Commonwealth of Australia Explanatory Memoranda

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

                                 2016-2017-2018




      THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA




                       HOUSE OF REPRESENTATIVES




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




                              ADDENDUM TO THE

                       EXPLANATORY MEMORANDUM




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




(Circulated by authority of the Minister for Health, the Honourable Greg Hunt MP)
 NATIONAL HEALTH AMENDMENT (PHARMACEUTICAL BENEFITS -
          BUDGET AND OTHER MEASURES) BILL 2017



OUTLINE

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

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

     5, 10, and 15 year anniversary price reductions
     The Agreement provides that in applying anniversary price reductions the total of
     previous reductions since 1 January 2016 must be considered. Because the
     current five year anniversary price reduction has applied since April 2016, most
     F1 drugs to which the new anniversary reductions apply would have already had
     a five year anniversary five per cent reduction.

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

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

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

     Under the Agreement, the Minister's discretion to reduce, or not apply, a
     statutory price reduction is not intended to be limited or subject to additional
     mandatory criteria. However, ministerial discretion is intended to be exercised
     only where genuinely justified based on pricing or other history.
     The pricing changes in the Bill are extensions to, or adjustments of, existing
     pricing policies. Current requirements for statutory price reductions mean that
     price reductions are mandatory regardless of the nature of a medicine, the supply
     history, or supply volume for a product. Many PBS medicines will have been
     subject to previous price reductions.
     The proposed new price reductions will result in additional reductions and reductions
     of a greater magnitude than current statutory reductions. The Agreement provides for
     relevant information, such as the recent pricing history for a pharmaceutical item, to
     be considered before applying one of the new statutory price reductions.
     The Agreement allows certain previous price reductions to be taken into account
     directly and provides for ministerial discretion to reduce the amount of a price
     reduction. The intention is to avoid situations where it might otherwise be
     unreasonable or unworkable to apply the full statutory reduction such as where a
     significant price reduction has recently occurred.




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

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

Inclusion of instruments on the Federal Register of Legislation
The amendments propose that the Minister may determine by written instrument
that a first new brand or anniversary statutory price reduction should be reduced
or not applied; and by notifiable instrument that a brand is a new presentation.
It is not proposed that a determination to reduce, or not apply, a statutory price
reduction be subject to Parliamentary scrutiny as the Minister would have access
to expert advice from the PBAC in making such decisions.
The highly technical nature of the subject matter, as evidenced by the role of the
PBAC in advising the Minister on matters relating to PBS medicines, means that if
expert advice is required the matter should be referred before the decision is made.
Companies affected by a decision would be consulted or receive information
regarding the likely outcome prior to the decision being finalised.
The Joint Oversight Committee, which will include members with particular
expertise regarding the PBS, will monitor the manner in which ministerial
discretion is exercised. One of the main functions of the Joint Oversight Committee
is to oversee the extent of reductions to statutory price reductions.
To ensure that determinations will be available publicly, the instruments made for
these purposes will be included on the PBS website (www.pbs.gov.au) and
registered on the Federal Register of Legislation.

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




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