B) This item repeals subsections 99ACF(3) to (3B), which enable the Minister to make written determinations not to apply an SPR, or to apply a lower SPR than would otherwise apply. The capacity to make such determinations is being included in the Act to implement the Strategic Agreement between the Commonwealth and Medicines Australia made on 27 April 2017. The Agreement ceases on 30 June 2022. Part 2 of Schedule 2 does not repeal the amendments made by item 11 of Schedule 2 that enable the Minister to make new price agreements or determinations under section 85B of the Act on the day a SPR applies, as well as after that day. 28

SCHEDULE 3 - PRICE DISCLOSURE PRICE REDUCTION THRESHOLDS The amendments to the Act to be made by Schedule 3 of the Bill are required to implement changes agreed in the Strategic Agreement made between the Commonwealth of Australia and Medicines Australia on 27 April 2017 and announced by the Government in the 2017 Budget as part of the PBS Medicines Package. The price disclosure requirements in Division 3B of the Act apply to medicines subject to competition. The objective of the price disclosure arrangements is to ensure that the prices at which the Government subsidises multiple-brand medicines more closely reflect the prices charged in the market. As a result of the price disclosure requirements, the prices of PBS medicines subject to competition are progressively reduced, ensuring better value for money. Part 1 - Amendments commencing on the day after Royal Assent Item 1 - Subsection 99ADB(1) Item 1 amends subsection 99ADB(1) of the Act to introduce three new definitions for use in Division 3B.  "data collection period", for a brand of a pharmaceutical item, is defined as having the meaning given by section 99ADBA (see item 2 of Schedule 3);  "related brand", of a pharmaceutical item, is defined as meaning a brand of an item that has the same drug and manner of administration as the first mentioned item (including another brand of the same item), but does not include a brand of an exempt item. An exempt item is defined in section 84 of the Act as a pharmaceutical item determined by the Minister under section 84AH to be an exempt item;  "start day", for a brand of a pharmaceutical item, is defined as meaning the day that the brand was first required to comply with the price disclosure requirements under section 99ADD of the Act. The definitions of related brand and start day are consistent with the meaning of those terms already given in the National Health (Pharmaceutical Benefits) Regulations 2017. Item 2 - At the end of Subdivision A of Division 3B of Part VII Item 2 inserts new section 99ADBA at the end of Subdivision A of Division 3B. The new section provides an expanded meaning for the data collection period for a brand of a pharmaceutical item. Subsection 99ADBA(1) provides that the first data collection period starts on the brand's start day. A brand's start day is the day the brand is first required to comply with the price disclosure requirements under section 99ADD of the Act. Subsections 99ADBA(2) and (3) set out when the first data collection period for a brand ends. Where, on the day before the starting day for a brand (the first brand), the price disclosure requirements apply to a related brand of the first brand, the first 29

brand's first data collection period ends when the data collection period for any related brand ends. In any other case:  if the first brand first becomes subject to price disclosure requirements between 2 April and 1 October, its first data collection period ends on the next 31 March; and  if the first brand first becomes subject to price disclosure between 2 October and 1 April, its first data collection period is the next 30 September. Subsection 99ADBA(4) specifies when subsequent data collection periods start and end. Each subsequent data collection period starts immediately after the end of the previous data collection period and ends on the next 31 March or 30 September, whichever is sooner. Section 99ADBA contains a number of examples of data collection periods to assist readers apply the section. The calculation of the start and end of a data collection period as set out in section 99ADBA is the same as that set out in section 67 of the National Health (Pharmaceutical Benefits) Regulations 2017. Item 3 - Paragraph 99ADH(1)(a) Subsection 99ADH(1) of the Act sets out the circumstances in which a price disclosure price reduction in section 99ADH will apply. One of the circumstances, as currently set out in paragraph 99ADHA(1)(a), is that the Minister has determined, under section 99ADB, the weighted average disclosed price (WADP) of a brand of a pharmaceutical item (the WADP brand). Item 3 will amend paragraph 99ADHA(1)(a) to provide that the Minister must have determined the weighted average disclosed price of a brand of pharmaceutical item in respect of a data collection period for the brand. This amendment clarifies that the WADP of a brand is in respect of a particular data collection period, which will support the operation of new paragraph 99ADH(1)(c) and new subsection 99ADH(2A) (see items 4 and 5 of Schedule 3). Item 4 - Paragraph 99ADHA(1)(c) Paragraph 99ADH(1)(c) of the Act currently provides that one of the circumstances for when a price disclosure price reduction applies is that the unadjusted price reduction (UPR) for the brand of the pharmaceutical item (being the difference between the applicable AEMP and the WADP of a brand, as a percentage of the AEMP) must be at least 10 per cent. Item 4 repeals paragraph 99ADH(1)(c) and inserts a new paragraph which allows for a higher UPR to apply in certain circumstances. New paragraph 99ADHA(1)(c) provides that:  if the drug and manner of administration of the item has been on the F2 formulary for less than 42 months - the UPR for the brand of the item must be at least 10 per cent;  if the drug and manner of administration has been on the F2 formulary for at least 42 months - the UPR must be at least 30 per cent; and 30

 if the drug and manner of administration of the item has been on the F2 formulary for at least 42 months, and the brand has had at least two prior, consecutive price reductions where the 30 per cent UPR threshold applied - the UPR reverts to at least 10 per cent. Item 5 - After subsection 99ADH(2) Item 1 inserts new subsection 99ADH(2A) which describes, for the purposes of paragraph 99ADH(1)(c), the circumstances in which a drug and manner of administration of a pharmaceutical item is taken to have been on F2 for at least 42 months. The drug in the brand must have been on the F2 formulary for at least 42 months at the end of the previous data collection period. Also, on a day at least 42 months before the end of the previous data collection period:  there must have been a related brand of the WADP brand (i.e. a brand of a pharmaceutical item that has the same drug and manner of administration, including another brand of the same item, and which is not a brand of an exempt item) that had the same pharmaceutical item as, or was bioequivalent or biosimilar to, the WADP brand; or  there were two or more related brands of the WADP brand that had the same pharmaceutical item as, or were bioequivalent or biosimilar to, each other. This description replicates in all respects, other than the timing, the circumstances that apply under section 84 of the National Health (Pharmaceutical Benefits) Regulations 2017 for a drug and manner of administration of a pharmaceutical item to be taken to have been on F2 for at least 30 months for the purposes of excluding a brand, determined to be an "originator brand" under subsection 99ADB(6B) of the Act, from price disclosure calculations. Item 6 - Subsection 99ADH(5) Subsection 99ADH(5) provides that section 99ADH of the Act does not limit the Minister's powers to make other price agreements or further determinations for a brand of a pharmaceutical item after a price disclosure reduction day. This item amends the subsection to provide that the Minister may make other price agreements or further determinations on the reduction day in addition to after the reduction day. This would mean that where the Minister wishes to adjust the price of a brand of a pharmaceutical item subject to an SPR under Subdivision E of Division 3B, it would not be necessary to apply the SPR and any price adjustment on different days - the price adjustment could occur on the reduction day. This amendment would not be reversed in Part 2 of Schedule 3 and would continue to apply after 1 July 2022. Item 7 - Application This item provides that the amendments made by Part 1 of Schedule 3 apply to the determination of a day by the Minister, by legislative instrument, for the purposes of section 99ADH, if the reduction day occurs after the day item 7 commences. 31

The effect is that the amendments made by Part 1 of Schedule 3, including the new criteria for when a price disclosure price reduction will be triggered, will apply for any price disclosure reduction day that occurs on or after commencement of the item. 32

Part 2 - Amendments commencing on 1 July 2022 Item 8 - Subsection 99ADB(1) Item 9 - Section 99ADBA Item 10 - Paragraph 99ADH(1)(a) Items 8 to 10 repeal the amendments made by items 1 to 3 of Part 1 of Schedule 3. This includes repealing the definitions of the terms "data collection period", "related brand" and "start day", repealing the explanation of how to calculate a data collection period for a brand of pharmaceutical item, and repealing the technical change to paragraph 99ADHA(1)(a). Item 11 - Paragraph 99ADHA(1)(c) Item 11 repeals the amendments to paragraph 99ADHA(1)(c) made by item 4 of Part 1 of Schedule 3 and replaces it with the text in force before the commencement of Part 1 of Schedule 3. As a result, the unadjusted price reduction threshold will revert to 10 per cent in all cases. Items 12 - Subsection 99ADHA(2A) Item 12 repeals subsection 99ADHA(2A), which was inserted by item 5 of Part 1 of Schedule 3. Part 2 of Schedule 3 does not repeal the amendment to subsection 99ADH(5) to allow for new price agreements or price determinations under section 85B of the Act on the reduction day as well as after the reduction day. 33

SCHEDULE 4 - NEW BRANDS Part 1 - Amendments commencing on day after Royal Assent Item 1 - After subsection 85AB(4) Item 1 amends section 85AB to ensure that, where a new brand of a listed pharmaceutical item is considered to be a 'new presentation' for pricing purposes, the listing of the new brand does not result in a medicine moving from the F1 to the F2 formulary. Section 85AB of the Act gives the Minister the power to determine whether a listed medicine is on the F1 or the F2 formulary. The Minister may only determine a medicine to be on the F1 formulary if all the criteria in subsection 85AB(4) (the criteria for F1) are met (see subsection 85AB(2)). The criteria for F1 relevantly include that there are no brands of pharmaceutical item that:  have the medicine, are bioequivalent or biosimilar, and are listed brands of the item in the relevant period; or  have another listed medicine in the same therapeutic group, are bioequivalent or biosimilar, and are listed brands of the item in the relevant period New subsection 85AB(4A) provides that for the purpose of working out whether the criteria for F1 in paragraph 85AB(4)(a) or (b) are met in relation to a medicine, a brand that has the medicine is to be disregarded if:  subsection 99ACB(3A) or (3B) applies to the brand of the pharmaceutical item that has the medicine and: o there is no other brand of the pharmaceutical item that has the drug; or o the drug is not on the F2 formulary. New subsection 85AB(4A) further provides that for the purpose of working out whether the criteria for F1 in paragraph 85AB(4)(a) or (b) are met in relation to a medicine, a brand that has the medicine is to be disregarded if:  subsection 99ACB(3B) applies to the brand of the pharmaceutical item that has the medicine; and  the tenth anniversary of the medicine in the pharmaceutical item being on F1 has not occurred. Subsection 99ACB(3A) or (3B) will apply to new presentations of a new brand of a pharmaceutical item in certain circumstances (see item 3 of Schedule 4). Where either subsection applies, the 25 per cent first new brand SPR in section 99ACB will not apply. Item 2 - Subsection 99ACB(1) Item 2 will amend subsection 99ACB(1) of the Act to include mention of new subsections 99ACB(3A) and (3B), which will ensure that the first new brand SPR in section 99ACB will not apply where subsection 99ACB(3A) or (3B) applies (see item 3 of Schedule 4). Item 3 - After subsection 99ACB(3) This item would insert new subsections 99ACB(3A) and (3B) in the Act. 34

Section 99ACB of the Act establishes a first new brand SPR for brands of pharmaceutical items that are not combination items. Additionally, where section 99ACB is triggered by the listing of a new brand of an item (the trigger item) that is biosimilar or bioequivalent to an existing brand of an item that has the same medicine and manner of administration, the Minister will usually determine that the medicine is to move to the F2 formulary. New subsections 99ACB(3A) and (3B) will create new circumstances in which section 99ACB does not apply in relation to a new brand of a trigger item (that is, the first additional new brand of a pharmaceutical item). New subsection 99ACB(3A) provides that section 99ACB will not apply in relation to the new brand if:  the new brand of the trigger item is a new presentation of an existing listed brand of a pharmaceutical item; and  the day that the new brand lists on the PBS is on or before the fifth anniversary of the drug in the trigger item being on the F1 formulary; and  the responsible person for the new brand of the trigger item is the same as the responsible person for the existing listed brand of the item; and o there is not another brand of the pharmaceutical item that has the drug that is a listed brand; or o the drug is not on F2. New subsection 99ACB(3B) provides that section 99ACB will not apply in relation to the new brand if:  the new brand of the trigger item is a new presentation of a listed brand of a pharmaceutical item; and  the Minister has made a determination under new section 99ACBA in relation to the new brand of the trigger item (see item 4 of Schedule 4); and  the determination under section 99ACBA has not ceased to have effect. Item 4 - At the end of Subdivision B of Division 3A of Part VII Item 4 of Schedule 4 will add new section 99ACBA to the Act. The new section will provide that the Minister may determine, by notifiable instrument, that a brand of a pharmaceutical item is not a 'new brand' for the purposes of section 99ACB. Subsection 99ACBA(1) provides that the Minister may make a determination under the section in relation to a brand of pharmaceutical item (a trigger item) where:  the brand of trigger item is not a combination item; and  the brand is not a listed brand of the trigger item but is a new presentation of an existing listed brand of a pharmaceutical item; and  the Minister is satisfied that the day the new brand of the trigger item will list on the PBS will be after the fifth, but before the tenth anniversary of the drug in the item being on the F1 formulary. Subsection 99ACBA(2) provides that if the Minister makes a determination under the section, it must be made before the day the new brand lists on the PBS. 35

Subsection 99ACBA(3) provides that in making the determination the Minister may take into account any advice given by the Pharmaceutical Benefits Advisory Committee, any information provided by the responsible person for the new brand of the trigger item, and any other matter which the Minister considers relevant. Subsection 99ACBA(4) provides that a determination made under section 99ACBA ceases to have effect on the earlier of:  the day that another brand of the pharmaceutical item becomes a listed brand;  the day the drug in the pharmaceutical item does not satisfy the criteria for being included on the F1 formulary; or  the tenth anniversary of the drug being on F1. Item 5 - Subsection 99ACD(1) This item amends subsection 99ACD(1) of the Act, which deals with flow-on new brand SPRs for combination items, to include reference to new subsection 99ACD(3) (see item 6 of Schedule 4). This ensures that the first new brand SPR for combination items in section 99ACD will not apply where new subsection 99ACD(3) applies. Item 6 - After subsection 99ACD(2) This item will insert new subsection 99ACD(3) to provide circumstances when the first new brand SPR for combination items in section 99ACD does not apply in relation to a new brand of a trigger combination item (that is, the first additional new brand of a pharmaceutical item) for a drug which is a single brand combination item. Paragraph 99ACD(3)(a) provides that (similarly to new paragraph 99ACB(3A)(a)) one of these circumstances is that:  the new brand of the trigger combination item is a new presentation of an existing listed brand of a pharmaceutical item;  a declaration under subsection 85(2) is in force in relation to the drug in the pharmaceutical item;  the day that the new brand lists on the PBS is on or before the fifth anniversary of the drug in the trigger combination item being listed on the PBS;  the responsible person for the new brand of the trigger item is the same as the responsible person for the existing listed brand of the item; and  the drug is not on F2. Subparagraph 99ACD(3)(a)(v), which provides that "the drug is not on F2", refers to the drug that is declared under subsection 85(2) in relation to a drug or medicinal preparation for the purposes of PBS listing. In this context, for the trigger combination item, the "drug" is the specific combination of component drugs which make up the combination item. It is not referring to a single component drug. If the new brand of trigger combination item had a listed component drug on F2, it would not automatically prevent subsection 99ACD(3) from applying. Paragraph 99ACD(3)(b) provides that the other circumstance is that:  the new brand of the trigger combination item is a new presentation of a listed brand of a pharmaceutical item; 36

 the Minister has made a determination under new section 99ACEA in relation to the new brand of the trigger combination item (see item 7 of Schedule 4); and  the determination under section 99ACEA has not ceased to have effect. Item 7 - At the end of Subdivision C of Division 3A of Part VII Item 7 of Schedule 4 will insert new section 99ACEA, which will enable the Minister to determine, by notifiable instrument, that a brand of trigger combination item is not a 'new brand' for the purposes of section 99ACD. Subsection 99ACEA(1) provides that the Minister may make a determination under the section in relation to a brand of a combination pharmaceutical item (a trigger combination item) where:  the brand of the trigger combination item is a combination item; and  the brand is a new presentation of an existing listed brand of a pharmaceutical item;  the drug in the pharmaceutical item is listed on the PBS as a result of a declaration under subsection 85(2) of the Act; and  the Minister is satisfied that the day the new brand of the trigger combination item will list on the PBS will be after the fifth, but before the tenth, anniversary of the drug being listed on the PBS. Subsection 99ACEA(2) provides that if the Minister makes a determination under the section, it must be made before the day the new brand of the combination item lists on the PBS. Subsection 99ACEA(3) provides that in making the determination the Minister may take into account any advice given by the Pharmaceutical Benefits Advisory Committee, any information provided by the responsible person for the new brand of the trigger combination item, and any other matter which the Minister considers relevant. Subsection 99ACEA(4) provides that a determination made under section 99ACEA ceases to have effect on the earlier of the tenth anniversary of the day the drug was declared under subsection 85B(2) and the day it is included on the F2 formulary. Item 8 - After subsection 101(4AC) This item will include a new function for the Pharmaceutical Benefits Advisory Committee in section 101 of the Act. New subsection 101(4AD) provides that the Committee may give advice to the Minister in relation to whether the Minister should determine that a brand of a pharmaceutical item is not a new brand for the purposes of section 99ACB or 99ACD, respectively. The item would also include a heading to the subsection 'Functions relating to determinations that brands are not new brands'. 37

Part 2 - Amendments commencing on 1 July 2022 Item 9 - Subsection 85AB(4A) This item repeals subsection 85AB(4A), as inserted by item 1 of Part 1 of Schedule 4, and substitutes a new subsection 85AB(4A). The new subsection provides that for the purposes of working out whether the criteria for F1 in subsection 85AB(4) are satisfied in relation to a medicine, a brand of pharmaceutical item that has the medicine is to be disregarded if:  before 1 July 2022, subsection 99ACB(3A) or (3B) applied in relation to the brand; and  all of the following apply - another brand of the pharmaceutical item has not become listed on the PBS, the drug is not on the F2 formulary and the tenth anniversary of the drug being on F1 has not occurred. Item 10 - Subsection 99ACB(1) This item makes a technical amendment to repeal the reference in subsection 99ACB(1) to subsection 99ACB(3B). The reference is redundant following the amendments to subsection 99ACB(3A) made by item 11 of Part 2 of Schedule 4. Item 11 - Subsections 99ACB(3A) and (3B) This item repeals subsections 99ACB(3A) and (3B), as inserted by item 3 of Part 1 of Schedule 4, and substitutes a new subsection 99ACB(3A). The new subsection provides that section 99ACB does not apply in relation to a new brand of a trigger pharmaceutical item if:  the new brand of the item is a new presentation of an existing listed brand of a pharmaceutical item;  before 1 July 2022, subsection 99ACB(3A) or (3B) applied to the new brand of the trigger item; and  all of the following apply - the drug is not on the F2 formulary, the tenth anniversary of the drug being on F1 has not occurred, and another brand of the pharmaceutical item has not become listed on the PBS. Item 12 - Section 99ACBA Item 12 repeals section 99ACBA, which gave the Minister the power, in certain circumstances, to determine that a brand of a pharmaceutical item was not a new brand for the purposes of section 99ACB. Item 13 - Subsection 99ACD(3) This item repeals subsection 99ACD(3), as inserted by item 6 of Part 1 of Schedule 4, and substitutes a new subsection 99ACD(3). The new subsection provides that section 99ACD does not apply in relation to a new brand of a trigger combination pharmaceutical item if:  the new brand of the combination item is a new presentation of an existing listed brand;  before 1 July 2022, paragraph 99ACD(3)(a) or (b) applied to the new brand of the trigger combination item; and  the tenth anniversary of the drug being declared under subsection 85(2) of the Act has not occurred and the drug is not on the F2 formulary. 38

Item 14 - Section 99ACEA This item repeals section 99ACEA, which gave the Minister the power, in certain circumstances, to determine that a brand of a combination item was not a new brand for the purposes of section 99ACD. Item 15 - Section 101(4AD) This item repeals subsection 101(4AD). Following the repeal of sections 99ACBA and 99ACEA, the Pharmaceutical Benefits Advisory Committee no longer needs to make recommendations to the Minister relevant to those sections. 39

SCHEDULE 5 - PHARMACY LOCATION RULES Part 1 - Australian Community Pharmacy Authority The amendments in Schedule 5 of the Bill commence the day after Royal Assent. The amendments in Part 1 of Schedule 5 are required to implement changes agreed in a compact between the Commonwealth of Australia and the Pharmacy Guild of Australia in May 2017 and announced by the Government in the 2017 Budget as part of the PBS Medicines Package. The purpose is to continue the community pharmacy location rules beyond 30 June 2020. Item 1 - Subsection 90(3C) This item repeals subsection 90(3C) of the Act. Subsection 90(3C) of the Act provides that eight other subsections in section 90 cease to have effect on 30 June 2020. Those subsections outline requirements relating to the approval of pharmacists to supply pharmaceutical benefits, including the circumstances in which an application by a pharmacist need or may to be referred to the Australian Community Pharmacy Authority (the Authority), and the circumstances in which the Secretary may, subject to a recommendation for approval from the Authority, grant approval, or may not grant approval. Item 2 - Section 99Y Section 99Y of the Act provides for Division 4B of the Act to cease to have effect on 30 June 2020. Division 4B provides for the establishment and operation of the Authority including powers, functions, membership, meetings and administrative matters. The National Health (Australian Community Pharmacy Authority Rules) Determination 2011, which describes the circumstances in which the Authority must recommend that a pharmacist be approved under section 90 of the Act in relation to particular premises, are also made under this Division. The functions of the Authority under section 99K include considering applications made by pharmacists for approval to supply pharmaceutical benefits in respect of particular premises and making recommendations to the Secretary as to whether applications should be approved. In making recommendations, the Authority must comply with rules determined by the Minister under section 99L of the Act (referred to as the pharmacy location rules). Item 2 repeals section 99Y, removing the cessation provision entirely. The outcome would be that the Division 4B, and the establishment of the Authority, would not cease on 30 June 2020. Part 2 - Miscellaneous Item 3 - Subsection 84(1) (definition of subject to an outstanding staged reduction) Item 3 repeals the definition of the term 'subject to an outstanding staged reduction' in subsection 84(1) of the Act. As a result of previous amendments to the Act the term is no longer used in the substantive provisions and the definition is no longer required. 40

Item 4 - Subsections 99ACE(5), (5A) and (5B) Item 4 corrects a minor drafting oversight in subsections 99ACE(5), (5A) and (5B), adding reference to 99ACE(4A). This clarifies that, under the flow-on first new brand SPRs for related brands of related combination items, a reduction to the claimed price for a pack quantity of a related brand of an item may be adjusted for prior reductions to component drugs. 41

SCHEDULE 6 - NAME CHANGES The amendments in Schedule 6 commence the day after Royal Assent. Item 1 - At the end of section 85 Item 1 amends section 85 of the Act by adding new subsections 85(11) and (12). New subsection 85(11) provides that the Minister may, by notifiable instrument, determine that for the purposes of Part VII of the Act, more than one name is recognised for a listed drug, more than one description is recognised for the same form of listed drug or more than one description is recognised for the same manner of administration of a form of listed drug. New subsection 85(11) will ensure that, where a determination is made, one name can be used interchangeably with the other for the purposes of PBS. This may be useful where the name of a drug is changed as a result of new national or international naming conventions, without any pharmacological change to the drug itself, and it is not appropriate for provisions in Part VII of the Act relating to listing, pricing, price reductions, price disclosure, and formulary allocation to be triggered by the name change. New subsection 85(12) provides that the Minister may determine a name or description as being used during a period of time, such as before or after a specified date. This would ensure that the name as changed can be used in other instruments under the Act, ensuring that legal effectiveness of PBS listings is maintained. Subsection 85(12) does not limit the scope of subsection 85(11). 42

SCHEDULE 7 - SAFETY NET Schedule 7 amends the Act to give effect to a number of minor measures and to clarify the intent of existing safety net provisions, better align safety net provisions with PBS policy and administrative practice, and simplify the drafting of those provisions. Schedule 7 commences on the day after Royal Assent. Item 1 - Subsection 84(1) Item 1 inserts a new definition of a value for safety net purposes in subsection 84(1) of the Act for the supply of a pharmaceutical benefit, a repatriation pharmaceutical benefit and an outpatient medication. This definition provides a description of payments that accrue to the general safety net threshold by introducing the new term, and allows for simplified drafting of the substantive safety net provisions in Division 1A of the Act. The value for safety net purposes, and therefore the amount that can accrue to the safety net thresholds, is:  for the supply of a pharmaceutical benefit, the amount prescribed in regulations made for the purposes of subsection 84C(1E) of the Act (see item 6 of Schedule 7); and  for the supply of a repatriation pharmaceutical benefit, the amount charged for the supply; and  for the supply of an outpatient medication, the applicable amount in relation to the supply (see existing subsection 84BA(4) of the Act). Item 2 - Subsection 84AAA(1) Item 3 - Paragraph 84AAA(1)(b) Item 4 - at the end of subparagraph 84AAA(1)(b)(iii) Subsection 84AAA deals with the circumstances which classify a supply of a pharmaceutical benefit as an early supply of a specified pharmaceutical benefit. Items 2 and 4 make technical changes to remove reference to supplies of a kind described in paragraph 84C(4)(a) of the Act (being supplies of repatriation pharmaceutical benefits in certain circumstances) in subsection 84AAA(1) and paragraph 84AAA(1)(b), as a consequence of the inclusion of new subsection 84AAA(4) by item 5 of Schedule 7, which provides that for the purposes of section 84AAA a reference to the supply of a pharmaceutical benefit includes a reference to the supply of a repatriation pharmaceutical benefit. These amendments clarify the policy intent that the supply of a repatriation pharmaceutical benefit is to be considered an "early supply" under the same circumstances that a pharmaceutical benefit is to be considered an "early supply" of a pharmaceutical benefit. Item 3 makes a technical drafting change consequential on the revised wording of section 84AAA. 43

Item 5 - At the end of section 84AAA Item 5 inserts a new subsection (4) into section 84AAA, which provides that for the purposes of section 84AAA, a reference to a pharmaceutical benefit includes a reference to a repatriation pharmaceutical benefit. This will clarify the intended operation of the section, but will not change the practical handling of repatriation pharmaceutical benefits or the circumstances in which they are treated as an early supply. Item 6 - Subsections 84C(1AA) and (1C) Section 84C of the Act provides the circumstances where a person or a person and their family become eligible for a safety net concession card or a pharmaceutical benefits entitlement card. Item 6 repeals subsections 84C(1AA) and (1C) and replaces them with new subsections 84C(1AA), (1B), (1C), (1D), (1E) and (1F). Subsection 84C(1AA) currently provides that a general patient becomes eligible to be issued with a safety net concession card if the total of the amounts the person (or the person and their family) has been charged in the relevant entitlement period (safety net calendar year), plus the amount they may be charged for a current pharmaceutical benefit prescription, is equal to or greater than the general patient safety net threshold amount. The amounts that can be included in the tally include amounts charged for subsidised general, concessional and repatriation pharmaceutical benefits, applicable amounts associated with outpatient medications, and general under co-payment prescriptions (i.e. prescriptions priced below the relevant PBS co-payment). Subsection 84C(1C) currently provides parallel provisions to subsection 84C(1AA) for a concessional patient. A concessional patient becomes eligible to be issued with a pharmaceutical benefits entitlement card on reaching or exceeding the concessional patient safety net threshold. The tally can include amounts for concessional and repatriation prescriptions, applicable amounts associated with outpatient medication, and the transferred value of general patient prescriptions. Subsection 84CA specifies the transfer value of a general patient prescription for this purpose. Value for safety net purposes New subsection 84C(1E) is referred to in the definition of the term "value for safety net purposes" (see item 1 of Schedule 7) and provides that regulations may prescribe the value for safety net purposes of a supply of a pharmaceutical benefit. This enables the legislation to clearly describe the handling of certain fees and charges (such as an additional patient charge negotiated as part of the Sixth Community Pharmacy Agreement (6CPA), by the Australian Government and the Pharmacy Guild of Australia). The Act is currently silent on the handling of such fees and charges. New subsection 84C(1F) provides that regulations made under (1E) must take into account the amount charged for the supply, but may adjust the value for safety net purposes by excluding certain components of the amount charged, or setting a maximum limit on the value. It is proposed that the regulations would provide that where a supply is either a general or concessional under co-payment supply, the value for safety net purposes would be the lesser of: 44

 the price of the pharmaceutical benefit worked out in accordance with a determination in force under subsection 84C(7) of the Act at the time of the supply, minus the further additional patient charge allowed under the Sixth Community Pharmacy Agreement fee; or  the amount charged for the supply. Where a supply is other than an under co-payment supply, the value for safety net purposes would remain as currently prescribed under paragraphs 87(2)(a), (b) or (e) of the Act. New subsections 84C(1AA) and (1B) for concession cards, and new subsections 84C(1C) and (1D) for entitlement cards, clarify how these provisions are intended to operate. Item 6 provides that a person who has been a general patient and a concessional beneficiary during a relevant entitlement period for safety net may tally eligible payments for the person, or the person and their family towards either the concessional safety net threshold or the general patient safety net threshold and apply for the corresponding entitlement card or concession card during that year, regardless of their entitlement category at the time. New subsections 84C(1AA) and (1B) together provide that a person who has been a general patient at any time during a relevant entitlement period is eligible to be issued with a concession card if the total value for safety net purposes for supplies of pharmaceutical benefits, repatriation pharmaceutical benefits and out-patient medication for the person, or the person and their family meets the general patient safety net threshold or will meet the threshold if the value for safety net purposes of the prescription to be supplied is included in the total. New subsection 84C(1C) provides the circumstances in which a person who has been a concessional beneficiary at any time during a relevant entitlement period is eligible to be issued with an entitlement card in respect of the period. These circumstances are that the sum of:  the value for safety net purposes of supplies of pharmaceutical benefits, repatriation pharmaceutical benefits and out-patient medication (eligible supplies) made to the person during the relevant entitlement period when the person was a concessional beneficiary; and  if the person has been a general patient at any time in the entitlement period, the transferred value of eligible supplies made to the person during the period when the person was a general patient; is not less than the concessional beneficiary safety net. New subsection 84C(1C) also provides that a person who has been a concessional beneficiary at any time in the relevant entitlement period is entitled to be issued with an entitlement card in respect of the period if:  the sum of the value for safety net purposes of eligible supplies made to the person and the person's family; and 45

 if the person has been a general patient at any time in the entitlement period, the transferred value of eligible supplies made to the person and the person's family while the person was a general patient is not less than the concessional beneficiary safety net. New subsection 84C(1D) sets out the circumstances in which a person is entitled to be issued with an entitlement card at the time of supply of a pharmaceutical benefit, repatriation pharmaceutical benefit or out-patient medication to the person or a member of the person's family, being:  if the person is a concessional beneficiary on the day of the supply - adding the value for safety net purposes of the supply being made to the total of the value for safety net purposes of eligible supplies referred to in paragraph 84C(1C)(a) or (b) would result in the concessional safety net threshold being crossed; or  if the person is a general patient on the day of the supply - adding the transferred value of the supply being made to the total of eligible supplies referred to in paragraph 84C(1C)(a) or (b) would result in the concessional safety net threshold being crossed. Item 7 - At the end of subparagraph 84C(4)(a)(ii) Item 7 adds the word "and" to the end of subparagraph 84C(4)(a)(ii) as a technical correction resulting from a previous amendment. Item 8 - Paragraph 84C(4)(b) Item 8 makes a technical correction by removing an unnecessary subparagraph from paragraph 84C(4)(b). The single paragraph and subparagraph in the current provision would be merged into the one paragraph. This is a drafting improvement which is not intended to alter the provision in any way. Item 9 - Paragraphs 84C(4)(c) to (e) Subsection 84C(4) currently provides that a supply or repeated supply of a pharmaceutical benefit shall not be taken into account for safety net purposes unless (among other things), a correct PBS charge has been made for the benefit. Current paragraphs 84C(4)(c) and (d) provide the amount which must be charged for a general or concessional pharmaceutical benefit, where the Commonwealth price of the benefit exceeds the general (paragraph 84C(4)(c)) or concessional (paragraph 84C(4)(d)) patient co-payment, for that supply to be an eligible supply for safety net. These paragraphs deal with the situation where an additional charge applies due to a special patient contribution for a brand of a pharmaceutical item. However, they are currently silent with regard to additional fees that may be charged by the approved pharmacist or approved medical practitioner under other sections of the Act and the regulations. New paragraph 84C(4)(c) provides that a supply or repeated supply of a pharmaceutical benefit made on a general benefit prescription where the Commonwealth price exceeds $28.60 will not be taken into account unless the amount received in respect of the supply is equal to the sum of:  $28.60, less any allowable discount; 46

 any allowable charge for supply under subsection 87(2A) of the Act (a special patient contribution); and  any charge for supply outside normal trading hours or for delivery in accordance with regulations made for the purposes of paragraph 87(4)(b) of the Act. New paragraph 84C(4)(d) makes corresponding provision in relation to the supply or repeated supply of a pharmaceutical benefit made on a concessional benefit prescription where the Commonwealth price exceeds $4.60, except that subparagraph 84C(4)(d)(i) refers to $4.60, less any allowable discount. Paragraph 84C(4)(e) currently provides the maximum amount that can be counted towards the general or concessional patient safety net, where the Commonwealth price of the benefit is less than the general or concessional patient co-payment. New paragraph 84C(4)(e) makes drafting improvements to eliminate the use of sub- subparagraphs. It does not alter the intent or the operation of the provision in any way. Item 10 - Subsection 84C(4AA) Subsection 84C(4AA) of the Act currently provides that the supply or repeated supply of a pharmaceutical benefit cannot be taken into account for safety net purposes if it is an early supply of a specified pharmaceutical benefit and is not a supply of an outpatient medication. The amendment to subsection 84C(4AA) removes the reference to supply of an outpatient medication, as it is redundant. The definition of an early supply of a specified pharmaceutical benefit in section 84AAA already excludes supplies originating from a hospital, so there is no need to repeat the exclusion of such supplies in subsection 84C(4AA). Item 11 - Subsection 84C(7) Subsection 84C(7) of the Act currently provides that the Minister may determine the manner in which the price for particular quantities or numbers of units of all or any pharmaceutical benefits is to be ascertained for the purpose of this section. Item 11 amends subsection 84C(7) to clarify that a determination providing the manner in which the price for particular quantities or numbers of units of all or any pharmaceutical benefits is to be ascertained is made only for the purposes of prescribing the maximum amount that can be counted towards the general or concessional patient safety net, where the Commonwealth price of the benefit is less than the general or concessional patient co-payment and subparagraph 84C(4)(e)(i) of the Act applies, not for all supplies of pharmaceutical benefits. Item 12 - Section 84CA Item 12 substitutes a new section 84CA, which relates to the transferred value of a supply of pharmaceutical benefit, repatriation pharmaceutical benefit or outpatient medication. The transferred value is relevant where a person has been a general patient and also a concessional patient during a particular safety net entitlement period. 47

Section 84CA currently provides that the transferred value of amounts charged for applicable supplies is $4.60 (as indexed by section 99G), multiplied by the number of supplies. (The $4.60 figure represents the co-payment amount for a concessional benefit prescription at the time the provision was last amended.) This transfer figure is relevant where a higher amount has been charged in relation to a general prescription which is subsequently applied towards a concessional patient safety net. Under new subsection 84CA the maximum transferred value in relation to a supply would be retained. However, if the value for safety net purposes is less than this amount, the transferred value will be the lesser amount. This provides for the possibility that the Commonwealth price for a pharmaceutical benefit could fall below the price of the concessional co-payment amount. Item 13 - Subsection 87(1) Item 13 makes a technical amendment to subsection 87(1) which replaces the term "medical practitioner" with "an approved medical practitioner". This is a drafting improvement which clarifies that a medical prescriber referred to in relation to section 87, applies to medical practitioners who are approved under section 92 as approved medical practitioners approved to supply pharmaceutical benefits - not to medical practitioners more generally. Item 14 - Paragraph 87(2)(b) Section 87 currently provides for the fees and charges an approved pharmacist or an approved medical practitioner is permitted to charge a person for the supply of a pharmaceutical benefit. Paragraphs 87(2)(b) and (c) together provide for the maximum amount which can be charged by an approved pharmacist or an approved medical practitioner for supply of a pharmaceutical benefit on a general patient prescription, where the person (or the person and their family) have previously been charged an amount which is equal to or more than the general patient safety net threshold. This sets the amount that can be charged when the general patient threshold is reached, regardless of whether a safety net concession card has been issued or presented. The result is that the charge is at the concessional benefit amount. Item 14 simplifies paragraph (2)(b) significantly by removing the reference to working out the amount that the person "has previously been charged, for supplies of pharmaceutical benefits, an amount that is not less than the amount of the general patient safety net (within the meaning of section 99F)", and substitutes the requirement that the person is eligible to be issued with a concession card. Because a person who is eligible to be issued with a concession card, includes a person and their family, this new subsection is able to encompass both the current paragraphs 87(2)(b) and (c). This is a drafting improvement which is not intended to alter the operation of the provision. 48

Item 15 - Paragraph 87(2)(c) Item 15 repeals paragraph 87(2)(c) of the Act as it is now redundant following amendments to be made to paragraph 87(2)(b) by item 14 of Schedule 7. Item 16 - Paragraph 87(2)(e) Item 16 is a technical amendment which removes a reference to paragraph 87(2)(c) in paragraph 87(2)(e). Paragraph 87(2)(c) is repealed by item 15 of Schedule 7. Item 17 - Subsection 87(2) (note) Item 17 amends the note at the end of subsection 87(2), designating it as "Note 1" as a consequence of the addition of a second Note to the subsection made by item 18 of Schedule 7. Item 18 - At the end of subsection 87(2) Item 18 inserts a new note at the end of subsection 87(2) which reminds the reader that the conditions under which a person is eligible to be issued with a concession card are provided for in new subsection 84C(1AA). Item 19 - Subsection 87(2AAA) Item 19 removes a reference to paragraph 87(2)(c) in subsection 87(2AAA), because that paragraph is repealed by item 15 of Schedule 7. Item 20 - Subsections 87(2AA) and (2AB) Item 20 repeals subsections 87(2AA) and (2AB) of the Act, which currently provide rules relating to working out the amount a person has previously been charged, for supplies of pharmaceutical benefits for the purposes of current paragraphs 87(2)(b) and (c). These subsections are no longer required under the new, simplified requirement that a person must be charged the concessional co-payment amount if the person is eligible to be issued with a concession card (see item 14). Item 21 - At the end of subsection 87A(3) Subsection 87A(3) of the Act provides that a person is entitled to a refund under the Act if an approved supplier has charged the person an amount in relation to the supply of a pharmaceutical benefit and, at the time of the supply, the person was eligible to be issued with a concession card or an entitlement card but was not the holder of such a card. Item 21 adds a note to the end of subsection 87A(3), which will remind the reader that the conditions under which a person is eligible to be issued with an entitlement card are provided for in section 84C. This is a drafting improvement for clarification purposes only. It would not alter the intent or the operation of the current provision in any way. 49

Item 22 - Subsection 99(2AB) Item 23 - Section 99F (definition of general patient reduced charge) Items 22 and 23 remove references to paragraph 87(2)(c) from subsection 99(2AB) and the from the definition of a general patient reduced charge in section 99F, respectively, as paragraph 87(2)(c) is repealed by item 15 of Schedule 7. Item 24 - Transitional provision--indexation of charges Item 24 is a transitional provision to ensure the indexation of amounts and charges provided for prior to the repeal and substitution of paragraphs 84C(4)(c) and (d) are not reset or otherwise affected by the respective repeal and substitution. Section 99G of the Act provides for a range of amounts and charges referred to in the Act, including the general patient charge (each amount of $28.60 referred to in paragraphs 84C(4)(c) or 87(2)(e) or subsection 99(2A)) and the concessional beneficiary charge (each amount of $4.60 referred to paragraph 84C(4)(d), section 84CA, paragraph 87(2)(a) or subsection 99(2B)). New subsection (1) provides that the repeal and substitution of paragraph 84C(4)(c) of the Act by Schedule 7 of the Bill does not affect the indexation of general patient charge that has occurred in each year after 2005 under Division 4A of Part VII of the Act, or the continuing operation of that Division. New subsection (2) provides that the repeal and substitution of paragraph 84C(4)(d) and section 84CA of the Act by Schedule 7 does not affect the continued indexation of concessional beneficiary charge that has occurred in each year after 2005 under Division 4A of Part VII of the Act, or the continuing operation of that Division. 50

SCHEDULE 8 - PRESCRIPTION AND SUPPLY Changes to listings for pharmaceutical benefits, such as changes to product names, can result in removal of a pharmaceutical benefit from the PBS. Where a pharmaceutical benefit is replaced by a similar product, which may include the same product with a different name, it is common practice for the original PBS listing to be repealed and a new listing take its place. From the date the old product ceases to be a listed pharmaceutical benefit, PBS prescribing and dispensing under the old listing ceases. All existing prescriptions and repeats for the previously-listed product cease to be valid for PBS purposes. However, it is often the case that the change in the product name is simply to reflect a new responsible person or a minor change in formulation or presentation which would not necessarily require immediate clinical review of patients prior to continuing therapy . In such cases, patients should continue to be able to be supplied the drug under the PBS without needing to obtain a new prescription. Schedule 8 would also make minor technical corrections for improved clarity of existing provisions and remove obsolete terms and references. Schedule 8 commences on the day after Royal Assent. Item 1 - Subsection 86(1) Item 1 would remove the word "furnishing" and substitute the word "provision" in reference to the payment of money or other consideration. This amendment is not intended to alter the meaning of the provision in any way. Item 2 - Subsection 88(1) For all PBS prescribers other than medical practitioners, the pharmaceutical benefits that may be prescribed are determined separately according to the practitioner group. For medical practitioners, current subsection 88(1) enables a medical practitioner to write a prescription for the supply of any generally listed PBS benefit. Item 1 would substitute a new subsection 88(1), which would provide that a medical practitioner is authorised to write a prescription for the supply of any pharmaceutical benefit determined by the Minister, by legislative instrument. This would see listings for medical practitioners handled in the same way as for other classes of PBS prescribers. New subsection 88(1) is not intended to be used as a restriction on medical practitioner prescribing. It is intended that all items available to medical practitioners for prescribing and subsequent supply prior to this amendment would remain available to them. Rather, the amendment to subsection 88(1) is to facilitate the retention of a pharmaceutical benefit on the PBS for supply-only purposes when it would otherwise have been de-listed from the PBS for all purposes. This would be done by removing the pharmaceutical benefit from the class of drugs determined by the Minister under subsection 88(1) as able to be prescribed by a medical practitioner (and restricting prescription by any other class of PBS prescribers who previously could prescribe the benefit). 51

Item 3 - Subsection 88(1A) Item 3 would remove the American spelling of the word "authorized" and substitute it with the Australian/English spelling "authorised". It will not change the meaning of the provision in any way. Item 4 - After subsection 88(1E) Subsections 88(1A), (1C), (1D) and (1E) of the Act currently provide that participating dental practitioners, authorised optometrists, authorised midwives and authorised nurse practitioners, respectively, are authorised to write a prescription for any pharmaceutical benefit determined by the Minister for the applicable PBS prescriber class. Amendments to subsection 88(1) will provide that the medical practitioner prescriber class is handled in the same way. Item 4 inserts new subsections 88(1EA) and (1EB). Subsection 88(1EA) provides that when deciding the appropriate PBS prescriber class or classes which will be authorised to prescribe a particular pharmaceutical item, the Minister must have regard to any advice provided by the Pharmaceutical Benefits Advisory Committee (PBAC). Subsection 88(1EB) provides that the Minister is not required to determine, in relation to a pharmaceutical benefit, that one or more PBS prescriber classes is authorised to write a prescription for the benefit. This will allow for a pharmaceutical benefit to remain listed on the PBS, but with no class of authorised prescriber. In this way, the Minister could revoke any determination made under any of subsections 88(1) to (1E) in the event that the Minister chooses to retain a listing for supply-only purposes. This would have the effect of preventing any new prescriptions being written in relation to the specified listing, while still allowing the pharmaceutical benefit to remain listed on the PBS. By retaining the PBS listing with no determined prescriber, supply of the benefit can continue to occur for a valid prescription written prior to the date of the determination being revoked. A note is inserted at the end of subsection 88(1EB) which reminds the reader that paragraph 89(b) of the Act lists provisions that may permit supply of a pharmaceutical benefit other than on presentation of a prescription, such as prescriber bag arrangements. Item 5 - Subsection 92A(3) Item 5 removes reference to an approved medical practitioner from subsection 92A(3) of the Act as the reference is redundant. Section 92A sets out the conditions to which the approval of a pharmacist or medical practitioner for the purposes of Part VII of the Act are subject. Subsection 92A(3) provides that for the purposes of section 95 of the Act, any conduct by an approved pharmacist or approved medical practitioner which contravenes a condition set out under section 92A will be deemed to be an abuse of his or her approval. Section 95 of the Act relates only to the suspension or revocation of an approval of a pharmacist. 52

The Professional Services Review (PSR) was established in July 1994 as an agency within the Health Portfolio to protect the integrity of Medicare and the PBS. Since that time, the PSR has had responsibility for reviewing and examining possible inappropriate practice by practitioners in relation to Medicare services or prescribing Government subsidised medicines under the PBS. Any requirement to impose penalties or sanctions to medical practitioners under section 95 of the Act is obsolete. Item 6 - Subsection 93A(5) Item 6 substitutes a new subsection 93A(5) of the Act. Current subsection 93A(5) provides that a medical practitioner may authorise a prescribed institution to supply certain pharmaceutical benefits, as the Minister determines, to patients receiving treatment in the institution. New subsection 93A(5) provides for other classes of PBS prescribers to also authorise a prescribed institution to supply certain pharmaceutical benefits, as the Minister determines, to patients receiving treatment in the institution, subject to the applicable prescriber class being authorised to prescribe the particular pharmaceutical benefit under section 88 of the Act. Item 7 - After subsection 101(4AAC) Item 7 inserts a new function for the Pharmaceutical Benefits Advisory Committee at subsection 101(4AACAA). The new function is to give advice to the Minister about which PBS prescribers should be authorised to write prescriptions for the supply of a pharmaceutical benefit. New subsection 101(4AACAA) is made for the purposes of new subsection 88(1EA) of the Act, to provide that the Minister must have regard to any advice provided by the Committee when deciding the pharmaceutical benefits to be determined for each PBS prescriber class. Item 8 - Subsection 105AB(8) Item 8 removes references to an approved medical practitioner and a participating dental practitioner in relation to review of decisions under section 95 of the Act by the Administrative Appeals Tribunal. Section 95 of the Act provides for the suspension or revocation of an approval to supply pharmaceutical benefits. However, this change is appropriate as section 95 has not applied to approved medical practitioners or participating dental practitioners since the establishment of the Professional Services Review in 1994. Item 9 - Paragraph 139A(1)(de) Paragraph 139A(1)(de) of the Act currently provides that the Secretary may certify that, on a particular date or during a specified period, a person was or was not authorised under section 93AA (prescriber bag supplies for authorised midwives) or section 93AB (prescriber bag supplied for nurse practitioners) to supply specified pharmaceutical benefits. Item 9 inserts a reference to section 93 into paragraph 139A(1)(de) to provide that the Secretary may also certify that, on a particular date or during a specified period, a 53

person was or was not authorised under section 93 (prescriber bag supplies for medical practitioners) to supply specified pharmaceutical benefits to patients. 54

SCHEDULE 9 - DATA COLLECTION Schedule 9 clarifies that the requirements that apply for approved suppliers to give data to the Secretary regarding general under co-payment prescriptions apply for all under co-payment prescriptions. Schedule 9 commences on the day after Royal Assent. Item 1 - Subsection 98AC(1) Subsection 98AC(1) currently provides that an approved supplier that supplies a pharmaceutical benefit, specifically including a general under co-payment benefit for the purposes of subsection 99(2A) (where the cost of the pharmaceutical benefit is less than the cost of the general patient co-payment amount), must provide certain information relating to that supply to the Secretary. The information and the manner in which that information is to be provided is set out in the rules made by the Minister by legislative instrument under paragraph 98AC(4)(a). Item 1 of Schedule 9 amends subsection 98AC(1) so that the information to be supplied to the Secretary under this subsection will also include concessional under co-payment benefits for the purposes of subsections 99(2AB) and (2B) of the Act (where the cost of the pharmaceutical benefit is less than the cost of the concessional patient co-payment amount). Collection of data by the Commonwealth from approved suppliers for all PBS and Repatriation Pharmaceutical Benefits Scheme (RPBS) under co-payment prescriptions is provided for in the Sixth Community Pharmacy Agreement (6CPA), by the Australian Government and the Pharmacy Guild of Australia. There are currently no supplies of pharmaceutical benefit to which subsection 99(2AB) or subsection 99(2B) under co-payment categories would apply. This is because the Commonwealth prices for all items currently listed as pharmaceutical benefits are higher than the concessional co-payment amount. However, subsections 99(2A), (2AB) and (2B), which have been in place for many years, have always anticipated that under co-payment pricing outcomes could occur for general and concessional prescriptions. 55

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