Australian Government Department of Health COST RECOVERY IMPLEMENTATION STATEMENT (CRIS) LISTING OF MEDICINES ON THE PHARMACEUTICAL BENEFITS SCHEME AND DESIGNATED VACCINES ON THE NATIONAL IMMUNISATION PROGRAM 1 July 2019 – 30 June 2020 Version 2.1 Cost recovery involves government entities charging individuals or non-government organisations some or all of the efficient costs of a specific government activity. This may include goods, services or regulation, or a combination of these. The Australian Government Cost Recovery Guidelines (the CRGs) 1 set out the overarching framework under which government entities design, implement and review cost-recovered activities. 1 The CRGs are available on the Department of Finance website . 1
Transcript
Australian GovernmentDepartment of Health
COST RECOVERY IMPLEMENTATION STATEMENT (CRIS)LISTING OF MEDICINES ON THE PHARMACEUTICAL BENEFITS SCHEME
AND DESIGNATED VACCINES ON THE NATIONAL IMMUNISATION PROGRAM
1 July 2019 – 30 June 2020Version 2.1
Cost recovery involves government entities charging individuals or non-government organisations some or all of the efficient costs of a specific government activity. This may include goods, services
or regulation, or a combination of these. The Australian Government Cost Recovery Guidelines (the CRGs)1 set out the overarching framework under which government entities design,
implement and review cost-recovered activities.
1 The CRGs are available on the Department of Finance website.
1.1 Purpose of the Cost Recovery Implementation Statement (CRIS)........................................31.2 Description of the activity.....................................................................................................4
1.2.1 What is the activity being cost recovered?.....................................................................41.2.2 What policy outcomes will the activity achieve?............................................................51.2.3 Why is cost recovery appropriate for the activity?........................................................61.2.4 Who will pay cost recovery charges?.............................................................................6
2. POLICY AND STATUTORY AUTHORITY TO COST RECOVER........................................72.1 Government policy approval to cost recover the activity......................................................7
2.1.1 When and what did the Government announce?............................................................72.1.2 How was cost recovery implemented according to the Government decision?.............72.1.3 Changes to orphan drug exemptions..............................................................................7
2.2 Statutory authority to charge.................................................................................................83. REVISED COST RECOVERY MODEL....................................................................................9
3.1 Cost recovery fee or levy?.....................................................................................................93.2 Regulatory activities included in the model..........................................................................9
3.2.1 Australian Technical Advisory Group on Immunisation (ATAGI) pre-submission evaluations....................................................................................................................................93.2.2 Pharmaceutical Benefits Advisory Committee (PBAC) evaluation of submissions.....113.2.3 Demand driven regulatory activities from streamlining process improvements.........123.2.4 Managing PBS listings.................................................................................................133.2.5 No levy for PBS list management activity....................................................................143.2.6 Delayed introduction of certain fees............................................................................14
3.3 Costs of the regulatory activity............................................................................................153.3.1 Costs breakdown..........................................................................................................163.3.2 Fees and charges – Original proposal and outcome following consultations.............173.3.3 Transitional Arrangements...........................................................................................21
1. INTRODUCTION1.1 Purpose of the Cost Recovery Implementation Statement (CRIS)
The CRIS provides information on how the Department of Health (the department) proposes to implement revised cost recovery arrangements including:
submissions to the Pharmaceutical Benefits Advisory Committee (PBAC) for medicines seeking to be listed on the Pharmaceutical Benefits Scheme (PBS)
designated vaccines to be listed on the National Immunisation Program (NIP) recovery for direct-sponsor driven PBS list management activities implementation of changes in the first stage of the PBS process improvements as agreed
under Clause 10 of the 2017 Strategic Agreement between the Australian Government and Medicines Australia (MA)
Before the annual release of the CRIS, the department engages stakeholders to discuss the financial and non-financial performance of revised cost recovery arrangements.
This CRIS reports financial forecasts for 1 July 2019 – 30 June 2020 and three forward years. It reflects the outcomes of consultations undertaken from mid-2017 to early 2019 and will be maintained to continue to reflect any future changes. This CRIS also sets out the Government’s commitment to ensure cost recovery revenue will be allocated to efficiently and effectively deliver activities funded by industry.
Former PBAC cost recovery arrangements have reflected costs estimated in 2008-09 indexed by consumer price index (CPI) over ten years. This has effectively seen partial rather than full costs of associated regulatory services being recovered and led to a significant shortfall in funding for services requested by medicines’ sponsors each year.
Targeted consultation on a full cost recovery approach across all PBAC/PBS related activity began in mid-2017, followed by two open industry forums in February 2018. Direct discussions with industry representative groups are ongoing. Industry views have been taken into account through Government requirements about the impact of a full cost recovery approach on sponsors and also on PBS medicines listings.
A draft CRIS was presented at two wider industry sessions in early 2019 and was published online for public consultation in February 2019. This CRIS reflects the outcome of consultations and seeks a partial cost recovery approach for 2019-20 to minimise the impact on PBS listings and will only recover the costs of those services that are directly requested by sponsors. The increase to existing fees will be stepped out over two years to reduce the impact on sponsors of increases to existing fees. New fees will also be introduced for improved processes. This means that implementation of the new and revised fee structure reflects partial cost recovery for the services provided to industry in this transition period.
Further, in response to feedback received in February 2019 on the draft consultation CRIS, introduction of the new post-listing deed management fee and the Australian Technical Advisory Group on Immunisation (ATAGI) pre-submission evaluation fees have been delayed until July 2020 (see Section 2.2 and Section 3.2.6 for more details). Information on the pre-submission evaluation fees for ATAGI has been included for information only in this CRIS as these are described in the National Health (Pharmaceuticals and Vaccines – Cost Recovery) Amendment Regulations 2019 and will commence from July 2020.
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1.2 Description of the activity
1.2.1 What is the activity being cost recovered?
Cost recovery activity and fees associated with PBAC evaluation and the listing of medicines, vaccines and other products or services on the PBS and NIP commenced on 1 January 2010. Fees have risen annually in line with CPI since that time based on a 2008-09 model. Activities from the historic 2008-09 model are now inconsistent with the current Australian Government Charging Framework and the Cost Recovery Guidelines (the CRGs).
Further, the historic model does not reflect the levels of effort, cost and complexity of current activities in evaluation and pricing negotiations, while other activities were not cost recovered under the historic model.
During 2017 and 2018, the department developed a revised cost recovery model to reflect the current costs of providing services to industry. The activities, costs and associated pricing structure are more accurate and robust, and align with the current CRGs and service expectations of industry.
a. ATAGI pre-submission evaluation cost recovery
Cost recoverable activities include ATAGI activity in providing advice to support the PBAC’s evaluation of vaccines for the National Immunisation Program (NIP), including on clinical, technical and implementation matters.
ATAGI advises the Minister for Health (the Minister) on the NIP and other immunisation issues. In 2006, amendments to the National Health Act (1953) were made to require a positive recommendation from the PBAC in order to list vaccines on the NIP. ATAGI has been providing pre-submission advice to sponsors of vaccines and evaluation advice to the PBAC since that time.
b. Pharmaceutical Benefits Advisory Committee (PBAC) cost recovery
The PBAC is an independent expert body appointed by the Australian Government. Members include doctors, health professionals, health economists and consumer representatives. Its primary role is to recommend new medicines for listing on the PBS or NIP. No new medicine can be listed unless the committee makes a positive recommendation. PBAC has two sub-committees (the Drug Utilisation Sub Committee and the Economics Sub Committee) to assist with analysis and advice.
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c. Streamlining pathways process changes
In 2017, the Australian Government signed a five year Strategic Agreement (the Agreement) with MA, recognising both parties’ commitment to a viable medicines sector in Australia and a sustainable PBS.
Under Clause 10 (Streamlined medicines listing processes) of the Agreement, a number of activities have been identified to improve the efficiency, transparency and timeliness of the PBS listing processes over the term of the Agreement. Newly identified cost recoverable activities for the first stage of the revised pathways to be implemented from 1 July 2019 include:
Enhanced pre submission meetings A new Intent to Apply notification step Revised positive recommendation pathways
The department is working collaboratively with industry to further develop the second stage of proposed changes, for implementation from July 2020. This second stage will include changes to PBAC submission categories and resubmission pathways. Further changes will need to be supported by updated cost recovery arrangements, which would be detailed in a future CRIS.
d. PBS list management
PBS list management includes activities that are directly requested by sponsors seeking to manage their medicine’s listing. These activities include:
1.2.2 What policy outcomes will the activity achieve?
The activity for reviewing and approval of products for PBS/NIP listing and management is considered appropriate for cost recovery for a number of reasons:
It can provide an important means of improving the efficiency and equity with which Australian Government services are provided and consumed
Charging of fees can send important price signals to individuals or groups about the cost or value of a government activity
The services are provided to an identifiable group of parties who derive a clear benefit from the listing of their products on the PBS or NIP
It ensures the quality use of PBS listed medicines and the ongoing sustainability of the PBS.
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This CRIS describes the cost recoverable activities that contribute to the achievement of Outcome 4 (Program 4.3) as outlined in the 2019-20 Health Portfolio Budget Statements:
Outcome 4: Individual Health Benefits
Access to cost-effective medicines, medical, dental and hearing services, and improved choice in health services, including through the Pharmaceutical Benefits Scheme, Medicare, targeted assistance strategies and private health insurance.
Program 4.3: Pharmaceutical Benefits
Objectives:
To provide reliable, timely and affordable access to cost-effective, high quality medicines and sustainable pharmaceutical services to all eligible Australians, through the subsidization of the cost of medicines through the Pharmaceutical Benefits Scheme (PBS) and Life Saving Drugs Program (LSDP) and funding for community pharmacy programs through the Sixth Community Pharmacy Agreement.
1.2.3 Why is cost recovery appropriate for the activity?
The Australian Government Charging Framework requires that regulatory activities such as registrations, applications, monitoring and compliance are cost recovered from the identifiable entity seeking the activity, unless the Government has decided the activity will not be cost recovered. Under the PBS/NIP cost recovery arrangements, there is a specific group of sponsors that create the need for this activity and therefore only they should bear the costs of the services. Cost recovery must meet the principles of transparency, efficiency, performance, equity, simplicity and policy consistency. The CRGs also specify that there must not be systematic over – or under – recovery of costs.
The National Health (Pharmaceuticals and Vaccines – Cost Recovery) Amendment Regulations 2019 provides authority to impose cost recovery charge for processes associated with the broader scope of evaluation and listing of items on the PBS and NIP.
1.2.4 Who will pay cost recovery charges?
The PBAC considers submissions from sponsors of medicines/vaccines, and considers the views of medical bodies, health professionals, individual consumers of medicines and their representatives. Sponsors are direct beneficiaries of having their medicine listed and maintained on the PBS/NIP as a result of these considerations.
Sponsors who receive these benefits are charged fees for services provided. If cost is a barrier, sponsors may apply to have the fee waived on public interest and financial viability grounds.
2. POLICY AND STATUTORY AUTHORITY TO COST RECOVER2.1 Government policy approval to cost recover the activity
2.1.1 When and what did the Government announce?
In the 2008-09 Budget, the Government announced that costs associated with the listing of medicines on the PBS and designated vaccines for the NIP would be recovered from the sponsors of submissions to the PBAC. Cost recovery, via fees for services provided, commenced on 1 January 2010 and has been indexed by CPI since then.
The cost recovery arrangements were revised in 2017-18 to reflect the CRGs, the true costs of activities, and proposed improvements to the PBS/NIP listing processes. Changes to processes and cost recovery have been agreed by Government and announced as part of the 2018-19 Mid-Year Economic and Fiscal Outlook (MYEFO) under the Improving access to medicines – streamlined listings measure.
In April 2019, in response to industry feedback on the draft CRIS, Government further agreed to amend two components of the 2018-19 MYEFO measure, specifically, to delay commencement of the ATAGI pre-submission evaluation fees and the deed management fee for a listed medicine until July 2020.
2.1.2 How was cost recovery implemented according to the Government decision?
The revised cost recovery arrangements will be implemented from July 2019 in accordance with the Government’s decision to allow sponsors time to plan and prepare for the changes, based on feedback provided during industry consultations.
Revised cost recovery arrangements will also support implementation of the first stage of PBS process improvements, as supported by the Access to Medicines Working Group and agreed by the Minister for Health. Stage 2 of process improvements will be implemented from mid-2020 and will require further changes to cost recovery and regulations to reflect new submission categories and other changes. Consultations will be ongoing during 2019 to refine the Stage 2 implementation approach.
Changes for further development and consultation include better aligning the PBAC process with Therapeutic Goods Administration (TGA), ATAGI and the Medical Services Advisory Committee (MSAC) processes and clinical evaluations. Key performance indicators will also be developed to reflect the changes to processes and included in a future CRIS once agreed by Government.
2.1.3 Changes to orphan drug exemptions
Previously, an exemption under paragraph 5.1(1)(a) of the National Health (Pharmaceuticals and Vaccines – Cost Recovery) Regulations 2009 (the exemption) applied to applications made in respect of medicines that were designated as orphan drugs under regulation 16J of the Therapeutic Goods Regulations 1990 (the TGA regulations).
Recent reforms to TGA’s orphan drug program changed previously indefinite orphan designations to now lapse after six months. These changes were made to ensure that assessment against the eligibility criteria is based on current information, and to create an incentive for sponsors to lodge their applications promptly. The TGA’s objective - to ensure medicines accessing the market are safe and effective - differs to that of the PBS, which is to subsidise medicines and vaccines to support patients’ access to clinically and cost effective medicines in a timely and sustainable way.
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In February 2018 it was proposed that, in order to meet the CRGs requirement for full cost recovery, the automatic fee exemption for PBS listing applications for medicines designated as ‘orphan drugs’ by the TGA be removed. Feedback from industry throughout 2018 indicated this proposed change was not supported. In the interests of timeliness and delivering the best outcomes for patients, PBAC considerations will continue to rely upon the TGA’s orphan designation. However, there remains a need to incentivise a reduction in resubmissions to the PBAC and remove the option of repeated ‘free’ submissions to the PBAC with costs incurred by Australian taxpayers.
Therefore, TGA orphan designation medicines will continue to be eligible for an evaluation fee exemption for the first submission to the PBAC within 12 months of registration on the Australian Register of Therapeutic Goods (ARTG). Fees will apply for subsequent submissions and to all other fee-related activities (including post-PBAC fees). As always, if the payment of fees poses a barrier to a medicine being brought forward, applicants will be able to apply for a waiver on a public interest and financial viability basis with evidence to support these claims. Additional guidance on applying for a waiver is being developed to support applicants.
This approach will both support patient access to innovative medicines that treat conditions that may not have an equivalent on the PBS and incentivise a single submission approach supporting timely patient access to new medicines.
2.2 Statutory authority to charge
Further details on the revised cost recovery arrangements are provided in the National Health (Pharmaceuticals and Vaccines – Cost Recovery) Amendment Regulations 2019 (the Amendment Regulations). Amendments to the Regulations will be implemented from 1 July 2019.
The provisions for ATAGI pre-submission evaluation fees are outlined in parts 1.A.1-1.A.6 of the current Amendment Regulations, to commence from July 2020. The new deed management fee is not included in the current Amendment Regulations as stakeholders raised concerns about the scope of the activity, which needs to be more clearly defined. The department will resolve this outstanding issue before including the defined deed management fee in a future regulation amendment to commence from July 2020.
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3. REVISED COST RECOVERY MODEL3.1 Cost recovery fee or levy?
The CRGs provide that the characteristics of a government activity determine the type of cost recovery charge used. There are two types of cost recovery:
Cost recovery fees: fees charged when a good, service or regulation (in certain circumstances) is provided directly to a specific individual or organisation.
Cost recovery levies: charges imposed when a good, service or regulation is provided to a group of individuals or organisations (e.g. an industry sector) rather than to a specific individual or organisation. A cost recovery levy is a tax and is imposed via a separate taxation Act. It differs from general taxation as it is ‘earmarked’ to fund activities provided to the group that pays the levy.
3.2 Regulatory activities included in the model
Cost recovery fees are defined below and will be detailed in an update to the current Regulations.
3.2.1 Australian Technical Advisory Group on Immunisation (ATAGI) pre-submission evaluations
The NIP is a population based vaccination program that provides protection to the Australian people against a range of vaccine preventable diseases. Vaccines listed on the NIP are recommended for relatively large population groups. They are promoted by governments to ensure high levels of uptake in order to meet target coverage rates, which can be as high as 95%. Being able to supply a vaccine on the NIP provides a significant market for sponsors, which continue to benefit from the listing process for many years.
The process requires vaccine evaluations that support sponsors in seeking pre-submission advice from ATAGI to inform the development of a vaccine submission to the PBAC.
ATAGI evaluations assess the suitability of a vaccine for the NIP and may include:
analyses of disease burden, vaccine safety and effectiveness in the proposed population assessment of the proposed vaccine schedule, impact on the existing NIP schedule and
anticipated coverage estimates assessment of the proposed methodology including identification of appropriate
comparators review of vaccine features such as duration of vaccine protection, potential for cross
protection and herd immunity identification of clinical uncertainties in the submission assessment of implementation issues (e.g. surveillance and monitoring requirements); and review and assessment of Population Intervention Comparator Outcome (PICO)
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These evaluations involve the analysis and review of complex clinical, vaccinology and epidemiological data. The activities included in the model relate to:
the administration process for developing ATAGI advice including liaison with industry, ATAGI discussants and vaccine evaluators
contracts for vaccine evaluators to support the development of ATAGI advice a proportion of the operating costs for ATAGI including remuneration of members and
meeting costs – related to the submission remuneration for ATAGI discussants role in developing the ATAGI adviceThere are two
types of vaccine submissions - complex and simple:
Fee Category DescriptionNIP - Complex submissions (new fee)
An ATAGI application is in the complex category if the Secretary determines that considering the application will require extensive, or complex, data analysis and review.
NIP - Simple submissions (new fee)
An ATAGI application is in the simple category if the Secretary determines the application is not in the complex category.
Introduction of the ATAGI fees will be delayed to July 2020. This will also impact the introduction of process improvements that were to be delivered together with the introduction of fees.
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3.2.2 Pharmaceutical Benefits Advisory Committee (PBAC) evaluation of submissions
Submissions from sponsors to the PBAC are evaluated in the order they can be considered by the committee. Fees are charged when submissions are lodged with the department. The description of the regulatory cost recovery activity associated with the key business processes are outlined below.
Fee Category Description PBAC Evaluation – Major
In general, a major application seeks to list new drugs or medicinal preparations for PBS subsidy or to make substantial changes to current listings.An application for a variation to an existing listing may also be major if it requires the PBAC to apply a health advantage test.Major evaluations are complex evaluations of drugs for which PBS listing may have significant financial implications.
PBAC Evaluation – Minor
In general, minor applications include those for new forms of an already listed drug or medicinal preparation or a less substantial change to the conditions of their prescription or supply.These applications involve changes to existing items that do not have significant cost implications but do require consideration by PBAC for clinical effectiveness and/or potential impact on the PBS.An otherwise major application may be deemed minor if it involves a resubmission or a medicinal food.
PBAC Secretariat Listing
A Secretariat listing is a minor application that is straightforward and not considered as a separate agenda item at a meeting of PBAC. PBAC still decides the merit of each application. Secretariat listings may be considered in or out of session by PBAC.
GenericListing of a new brand of existing pharmaceutical item
Generic applications occur where a new product is listed on the PBS because it is bioequivalent or biosimilar and the price is already determined by an existing item. However, if the application is in respect of a product listed in Schedule 2 of the Regulations (currently somatropin and glucose indicators), it is deemed to be an exception and is classified as minor or PBAC Secretariat Listing.
Independent Review
Independent reviews are available for applicants where the PBAC has declined to recommend the listing of a new drug on the PBS or in certain circumstances where PBAC has not recommended the listing of an additional indication of an already listed drug.
3.2.3 Demand driven regulatory activities from streamlining process improvements
In 2017-18, a streamlining pathways framework (the Framework) was co-designed by a department-industry subgroup to improve the efficiency, transparency and timeliness of PBS medicines listing processes. The Minister for Health agreed to broad consultation on the Framework in August 2018. The first stage of process changes will be implemented from July 2019 and will include transitional arrangements.
The Stage 1 changes include:
Pre-submission meetings. The purpose of the new pre-submission meeting process is to increase access to, and better support of, quality submissions to the PBAC. Increasing the transparency, consistency, accountability and quality of pre-submission meetings is a commitment under the Government’s Strategic Agreement with Medicines Australia. These meetings will differ to that of previous years in both timing, requirements and the documentation of outcomes.
Intent to Apply. This new ’prior notice’ before lodgement of submissions to PBAC, supports increased planning time which will permit the progression of all submissions through to the PBAC in a timely way, by allowing time to prepare and resource all incoming identified assessments to support efficiency and provide certainty. The Intent to Apply form and process will also apply to resubmissions.
Table 3 – PBAC submission-related activity description (new fees)
Fee Category DescriptionPre submission meetings
Formal, (non-binding) pre-submission meetings with departmental officers providing guidance on certain submissions. Meetings are held well in advance of submission to the PBAC, with documented meeting outcomes. A fee is payable by a person for the service of the Commonwealth holding a pre-submission meeting for that person. The pre-submission meeting is intended to assist that person prepare a submission to PBAC.
Intent to Apply (or ‘prior notice’ in the Amendment Regulations)
The form must be completed and lodged with the department one month prior to lodgement of a submission for evaluation or pricing for consideration. The form is not required for generic submissions. The prior notice must include the evaluation category that the application is likely to be in. The person will generally be invoiced a fee for the submission services that reflects this evaluation category.
Positive recommendation pathways. The aim is to introduce an expanded range of pricing pathway options and services which better reflect the pricing arrangements available to people after a positive recommendation from the PBAC.
o Activities and process changes include better planning and allocation of resourcing and provide increased certainty regarding pricing activities to support greater transparency and accountability of these processes.
o Introduction of a Notice of Intent (or ‘prior notice’ in the Amendment Regulations) where sponsors, following a positive PBAC recommendation, advise the department through formal notification of their intentions – whether to progress a PBS listing, hold the recommendation until further notice or return to the PBAC for re-consideration.
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o Four newly defined positive recommendation pathways (alongside existing secretariat listings) will be determined by the listing/pricing arrangement requested by the sponsor and the PBAC outcome.
Case Managers will be allocated to support the listing process for specific Pathway A medicines, determined by the PBAC to address a high and urgent unmet clinical need.
Fees for pricing services will be charged at the time of the Notice of Intent step of the process. This change ensures the department is able to link cost recovery to activities requested by sponsors as for all other PBAC/PBS fees.
Fee Category DescriptionNotice of Intent (or ‘prior notice’ in the Amendment Regulations)
Notice of Intent includes whether a sponsor intends to submit a pricing offer and by when; not submit a pricing offer; or resubmit to PBAC. This fee is a non-refundable deposit that is invoiced together with the fees for pricing services.
Pricing Pathway A (facilitated)
This pathway will apply only if PBAC has identified that the submission application meets the required criteria (regulation 3.4) and the person making the pricing application accepts PBAC’s recommendation of this pathway in their prior notice.
Pricing Pathway B (New deed)
This pathway will apply to submissions that require negotiation and finalisation of a new deed of agreement and a full assessment of the proposed risk-sharing and pricing arrangements including concurrent deeds. An application for pricing services will not be in Pathway B if it is in Pathway A.
Pricing Pathway C (Existing deed)
This pathway will apply to submissions that require changes to an existing deed of agreement currently in force between the Commonwealth and any person with terms that are substantially similar to those that are appropriate for the new drugs, and/or where a sponsor has received a positive PBAC recommendation to list within the arrangements of an existing deed. An application for pricing services will not be in Pathway C if it is in Pathway A or B.
Pricing Pathway D (Standard listing)
This pathway will apply to submissions that do not involve negotiation of a deed of agreement.
Pricing Secretariat An application is in the Pricing Secretariat category if it’s not in the Pricing Pathway A, B, C, or D category. This category is intended for the simplest of applications.
3.2.4 Managing PBS listings
The PBS post listing and management functions, including services provided on demand by industry in order to manage the PBS listing of a medicine, are not cost recovered under the current Amendment Regulations.
Consultation with industry in 2018 canvassed the proposed approach of applying fees to post-listing activities that are demand driven by sponsors. This includes deed management, price increase and ministerial discretion requests from mid-2019. These are all sponsor driven activities and can be charged as fees under the CRGs. In response to stakeholder consultation feedback, the introduction of the deed management fee will be delayed until July 2020.
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The outputs for post-listing activities from July 2019 are price increase requests and ministerial discretion requests that are driven by sponsors in order to adjust the prices that apply to their PBS listing.
Development of the 2018-19 cost recovery model has carefully examined the minimum efficient costs to undertake these activities under the CRGs.
Table 5 - PBS List-management requested activities description (new fees)
Fee Category DescriptionPrice increase requests
Sponsors may seek the Minister (or delegate) to consider a request a price increase is agreed for their medicine.
Ministerial discretion requests
Sponsors may seek the Minister (or delegate) to consider the statutory price reduction or cumulative effects of other price reductions are not to apply.
3.2.5 No levy for PBS list management activity
Consultation with industry on full cost recovery in early 2018 included the application of a PBS listing levy (for each PBS listed medicine and totalling approximately $5 million per annum in cost recovered revenue) for activities where the work undertaken cannot be directly attributed to an individual sponsor. For example, maintaining the currency of information about the medicine and ensuring the medicine’s price is compliant with the legislation. These activities ensure the ongoing clinical and cost effectiveness of PBS medicines and Australian patient’s ongoing access to medicines. These activities are of benefit to private beneficiaries, and under the CRGs, should be funded by those beneficiaries. Under the Australian Government Charging Framework, these costs are able to be applied as an annual levy.
During consultation, industry raised strong concerns about being charged for these activities (e.g. price disclosure and statutory price reductions). Consultation also determined there would be an impact on listings on the PBS of this approach.
As a result, this CRIS does not include a PBS listing levy. Partial cost recovery arrangements will be in place. The Government has decided that these activities will continue to be funded via an appropriation to the department.
3.2.6 Delayed introduction of certain fees
a. ATAGI pre-submission evaluation cost recovery
In August 2017, the pharmaceutical industry expressed a desire for clearer timeframes and expectations for the ATAGI advice stage of vaccine consideration and expressed a willingness for activities to be cost-recovered to support this outcome. A review of ATAGI processes and procedures undertaken in 2018, in consultation with industry, suggested enhancements to improve timeframes, improve transparency, and provide clarity regarding requirements and expectations for ATAGI and companies seeking advice.
In February 2019, Medicines Australia on behalf of vaccine manufacturers, raised concerns about the financial impact of introducing the new ATAGI cost recovery fees from July 2019 and requested additional time for industry to prepare and budget.
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The Government considered that delaying implementation by a further 12 months would address these concerns. This will also delay process improvements that were to apply with the introduction of the new cost recovery fees. During the period of delay, the costs associated with the provision of ATAGI advice will be re-assessed based upon the testing of the vaccine evaluation market and the costs will be updated to reflect this.
b. Deed management cost recovery
A deed is often requested by sponsors when seeking to list their medicines on the PBS and may include risk sharing arrangements or special pricing arrangements where sponsors are not able to supply the medicines at a particular publically available price. Ongoing management of a deed ensures that PBS subsidies paid to sponsors do not exceed the agreed listed price. The department manages these ‘contracts’ on behalf of those sponsors that request a negotiated arrangement to include their medicines on the PBS.
A new deed management fee was proposed to cost recover the activities required for ongoing management of a deed, making changes to a deed and re-negotiation of a deed when it expires. Medicines Australia has raised concerns about the definition and scope of the activity.
The Government agreed in April 2019 to delay implementation by a further 12 months to allow for resolution of these concerns through further consultation.
Costs of the regulatory activity
All previous CRISs (up to and including 2018-19) were developed based on the original 2007-08 cost model and reflected the services, processes and the levels of complexity associated with different submissions at that time. The revised volume, costs and associated cost recovery revenue are updated and reflect current processes and complexity.
For the financial year 2019-20, the total regulatory effort required by the department to deliver the fee for service activities (only and under partial cost recovery) is estimated to be $32.20 million, which was identified by the 2018-19 cost recovery model to account for the minimum efficient costs to ensure the improved PBS processes from 1 July 2019. The current cost recovery regulations provide waivers and exemptions for sponsors if their submissions satisfy the criteria. Based on the past three year actual average of waivers and non-orphan exemptions granted, the estimated annual cost of these activities is approximately $2.68 million. This also includes estimated initial orphan drug exemptions (see Section 2.1.3). The cost of delaying ATAGI pre-submission evaluation and deed management cost recovery is a further $2.61 million in 2019-20.
Pre-submission meetings 70 $1.18 m 0 0Intent to apply / Notice of Intent
261 $0.10 m 0 0
PBAC submission evaluation
356 $25.21 m 29 (8%) $2.33 m
Positive recommendation pathways
62 $2.62 m 13 (21%) $0.35 m
PBS list management activities
455 $1.68 m 0 0$1.20 m
Total $32.20 m $2.68 m $2.61 m
3.2.7 Costs breakdown
In line with the CRGs, the cost recovery model includes the following costs2:
Direct costs: allocation of direct costs is relatively straightforward. The direct costs included in this model are staff salaries (including on-costs for superannuation and leave) for those directly involved in the activity, committee costs and supplier costs (e.g. contractors, consultants and legal).
Indirect costs: are those costs that cannot be easily linked or where tracking this outweighs the benefits. Indirect costs are allocated as overheads to the staff directly involved in performing the activities using the Department of Finance’s approved costing methodology. The indirect costs include staff training and development, workers compensation premium, human resources support, organisational services, desktop ICT services and property operating expenses.
Other costs: IT system maintenance and depreciation costs associated with the PBS/NIP listing processes.
Activity based costing methodology has been applied to allocate costs to activities and outputs using volume-based cost drivers. This method enables more informed analysis of the efficiency of outputs and business processes of the activity. The cost data for the listing of medicines on the PBS and management of the list were estimated on the following basis:
The regulatory activities to be delivered on a cost recovery basis were identified in consultation with relevant staff
Committee costs were estimated based on the number of committee members and number of meetings, which include wages/salary of committee members, travel allowance, accommodation, flights and catering
The number of submissions per year is derived from the average submissions for the past three years
Supplier costs were based on signed contracts
2 Definition of the direct and indirect costs are from the CRGs.
3.2.8 Fees and charges – Original proposal and outcome following consultations
The revised cost recovery model identifies a different set of activities and costs compared to 2010.
Full cost recovery was proposed in February 2018 for consultation purposes. It included increases to current fees, new fees to reflect process improvements and also a PBS listing levy to cover activities supporting the listing of each medicine item on the PBS. Total full cost recovery was estimated at $37.2 million in 2019-20. Table 6 above notes that partial cost recovery (i.e. without a levy) is around $32.2 million less the financial cost of estimated waivers/exemptions.
Consultations with industry during 2018 have demonstrated concerns around the large increases to existing PBAC submission fees. Concerns were also raised about the PBS listing levy and its impact on medicines remaining listed on the PBS (see section 3.2.5). Further discussion with industry focused on stepping out the increase for existing fees in 2019-20 to ensure that sponsors are able to manage the change through budgeting and planning. This would be accompanied by a further 50 per cent increase in 2020 to reach the full fee. Notably, changes to apply from mid-2020 will also encompass adjustments for further process improvement changes including changes to 3 Unit cost of ATAGI pre-submission evaluation is included to show the alignment with expenses and the indicative 2020 fees indexed by CPI. These will be re-assessed based upon the testing of the vaccine evaluation market and the costs will be updated accordingly.
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submission types as set out in streamlining pathways consultations. New fees associated with new processes would be charged at full cost in 2018-19.
Table 8 details the Government agreed partial cost recovery fees and revenue estimates for 2019-20. A stepped increase in 2019-20 is included for PBAC evaluation fees and standard and secretariat pricing and listing fees (bolded and marked with *) is included. The estimated volumes exclude waivers and exemptions (refer to Table 6). As a result, total revenue reduces to $21.73 million in 2019-20. The difference will be supported by Government appropriation to the department.
The independent review fee is included in this table based on the existing charging approach by referring to the major evaluation fee (see CRIS 2018-19 fee structure and all previous CRISs). Considering there have been no actual independent review applications submitted over the past five years, therefore there is no revenue estimated for this charge.
The table also includes an indicative fee for July 2020 to demonstrate the further step increase in fee costs where it applies. Note also the fees include the legislated annual increase by (an estimated) CPI. Note these fees may be adjusted further as work to improve processes continues.
Table 9 outlines the fee pay points to enable a consistent approach of upfront payment across all charging categories for PBS listing and management processes. These fee pay points have been updated to occur prior to activity being undertaken and costs incurred by the department. This will prevent revenue lost and cost incurred ensuring that resources are used efficiently.
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Table 8 - 2019-20 fees, estimated volumes, estimated revenue and indicative 2020-21 feesCharge Type Fee from
4 Introduction of the ATAGI pre-submission evaluation fees will be delayed to July 2020.
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Table 9 - PBS Listing and Management Process with Cost Recovery Fee PointsCategory ATAGI Pre-submission Evaluation Process
Pre-submission Evaluation Application
Application receivedATAGI Pre-submission Evaluation Fee Point
ATAGI AssessmentATAGI advice
Category PBS Listing ProcessPre-Application Request for pre-submission meeting received
Pre-submission Meeting Fee PointPre-submission meeting with sponsor
Review sponsor meeting outcome recordApplication Intent to apply form received informing of submission evaluation type
Intent to apply and Evaluation Submission Lodgement Fee Point*PBAC Evaluation
Positive PBAC Recommendation(Proceed to positive recommendation pathways)
ORRejected PBAC Recommendation
Positive Recommendation Pathways
PBAC positive recommendationNotice of Intent form received informing of the positive recommendation
pathwayNotice of Intent and Positive Recommendation Pathway Fee Point
Pricing offer madePricing agreement reached
Adjustment to the invoicing based on the pricing agreement reached**Listing occurs
Category PBS Post Listing ProcessPost Listing Application
Request for post listing activity (i.e. price increases, or ministerial discretion) received
Post Listing Fee PointActioning the requested post listing activity
* Any submissions not requiring PBAC’s consideration (see Item 3, 4, 5 in the table ‘Fee for providing submission services’ in the Amendment Regulations 2.2) will be invoiced within 14 days of the request for services.**Pathway A, D, Secretariat Pathway – invoice is to be paid in full; if Pathway B or C selected – sponsor is invoiced the Pathway C (existing deed) fee and an adjustment can be made (if needed) once the final pricing agreement is reached.
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3.2.9 Transitional Arrangements
The following transitional arrangements apply in implementing changes to fees from July 2019 and linking of these to the current PBAC cycle and PBS processes.
Pre-submission meeting fees o commence for meetings requested from July 2019
Intent to Apply feeso required for PBAC Minor submissions lodged in August 2019 and onwardo required from October 2019 for PBAC submissions to be lodged for consideration at the
March 2020 PBAC meeting and onward Increased evaluation fees
o apply for all submissions lodged for the November 2019 PBAC meeting onward Notice of Intent and Positive recommendation pathways
o required for all positive PBAC recommendations from the July 2019 PBAC meeting onward and sponsors seeking to progress previous positive recommendations not progressed previously
Price Increase Request and Ministerial Discretion request feeso from 1 July 2019.
4. ASSESSMENTThe overall risk rating for the revised cost recovery arrangements is high:
The proposed change in annual cost recovery revenue for the activity is more than 10% and involves new charges
The total annual cost recovery revenue for the activity is more than $20 million The revised cost recovery arrangements will include some new activities and existing
activities that have not been cost recovered previously
These risks are mitigated as:
Work is underway to co-design further improvements to processes The Department will continue to adopt best practice through further revision of costs and
the cost model during 2019 as part of further process improvements for implementation from 2020
There will be continued consultation with industry representatives to understand concerns and address feedback
A stepped approach to fee increases will enable industry time to prepare for changes to the cost recovery arrangements
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5. STAKEHOLDER ENGAGEMENTConsultations with medicines’ associations and sponsor representatives on the proposed changes to the cost recovery arrangements have been held from mid-2017, throughout 2018 and are ongoing. Public consultation on the draft CRIS commenced in early 2019.
In accordance with the relevant provision of the National Health Act 1953 (the Act), an independent review of PBS cost recovery was undertaken in 2011. The Committee that undertook the Review extended the opportunity to Medicines Australia, Generic and Biosimilar Medicines Association (GBMA), and pharmaceutical companies to provide a submission. Each of these organisations presented matters for the Committee’s consideration.
The CRGs require that periodic reviews of cost recovery arrangements are undertaken no less frequently than every five years. PBS cost recovery commenced 1 January 2010. During the 2016-17 Portfolio Charging Review, the department began a comprehensive review of the original costing model.
The objective of the review of cost recovery arrangements was to ensure that the real costs of the activities associated with different requests for listing or management of listings were recovered, led to improved service standards, and complied with the Australian Government Charging Framework.
As a result, the revised volume, costs and associated cost recovery revenue are presented in the revised cost recovery model. The cost model was further revised to factor the costing of updated activities under the first stage of process improvements approved for broader consultation by the Minister in mid-2018. The further revised cost recovery model was submitted to the Department of Finance for checking and validating later in 2018.
Consultations in 2018 on revised cost recovery arrangements included full cost recovery proposals to increase fees from 1 July 2018 and to remove the automatic orphan drug exemption. It was also proposed that cost recovery would include new fees and/or levies for PBS list management activities. Three options on post-listing cost recovery were provided for discussion and feedback directly with peak bodies and also through two industry forums in February 2018.
Stakeholder feedback and concerns concentrated on the proposed timing, quantum of increase and removal of the automatic orphan drug exemption. Further, industry suggested that the increased fees should be coupled with efficiency gains and were therefore seeking that the timing of these changes align with streamlining PBAC processes. Concerns were also raised about the impact of fee increases and the proposed levy on some medicines remaining PBS listed.
The initial full cost recovery proposal was amended to a partial approach to address industry concerns about the extent of cost recovery, level of increases to fees and the timing of the implementation of revised cost recovery arrangements. This has been agreed by the Australian Government.
The draft CRIS outlining the Government agreed partial cost recovery arrangements was published online for public consultation in February 2019. A total of fifteen responses were received from a range of respondents, including peak bodies on behalf of their members, pharmaceutical companies, healthcare providers and researchers. Feedback seeking further detail or explanation as to fee types and changes have been addressed where possible within this CRIS.
Further changes to processes will be considered as part of planned PBS process improvements work that continues separately. Procedure guidance will also detail process changes, fee administration and performance measures.
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In order to implement agreed streamlining process improvements, changes to the cost recovery regulations are required. The department will continue discussions with stakeholders to ensure that:
stakeholders are consulted throughout development and are informed of the proposed changes and timing of commencement
service standards are improved and PBAC activities comply with the government’s policy to recover the costs of all regulatory activities from the entity seeking the activity
the PBAC cost recovery arrangements are efficient, effective and transparent over time
The Department has been regularly meeting with medicines representatives to discuss and inform all of these activities throughout 2018 and will continue to do so.
6. FINANCIAL ESTIMATESThe financial estimates in the Table 10 demonstrate the expenses of the partial cost recovery approach within this CRIS along with the estimated revenue from the proposed implementation of stepped increases in some fees in 2019-20. This shows a net loss of revenue (and need for Government appropriation to cover the shortfall) of $10.47 million in Year 1. Forward projections demonstrate the difference between expenses and revenue reduces to around $2.8 million from Year 2 onwards.
Note Table 10 below does not carry forward the cumulative losses of $32.10 million incurred between 2008-09 to 2018-19 (detailed in 2018-19 CRIS5).
Table 10 - Financial estimates for the cost recovery activities for the Budget and three forward years as per the cost recovery model 2018-19
Forecast Financial Estimates 2019-20 ($ million)
2020-21 ($ million)
2021-22 ($ million)
2022-23 ($ million)
Combined Expenses = X $32.20 $32.67 $33.56 $34.47 Combined Revenue = Y $21.73 $29.95 $30.76 $31.59 Balance = Y - X ($10.47) ($2.72) ($2.80) ($2.88)Cumulative Balance ($10.47) ($13.19) ($15.99) ($18.87)
5 The 2018-19 CRIS is available on the Department of Health website.
7. FINANCIAL PERFORMANCEThe following table will be updated after each financial year. The actual financial performance (Table 11) will be compared with the forecast financial performance for 2018-19 as published in the CRIS for the 2018–19 financial year. Any material variance (i.e. a variance greater than 5%) will be identified as a material variance and explained.
As the PBS/NIP listing process is only partially cost recovered, the aim of comparing the actual financial results with forecasted financial estimates over a 5-year period is to ensure that the degree of alignment of under recovery of costs is as agreed by the Australian Government as part of the Department’s balance management strategy. While 2019–20 onward data have no actual financial results yet, this will remain in the table to show all years considered as part of the balance management strategy period, which is from 2018–19 to 2022–23.
The forecasted financial figures for 2018-19 are included in the table below because this is the start of the new 5-year period. The 2018–19 forecasts will be removed from the 2020-21 CRIS update and going forward for consistency, as only the most recent financial year results would be compared to the forecasted figures. Note that 2018–19 is the final year where cost recovery was conducted under the previous arrangements.
Table 11: Financial performance for cost recovered activities
Actual Financial ResultsForecast 2018–19 2019–20 2020–21 2021–22 2022-23
The increase in revenue from the forecasted figures for 2018-19 is due to the change in the volume mix of actual applications received. There were more applications which had a higher fee received than expected, and the number of applications with lower fees were fewer than expected.The increase in expenses is due to more external evaluations being undertaken than expected, which is one of the more significant per application costs associated with PBS listing services. In addition to this, there have been higher IT costs than expected, due to certain IT assets reaching end of life and a number of new IT assets being built to replace them.
Balance management strategy explanation
The reported variance in 2018-19 is not expected to be as significant going forward because it is the final year of cost recovery under the previous arrangements. From 1 July 2019 new arrangements were introduced to address the significant under recovery of costs.
6 The 2018–19 forecasted financial figures were obtained from the Cost Recovery Implementation Statement (CRIS) Listing Of Medicines on the Pharmaceutical Benefits Scheme and Designated Vaccines on the National Immunisation Program for the period 1 July 2018 – 30 June 2019.
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8. KEY PERFORMANCE MEASURESThe Government’s Charging Framework has been developed to apply across the general government sector. It includes performance requirements based on Section 38 of the Public Governance, Performance and Accountability Act 2013 (the PGPA Act), which is ‘Measuring and assessing performance of Commonwealth entities’.
The non-financial performance of the activities explained in this CRIS is monitored through a set of requirements under subsection 99YBC (5) of the Act included in the department’s annual report, consistent with the PGPA Act. The performance requirements are:
The Secretary must, as soon as practicable after June 30 in each year, prepare and give to the Minister a report on processes leading up to the Pharmaceutical Benefits Advisory Committee consideration, including:
a) the extent and timeliness with which responsible persons are provided copies of documents relevant to their submission to the Pharmaceutical Benefits Advisory Committee
b) the extent to which responsible persons exercise their right to comment on these documents, including appearing at hearings before the Pharmaceutical Benefits Advisory Committee
c) the number of responsible persons seeking a review of the Pharmaceutical Benefits Advisory Committee recommendation
The department’s self-assessment against the key performance indicators (KPIs) is summarised in its Annual Report 2017-18 and published online. A brief summary relevant to PBAC cost recovery is provided below:
Ensuring access to innovative, clinically effective and cost-effective medicines through the PBS
Percentage of submissions for new medicines that are recommended for listing by Pharmaceutical Benefits Advisory Committee (PBAC), that are listed on the PBS within six months of agreement of budget impact and price.
Source: 2017-18 Health Portfolio Budget Statements, p.99
2017-18 Target 2017-18 Result 2016-17 2015-16
80% 88% 85% 92%
Result: Met Result: Met Result: Met
8. KEY FORWARD DATES AND EVENTS June 2019: publish the CRIS on Health’s website July 2019: commence changes and continue to consult on further process improvements
for 2020-21 and associated cost recovery changes October – November 2019: update the CRIS to report 2018-19 actual result 2020-21: commence portfolio charging review for 2022-23 Budget
