Federal court dismisses Arrotex dispute against Health Minister

Pharma News: The Federal Court has ruled against Arrotex Pharmaceuticals in their bid to challenge the Minister for Health and Aged Care over the interpretation of the 12.5% average unadjusted price reduction test for pharmaceuticals under the price disclosure regime.

This decision marks the first time the Court has addressed these issues following recent amendments to the Strategic Agreements.

According to the judgment, the Court affirmed that data from the price disclosure cycle immediately preceding a reduction can indeed inform the 12.5% Test.

Arrotex Pharmaceuticals, dissatisfied with price reductions affecting 84 of their products from April 1, 2024, argued that these reductions violated agreements with Medicines Australia and the Generic and Biosimilar Medicines Association.

The company argued that, for these pharmaceutical items, there had not been three data collection periods immediately before 1 April 2024 where a price reduction had not been made, and therefore the price reduction on 1 April 2024 was invalid.

Under the 12.5% Test, a reduction is triggered if three consecutive six-month data collection periods show an average unadjusted price reduction of at least 12.5%, capped at 30%. Price reductions take effect on April 1 and October 1 each year, based on data collected from the previous six-month periods.

Justice Rofe dismissed Arrotex’s case, emphasising the legislative text’s primacy despite arguments rooted in the Strategic Agreements. The Court highlighted that these agreements, while defining “Price Disclosure Cycle,” do not supersede statutory language.

The ruling underscores the regime’s intent to align subsidised medicine prices with market rates, emphasising the importance of continuous, data-informed price adjustments.

According to Clayton Utz, “This case acts as a reminder to industry in preparation for future negotiations with the Commonwealth over Strategic Agreements (and in engaging with consultation processes) to seek to clearly articulate expectations of the industry at the outset. In particular, if the wording of the Act is clear it will prevail over arguments based on purpose as discerned from the Strategic Agreement.”

In practical terms, the Court clarified that all data, including that from the six months before a reduction day plays a role in determining the the size and timing of price reductions.

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