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News & Trends - Pharmaceuticals

Pharma industry braces for fee hikes

Health Industry Hub | June 29, 2023 |

Pharma News: The cost recovery fees for the Pharmaceutical Benefits Scheme (PBS) and the National Immunisation Program (NIP) are set to commence on July 1, 2023. These fees, which have been adjusted in accordance with the Australian Government Charging Framework and Cost Recovery Guidelines, are aimed at ensuring the industry contributes to the costs associated with these reimbursement programs.

The recently conducted annual review for the 2023-24 financial year has led to an increase in the cost recovery fees. On average, fees have risen by 6.22%, with some increases ranging from 2.05% to 19.42% when compared to the fees charged in the previous financial year (2022-23). Several factors have contributed to these changes, including increased staff salary rates by an average of 5.1%, a 2.2% rise in supplier and IT costs, a 6.1% increase in overhead costs, and a 9.8% spike in depreciation costs primarily related to the ongoing development of the Health Products Portal (HPP).

The evaluation of complex PBAC submissions by external health technology assessment (HTA) groups has also become more intricate, leading to increased costs. Consequently, the government has allocated additional funding to ensure the Department can adequately evaluate these complex submissions. This funding increase is reflected in a 13.1% rise in supplier costs associated with certain types of PBAC submissions.

Industry bodies raise concerns over regulator’s double-digit fee increases

Similarly, the costs related to the evaluation of ATAGI submissions have increased due to new panel arrangements for ‘Health Technology Assessment and Support Services’ implemented in April 2023. As a result, supplier costs for both complex and simple applications have, on average, increased by 23.2%, marking the first such increase since the commencement of cost recovery arrangements for ATAGI applications in July 2019.

Additionally, the cost recovery of ministerial determination requests, also known as stockholding applications, commences on the same date. As per the 2022 Strategic Agreement with the Medicines Industry, manufacturers of certain PBS-listed medicines are required to maintain a minimum quantity of four to six months’ supply within Australia. To address any necessary alterations to these stockholding arrangements and comply with legal obligations, manufacturers have been submitting applications for ministerial determinations since October 2022. These applications undergo assessment and processing by the Department of Health and Aged Care and will be subject to cost recovery from 1 July 2023.

In May 2023, public consultation on the draft Cost Recovery Implementation Statement, which outlines the fee changes for the 2023-24 financial year, was conducted. During the consultation, stakeholders expressed the need for greater clarity regarding the reasons behind the fee increases for 2023-24. They also sought clarification on the utilisation of additional government funding provided for this purpose.

Stakeholders highlighted the importance of early engagement to allow sufficient time for businesses to plan and adjust to the fee changes. They specifically requested a delay in implementing the 2023-24 PBAC/NIP cost recovery fees until January 1, 2024. Furthermore, stakeholders advocated for more opportunities to seek fee exemptions for submissions related to the listing of TGA designated orphan medicines.

Additionally, stakeholders raised concerns about waiver provisions and alternative fee structures for lower-value medicines and vaccines or for smaller companies. They emphasised the necessity of developing publicly available metrics that reflect improvements in transparency and resource efficiency regarding the PBS evaluation and listing process. Stakeholders also called for a transparent articulation of how the cost recovery fees are utilised in terms of departmental resources and staffing.

In response to these concerns, the Department of Health and Aged Care announced that it is currently conducting a comprehensive ‘time and motion study.’ This study aims to review the level of effort exerted by departmental staff in administering PBAC submissions. The anticipated results will identify potential efficiencies throughout the submission process, and any improvements found will be reflected in the amended fees charged in the 2024-25 financial year. The decision to undertake this study follows an independent review of the activity-based costing model.

The ongoing efforts and dialogue between the government, pharmaceutical industry, and other stakeholders will play a crucial role in shaping the future of cost recovery in Australia’s healthcare landscape.

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